In case you missed the news this week, the European Union has approved Microsoft's pending $26 billion acquisition of LinkedIn (via C|NET). Since the news broke back in June, opinions have been split on whether or not this acquisition makes sense. Why would Microsoft spent billions on a professional networking site? With LinkedIn paying subscribers coming in at less than 1% of its 433 million users and driving $2.9 billion in revenue for 2015, is it really about the revenue? It is not likely that Microsoft will suddenly announce tools and apps focused specifically around HR professionals, so why spend this much for what is essentially a social network? And what, if anything, does the LinkedIn acquisition mean to Office 365 and enterprise collaboration?
When this deal closes, it will become the largest acquisition in Microsoft's history. What business and technology assets come with this deal?
In an internal memo, Microsoft CEO Satya Nadella outlined the reasoning for employees, highlighting the fact that they were bringing together "the world’s leading professional cloud with the world’s leading professional network." He also explained the focus around any acquisition, and how they should first-and-foremost expand the company's opportunity:
"Specifically, does it expand our total addressable market? Is this asset riding secular usage and technology trends? And does this asset align with our core business and overall sense of purpose? The answer to all of those questions with LinkedIn is squarely yes." ~Nadella
Many struggle to get past the sheer size of the deal. Microsoft's next largest deal, orchestrated by former CEO Steve Ballmer back in 2014 to purchase the Nokia handset business, led to the company writing down charges that exceeded the $9.4 billion price. But more close to home was the 2012 acquisition of Yammer for $1.2 billion, which did not deliver the expected business growth -- even though that acquisition is seen by many as a primary driver of some of the cultural changes within Microsoft as a whole as the company shifted from on-premises solutions to the cloud.
In a Forbes article, contributor Grant Feller identified some of the strengths of the deal -- namely, Microsoft's ability to embed some of its core technology, such as Skype, the Office productivity apps (Word, Excel, PowerPoint) and other enterprise applications that will make the social network even more of a business tool.
"Microsoft has just bought one of the world’s most influential, specialized, highly read, constantly-updated (and occasionally annoying) digital media companies." ~Grant Feller
But you also have to consider the various tools and technologies under the hood of LinkedIn. Between 2010 and 2016, LinkedIn acquired 18 different companies, most notably Lynda.com (online learning) for $1.5 billion, Bizo (B2B audience targeting) for $175 million, Bright.com (AI for recruiting) for $120 million, and SlideShare (content sharing) for $119 million. Other investments include tools and expertise in content sharing, data science, and predictive analytics -- all of which can provide value to Microsoft's broader business intelligence strategy.
That's where the acquisition begins to look brilliant. As Nadella points out, companies and their customers “are looking for ways to get even more out of social media.” LinkedIn operates very differently than Facebook and other consumer-based platform, in that it knows where people work, it knows their skills (confirmed via crowd-sourcing), who they are connected to through school, community activities, or past employers -- and it knows what content is being shared, topics being discussed, and keywords being used across all of these connections. LinkedIn understands people better than just about any other company in the world.
Following this strategy of understanding people and their many network connections, LinkedIn has built an enviable team of data scientists, a commodity coveted by other tech firms. The data they gather will be invaluable to Microsoft as they expand the Microsoft Graph, and develop features to further transform collaboration and productivity.
More from Nadella's letter to Microsoft employees:
The opportunity for Office 365 and Dynamics is just as profound. Over the past decade we have moved Office from a set of productivity tools to a cloud service across any platform and device. This deal is the next step forward for Office 365 and Dynamics as they connect to the world’s largest and most valuable professional network. In essence, we can reinvent ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes.
We are in pursuit of a common mission centered on empowering people and organizations. Along with the new growth in our Office 365 commercial and Dynamics businesses this deal is key to our bold ambition to reinvent productivity and business processes
Think about it: How people find jobs, build skills, sell, market and get work done and ultimately find success requires a connected professional world. It requires a vibrant network that brings together a professional’s information in LinkedIn’s public network with the information in Office 365 and Dynamics. 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.
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.
As you look back over the past two years with Nadella at the helm, there is a clear path toward building intelligence into Microsoft's many platforms and features, connecting Microsoft’s products to data sources that can provide customers with timely and useful information, and leveraging the graph and machine-learning to develop services that can anticipate the information users want and actions they’ll take. The data provided through LinkedIn will help Microsoft enter a period of business intelligence hyper-growth.
In an article on PCMag.com, author Rob Marvin outlines a number of integrations that Microsoft will likely deliver right away:
Nadella has also talked about giving the Cortana digital assistant access to data from LinkedIn, which could make the platform more intelligent and help it leapfrog the competition at Apple and Google. Microsoft is not really talking about competitors at this point, but it is difficult to ignore movement in the space with regular updates from leaders and upstarts. Clearly, this acquisition is a big bet on the future of machine learning and Microsoft's intent to remain the leader of enterprise software and services.
The big question remains: How will this impact collaboration, if at all? According to Nadella in the Wall Street Journal, work is divided between the tools that information workers use to get their jobs done -- such as the Microsoft Office productivity applications and Office 365 -- and the various social networks that connect people personally and professionally. The LinkedIn deal will bring those two pieces together.
“It’s really the coming together of the professional cloud and the professional network” ~Nadella
For instance, connecting Office 365 directly to LinkedIn could provide depth to an organizational chart, or help attendees in a meeting to learn more about each another through Outlook or the new SharePoint People Cards. Microsoft’s Dynamics users would also see immediate benefits, giving them more visibility into the backgrounds or peers of potential customers by leveraging the LinkedIn data. And as content is being created, and projects are underway, teams will more easily be able to tap into the historical content and untapped knowledge of their networks through automated, machine-learning features that understand the context of your work and make relevant suggestions around content and people, improving the quality of your work as well as your speed of delivery.
We are entering an exciting era as partners of Microsoft. The Beezy team is already hard at work to leverage the best of what Microsoft has to offer within our Office 365 and SharePoint solution, and we look forward to leveraging all that LinkedIn has to offer.
If you have not yet seen our award-winning solution, and want to learn more about how Beezy is extending and enhancing collaboration and communication to help deliver your intelligent workplace, please sign up for one of our no-pressure demos today!