Many years ago, I received an “invitation” email from a colleague at URI to join this professional network. I remember thinking … hmm, what is this? Another Facebook? I decided, what’s the harm? Little did I realize where this “social network” company would reach.
After viewing the news yesterday about the mega-acquisition of LinkedIn by Microsoft … not to mention the jaw-dropping increase in LinkedIn’s stock at yesterday’s market open (sure that is a celebration for their stockholders) … I started to ponder Microsoft’s $26B decision. Some perspective.
- This deal is Microsoft’s 196th acquisition since 1987. Not including the 64 companies with an investment.
- Considering their acquisition history, this acquisition is clearly the largest; the acquisition of Skype in 2011 was the next largest transaction ($8.5M). As a comparison, their investment ($5M) in AT&T Incorporated in 1999 was the closest investment.
- LinkedIn has completed 16 acquisitions itself since 2010.
- The LinkedIn purchase represents a 50% premium over its share price.
- A quick analysis categorizing Microsoft’s acquisitions, 87% of the companies are software developers at some level (mobile, IT administration, enterprise, cloud).
- Some of Microsoft’s acquisitions have not been successful. Its 2013, $7.6B acquisition of Nokia to enter the mobile market has not necessarily paid dividends.
So the next thought … the premium purchase price coupled with (what could be considered) very different from Microsoft’s acquisition history … may suggest that Microsoft did not carefully consider the acquisition or a clear vision of finding gold.
So how does the LinkedIn acquisition fit? Strategically? Culturally?
Office365 Integration. As Microsoft transitions its flagship product to Office365, the strategy of using the personal productivity software to the several of LinkedIn’s features becomes apparent. Clearly, LinkedIn has become the gold standard for professionals, businesses and groups (yes textbook authors too!) seeking several features in one environment … social media, personnel recruiting, promotion, research and branding. So visualize this … the LinkedIn application linked into Microsoft’s platform …
- Individuals marketing themselves to employers with their portfolio of artifacts (spreadsheets, applications, media, etc.) which are stored, created and maintained in 365 and Microsoft’s cloud. The individuals’ resume content and their supporting artifacts and work are directly and seamlessly integrated into the one platform.
- Businesses and individuals marketing their product and services can do the same as individuals. Link posts, profiles, articles and other content directly to their brand message.
- Develop a “lock-in” advantage between LinkedIn and Microsoft portfolio of products (cloud and software applications). Increasing revenue and market reach.
Pulse Integration. Some are not aware, but LinkedIn’s acquisition of Pulse in 2013 was a great addition to its application and functional portfolio. Pulse provides an “independent” forum for consolidating and categorizing post content in a reader-style format. Some posts sent by members through LinkedIn are “promoted” (literally) to the Pulse forum. This acquisition and the subsequent integration into created a “multi-use” environment for LinkedIn Influencers and other content providers (post authors). Strategically, this provides Microsoft with additional, robust content that competes directly with other media (newspapers, magazines, news organizations) as well with online portals (Yahoo, Google).
Competitive Environment. Let’s face it, technology has (and will continue to be) on a feeding frenzy. Consumers crave it with no end in sight due to their voracious appetite. Businesses are responding to that adoption and their own need for efficiency as a low-cost provider of products and services. So, what are the executives at Yahoo, Facebook, Twitter and Google (and others) thinking today?
YouTube … it provides Microsoft with the textual content (posts, resumes) and demographics (business professionals) with potential media content (videos and other artifacts) that YouTube does not have at the present time (notice I said present). Gaining an instant audience with an instant cafeteria-style set of options for its members to utilize. Facebook, even though widely popular, does not garner the laser focused type of environment … which is more focused on business commerce, professional individual/corporate recruiting, research and articles … that LinkedIn has compiled. Lastly, those millions of icons on articles and websites (picture the LinkedIn icon) will be owned and controlled by Microsoft.
We all know that the high price tag purchase (it’s only money!) … was not only for the LinkedIn infrastructure (model, applications, etc.) … but really for its membership base. A focused, professional business clientele. It’s very solid network effect model. Its content (posts, articles, media). Data! Can chatbots be far behind? (Hint!)
What is the key that will judge the success of this acquisition? Integration of BOTH core competencies and products that will create synergies between the companies. I am not the rocket scientist here … just simple application of basic strategic synergies and technology principles with these two very successful companies.
So, another blog in late 2017 to review the progress.