Economic Graph: Why Microsoft bought LinkedIn?

“You might feel a sense of excitement, fear, sadness, or some combination of all of those emotions. Every member of exec team has experienced the same, but we´ve had months to process”
Jeff Weiner, LinkedIn Ceo

LinkedIn was bought for $26.2 billion in an all-cash deal this week. It is one of the biggest acquisitions this year and the biggest acquisition in the history of Microsoft. Failure rate of mergers and acquisitions in general is somewhere between 70% and 90% and Microsoft has not really been an exception. This deal might still actually make sense. Below I present some of the main points why Microsoft bought LinkedIn.

“LinkedIn will become the social fabric across all of Microsoft”
Satya Nadella, Microsoft CEO

Data is power
Firstly, Microsoft is mainly buying access to the lucrative professional audience. LinkedIn has 433 million users of which pretty much everyone is on their target audience. LinkedIn will be run as a separate entity (a bit like Instagram within Facebook), but naturally there is vast amount of insights to be gained from the platform that would benefit Microsoft in multiple ways (product development etc.). Microsoft will want to create an economic graph, alike to Facebook´s social graph but with people with money.
economicgraph
Better productivity: Goodbye work-life balance
Microsoft has been aggressively pushing their cloud solutions. The first possible use cases Satya Nadella mentioned in his memo were around connecting Office 365, Dynamics and LinkedIn database. You could for example get articles in LinkedIn newsfeed based on the actual project you are working on. Or Office could suggest you to connect with expert to connect via LinkedIn to help you complete a task you are working on. When you are going to a new business meeting you would get automatically the background information from LinkedIn. Great functions, but are they worth the $26 billion price tag?

LinkedIn as a CRM Platform
Currently Microsoft is at fourth place in CRM software, behind Salesforce, Sap and Oracle. Merging databases with LinkedIn could bring Microsoft much needed advantage in this field. Of course around 75% of CRM implementations fail, but that also means that there is target market not particularly happy with their current products.

This deal might be really good thing for the future of LinkedIn. The platform has not really evolved from recruiting site, which is a challenge if majority of your audience is not actively looking for a job. Although some argue that LinkedIn is a content company, only 25% of LinkedIn users return every month to the site. Connecting with Microsoft might give it a boost that it needs to stay relevant in the competitive social media space. Twitter could do with similar boost.

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