Earlier today, Microsoft announced that it will acquire LinkedIn for $26.2 billion. Acquisitions are always interesting because they reveal a company’s current and future focus. Microsoft is making a move into the social networking space, but why?
What Microsoft is acquiring
Microsoft is buying LinkedIn for $26.2 billion in cash. That valuation alone is a bold statement. For perspective, Facebook acquired WhatsApp for $19 billion and Instagram for $1 billion. Google acquired YouTube for $1.65 billion. Twitter acquired Periscope and Vine for less than $1 billion. As a chart-topper for social network acquisitions, the Microsoft-LinkedIn deal is certainly one to pay attention to.
Microsoft describes LinkedIn as “the world’s largest and most valuable professional network” that “continues to build a strong and growing business”. As far as we can tell right now, Microsoft doesn’t plan on making any major changes to LinkedIn. As part of the deal, “LinkedIn will retain its distinct brand, culture, and independence.” Jeff Weiner, the CEO of LinkedIn, will keep his position, but will now report to Satya Nadella, the CEO of Microsoft.
It seems like Microsoft has a lot of faith in LinkedIn, both as a source of revenue and as a company that knows what it’s doing. From that perspective, the acquisition seems like a no-brainer. Why, LinkedIn, though? Why a social network at all?
What Microsoft actually wants
Ever heard of Socl? How about Yammer? Most people haven’t. They’re two social networks owned by Microsoft that never quite took off. These days, social networks seem to be a must-have for big companies like Microsoft. Google tried to make it’s own social network, failed, and settled for YouTube. Now, Microsoft seems to be doing the same with LinkedIn.
Microsoft CEO Satya Nadella said that Microsoft plans to work with LinkedIn to “accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.” In other words, both companies plan to make a lot of money together. More than that, though, Microsoft and LinkedIn offer each other valuable information.
Microsoft has been in business for over 40 years. LinkedIn has been around for less than 15 years. Microsoft has knowledge and experience that could turn LinkedIn into an unstoppable force, but also the power to run it into the ground. On the other hand, LinkedIn has access to a wealth of data about its users. It knows where millions of professionals work, where they’ve worked in the past, and can predict when they might change jobs. Microsoft can no doubt do something useful with that information.
As far as social network acquisitions go, LinkedIn seems like a pretty safe bet. It has a solid user base that’s only growing, and it fits in well with Microsoft’s enterprise software. As Microsoft explains, it’s a union between the “World’s Leading Professional Cloud” and the “World’s Leading Professional Network”.
It’s an acquisition that just makes sense, and, as long as Microsoft maintains faith in LinkedIn’s autonomy, will likely prove fruitful for both companies.
