Jeff Weiner - CEO, LinkedIn
With the dust slowly settling on one of the biggest technology acquisitions of the year, eyes are now slowly turning away from Redmond, as the industry sizes up the long-lasting effects of the multi-billion dollar deal.
As reported by ARN, the $US26.2 billion deal represents a marriage of business services in a Cloud-focused economy, an acquisition of professional convenience.
But as the world awaits how Microsoft will utilise LinkedIn within the competitive marketplace, likewise it ponders on its wider-reaching impact, on customers, competitors and partners.
History shows that there have been few blockbuster acquisitions on this scale outside the professional services arena.
HP acquired Electronic Data Systems for $US13.9 billion, but never gained the synergies sought, and is now in the process of spinning out its Hewlett Packard Enterprise Services group to CSC for $6.9 billion.
From memory, the only other blockbuster acquisition that comes close is the $US19 billion acquisition of WhatsApp by Facebook, which provided the basis for Facebook Messenger, its mobile messaging platform.
Relative to Redmond dealings, Microsoft previously spent $US9.4 billion to purchase of Nokia’s mobile phone business, most of which the company has written off and the company also acquired Skype, the voice and video chat provider, for $US8.5 billion in 2011, alongside $2.5 billion in 2014 for Mojang AB, the developer of the “Minecraft” game.
While LinkedIn will operate as a stand-alone business, it offers Microsoft three new services lines it can sell to enterprises: talent management; learning management and marketing, creating a knock-on effect for market across the world.
“Over the last several years, Microsoft has awoken to the revenue potential inherent in understanding people - either through its own experience gained by selling cloud services or by seeing the explosive revenue growth of firms like Facebook who directly monetise the social graph of their members,” Technology Business Research Vice President, Stuart Williams, said.
As reported by ARN, the announced LinkedIn acquisition is all about the data - the professional social graph data - volunteered by members and captured by LinkedIn.
Data, especially validated data about individuals, is increasingly more valuable than the applications through which people work.
“Microsoft offers LinkedIn new routes to market and monetisation opportunities for the data,” Williams said. “The market forces driving the deal also compelled IBM to acquire the Weather Company, and for many competitors to partner with Facebook.”
Williams said Microsoft can use the social graph data to add value across its productivity, search, advertising and business software portfolio.
However, it’s biggest risk is in maintaining the good will of the membership.
“So long as members see the value of engagement, they will return, contribute and participate with others,” Williams added.
“If they feel that they are being turned into product without getting a personal return, then they will leave and the capital spent on the deal and all opportunity is lost.”
To be blunt, this is a huge challenge for Microsoft, who successfully built its consumer Xbox membership, but as Williams warned, the LinkedIn community is a different and more sensitive group.
Implications to competitors
For Williams, person-based data represents a premium, with each of the large software vendors racing to build out effective data-economies.
Consequently, CRM vendors such as Salesforce, SAP, Oracle and IBM are partnering with Facebook to gain access to its consumer-level personal profile data, whole Adobe is building an open data consortium that opts-in consumers across a collective of brands.
Furthermore, Salesforce previously made multiple acquisitions to build out its enterprise data portfolio, adding Jigsaw for corporate profile data, Dimdim for conferencing and Manymoon for content development.
Delving deeper, Google built its Google+ circles, but has failed to attract millions of subscribers, with IBM acquiring The Weather Company.
“Accessing personal data is different than accessing machine data in that people need to offer, participate and maintain the data,” Williams explained.
Williams said firms such as Slack - a cloud-based collaboration tool - are winning enterprise share since the network effect is easier to apply within the bounds of a business than across the global population.
As explained by Williams, building and maintaining a professional membership site requires securing personal information as well as needing to add business value.
“The skills are specialised and valuable - hence the premium paid for LinkedIn,” he added. “It is a never-ending task Microsoft will own.
“Once the acquisition closes, Microsoft will have 433 million new relationships to manage - and if it can pull off this trick - it will have stolen a march on all of its competitors except Facebook.”
Implications to partners
Previously, LinkedIn has either gone directly to subscribers or sold directly through its internal sales team which stands tall as a big change for Microsoft, who primarily works through partners.
While LinkedIn will operate as its own unit, Williams expects that multiple new pathways will open up for monetisation.
“Two direct pathways are, firstly, gaining access to LinkedIn data while not being a member, is a possibility - at the risk of angering members; and secondly, selling access to members for new productivity, sales and educational applications is a clear pathway,” he said.
Going forward, William believes partners, especially systems integration partners, will want to access the LinkedIn API in order to pull information into Dynamics and other applications.
“Microsoft should be wary about the use of member information,” he cautioned. “LinkedIn has been careful, but at the cost of becoming closed off from the application of the data.
“Developers, from analytics to machine learning to Cortana, will want to access the LinkedIn API. Adding new, person-based insights to existing applications is a strong incentive.”
Implications to customers
When the deal closes within the calendar year, Williams believes maintaining the trust and participation of the LinkedIn members is the greatest risk and potential reward for Microsoft in this acquisition.
“Microsoft will own the platform on which thousands of communities and relationships are formed and grown,” he explained. “Limiting or validating how personal data is used will be the key.”
For Williams, all uses of the data must, in the end, be useful to the members who volunteer and maintain their profiles and engagement.
“So long as Microsoft abides by the spirit of LinkedIn as a personal professional social network, it can use that data to add value to other offers,” he added.
