By Gaurav Pradhan
On June 13th, 2016 – A very significant event happened in the Professional Social Network as Microsoft announced acquisition of LinkedIn for $26.2 billion. Microsoft is willing to pay a value of $ 196 for each share of LinkedIn.
This has raised a lot of eyebrows, because there are still some unanswered questions related to Microsoft’s earlier acquisitions. But for now, let’s understand this acquisition deal and try to foresee its future.
Microsoft’s Strategy behind acquiring LinkedIn
Microsoft has tried to make a mark in Social Enterprise Strategy, with the previous acquisition of Yammer of $ 1.2 billion and Skype for $ 8.5 billion. They have been already integrated with their enterprise applications – SharePoint, Microsoft Office, Office 365 and Microsoft Dynamics. This also gave a significant user base of 4 million registered users of Yammer and 330 million monthly active users of Skype. The collaboration features of Yammer and VoIP capability of Skype have been very much beneficial for Microsoft as it got integrated with its enterprise products.
LinkedIn has presently approximately 400 million registered users, which can be a really good base for Microsoft to go ahead with the idea of ‘Social Selling’ of its products.
LinkedIn can be a perfect platform for users to try out the Microsoft products like MS Office, OneDrive, Skype etc. along with regular use of LinkedIn as a professional Social Networking. These features can be made available as a subscription for the user or also can be available for free.
Along with that Microsoft will also ride on the present day business model of LinkedIn i.e. Recruitment Ads and Premium Subscription for users. The recruitment end ‘Talent Solutions’ accounted for $ 2 billion out of the overall revenue of $ 3 billion recorded by LinkedIn in 2015.
Challenges Lying Ahead of Microsoft
Microsoft has a history of big acquisitions but they have not been able to bring synergy between the acquired business/product and parent.
One such acquisition can be cited as Yammer, which got acquired in 2012. It also got integrated with Microsoft product. But it didn’t take off the way it was expected as there were on 8 million users who got on-board after a year of the acquisition.
LinkedIn can be a very risky acquisition as it was already suffering with some inherent problems. It was showing poor growth numbers and lost over half the share value within two months of getting listed. One main reason of it can be it’s unclear revenue generation strategy, which led to diminishing business value despite of providing service. Microsoft have to re-look into LinkedIn’s revenue strategy keeping in mind that the brand value and current engagement with users and other stakeholders should not getting disturbed. If this issue is not addressed in time, LinkedIn can become a very costly acquisition for Microsoft.
Future Ahead for both Microsoft & LinkedIn
This acquisition has created a ripple in Social Enterprise sphere. Things will not be the same for other players. Companies such as Facebook and Google, who are trying to operate in similar segment will have to rethink their strategy. If Microsoft is able to leverage LinkedIn’s database, they will have a stronger edge over their competitors. But for that Microsoft has to find ways to establish synergy with LinkedIn and ways to use it for user engagement and revenue growth.
We can only hope that Microsoft will be able to tame this white elephant, else it can be a possible stepping stone for one more steep falls experienced by Microsoft in earlier acquisitions.
The New Yorker – Why Microsoft Wanted LinkedIn
Business Insider India – Here’s what Wall Street thinks of Microsoft buying LinkedIn