With many reasons why the acquisition makes sense and has the possibility of being beneficial for both companies, there’s always the chance that it will be nothing more than a big failure.
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To begin with, LinkedIn is a promising business on its own merits.
LinkedIn Corp.’s stunning .2 billion price tag led to speculation that Microsoft may have been caught up in a bidding war in order to acquire the professional networking site. Member page views grew 34%, so engagement trends look quite healthy, and revenue during the quarter jumped by 35%, to $861 million.
Over 90 percent of Facebook’s revenue stems from advertising, but almost 60 percent of LinkedIn’s revenue relies on fees charged from companies looking for recruitment solutions, and advertising contributes less than 20 percent of its revenue. LinkedIn, meanwhile, is the only major social network for “professionals” rather than consumers. This creates a self-sustaining cycle of growth and increasing customer value. Microsoft must work hard to truly exploit the apparent advantages of linking up with LinkedIn.
Under the terms of the deal, Jeff Weiner will remain the CEO of LinkedIn and will report directly to Microsoft CEO Satya Nadella. It’s safe to say that a lot of LinkedIn’s 433 million members are familiar with Microsoft’s products, such as the Office productivity suite.
Today at 11:45 a.m. ET, the two companies will hold a joint call to further elucidate the new deal.
The problem with this approach is that the benefit to both products gets diluted and the integration with Office 365 reduces a product’s appeal when that isn’t the product you are using. In return, this new merger will provide an opportunity for monetization for both organizations and individual subscriptions using targeted advertising. Overall, Microsoft customers are actually less career-minded than the average American, let alone LinkedIn customers.
Paul Haswell of Pinsent Masons, the law firm behind Out-Law.com, said that the most expensive acquisition in Microsoft’s history made sense in the context of the company’s positioning as the best-known provider of productivity software for businesses. In addition, the Washington-based company has stated that LinkedIn will assist its digital assistant Cortana, according to Recode.
Nevertheless, the acquisition raises the question of how Microsoft will deal with LinkedIn’s user profiles in the future, the most valuable asset it is seeking from the deal. Microsoft offered as much as $55 billion, but Benioff was looking for something closer to $70 billion.
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In a press handout, Microsoft emphasized the cross-sale opportunities between LinkedIn content and Microsoft applications.
