When the news that Microsoft intended to purchase LinkedIn was first announced last week, responses on social media from those in the channel ranged from disbelief to bewilderment. Many wondered why a company so heavily focused on line of business applications and infrastructure would want to own a social media site. An even larger question filling the comments sections of several publications was why would they ever pay so much? While LinkedIn reportedly made almost $3 billion in revenue last year, mostly from recruiting services and job adds, profitability for these sites has never been strong. The good news is the bottom line is fairly solid and its earnings appear to be trending upward.
But, even if the current margin growth rates continue to climb, it still could take Microsoft 10-20 years (if not more) to get a return on its $26 billion investment…if LinkedIn remains a standalone social media site. That scenario seems unlikely based on the presentation Microsoft created for investors and other interested parties. Their aspirations for the site and all the information it contains appear to be much higher…
It looks like LinkedIn will become a cog in Microsoft’s business and collaboration platforms. In other words, with more than 100 million active users each month and over 400 million total profiles, the indications are that they bought the site more for the information it contains than the social media aspect. Data is invaluable today, and the professional and personal details freely shared on LinkedIn has to be among the most valuable information any company can get ahold of. That’s no exaggeration. Just look at what most profiles include:
- Work histories: employment dates, company addresses, phone numbers, etc.
- Educational details: Schools, degrees, dates of attendance
- Awards and accolades: indicates areas of interest and success potential
- Professional certifications: qualifications and skills
- Community activities: local and charitable interests
- Personal details: family, life history, cities
Let that sink in. If you have a LinkedIn profile, take a look at how much you shared. Chances are, much of this information is already available online. Insurance companies, organizations, and even government agencies have been selling your data for years. But how many companies have so much detail about your life and career…all in one place?
The question is, what will Microsoft do with it? Should you delete your account today out of fear your details will be mined and sold off to the highest bidder? Absolutely not. No one is suggesting the company has any ill intentions or would risk its reputation doing anything to offend the business community or any professional who uses its applications and cloud services. But the implications that they could slow growth of the site and the amount of information users are willing to share. Something to think about.
The official reasoning behind the purchase is much more straightforward. “This combination will make it possible for new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and Office suggesting an expert to connect with via LinkedIn to help with a task you're trying to complete," says Microsoft CEO EO Satya Nadella in a staff memo. “As these experiences get more intelligent and delightful, the LinkedIn and Office 365 engagement will grow. And in turn, new opportunities will be created for monetization through individual and organization subscriptions and targeted advertising."
Is that enough to justify the $26 billion expense? That’s for Microsoft shareholders to decide. The LinkedIn data may be especially useful when connected to Dynamics and other applications, but you have to wonder how many of the profiles are still active or even accurate. After all the site was started almost 14 years ago. Just 1/4th of the users are active on any given month. As with any online service, people tend to forget their logins and create multiple profiles. Others retire, make significant life and career changes without updating their online information and, unfortunately, a number of others have died over the past decade plus. Of course we can’t discount the Nigerian princes and other fake profiles created to get access to others’ personal information. The point is, the number of legitimate LinkedIn users may not be as accurate as portrayed.
So while many of us may be skeptical of the purchase price and fit, the integration of LinkedIn to the Microsoft ecosystem should be an interesting process to watch. Will Google, Oracle or other competitors look to make similar moves with other social media sites, or look to create similar platforms using different methods? Perhaps, but don’t expect any major moves soon. Chances are they’ll wait a while to see how Microsoft leverages its latest investment.
