​Why is Microsoft buying LinkedIn?

​Why is Microsoft buying LinkedIn?

Microsoft’s acquisition of LinkedIn is an acquisition of professional convenience.

Satya Nadella - CEO, Microsoft

Satya Nadella - CEO, Microsoft

After shifting through the opening pages of the presentation notes, with a crackling backdrop of executives talking analysts and media through the acquisition over conference call, one thing remains clear.

Microsoft’s $US26.2 billion acquisition of LinkedIn is an acquisition of professional convenience, a marriage of business services in a Cloud-focused economy.

On paper, and told through marketing rhetoric, it’s the story of the world’s leading professional Cloud, meeting the world’s leading professional network.

But in short, Redmond sees untapped potential in driving increased engagement across LinkedIn, Office 365 and Dynamics, in a move designed to boost sales of its business and email software.

The acquisition exposes Microsoft to more than 433 million members worldwide, billed as a precious commodity in a data-driven and deeply connected world.

“That's a valuable asset that can be deeply integrated with a number of Microsoft assets such as Office 365, Exchange and Outlook,” CCS Insight Head of Research, Ben Wood, when talking to the BBC.

“That said, Microsoft has stated that the company will continue to operate as an independent business, so we'll have to see how deeply the integration occurs.”

Market potential

As outlined during the presentation, while Microsoft and LinkedIn are highly complementary, both companies participate in unique total addressable markets, reaching $US200 billion and $US115 billion markets respectively.

In addition to TAM growth, Redmond believes the likelihood of seizing more of the industry will increase through differentiated experience, which rises 58 per cent to $US315 billion through the acquisition.

“We’ll accelerate engagement and usage through a variety of different business models, subscriptions for individuals, subscriptions for organisations as well as advertising,” Microsoft CEO, Satya Nadella, said during the conference call.

“So that’s really the opportunity ahead. Think about how Dynamics, for example, gets enhanced with LinkedIn Recruiter, how Dynamics gets enhanced with Sales Navigator and social selling.

“How you can take some of the learning solutions of LinkedIn and then build out the full learning management solutions. The marketing solutions that LinkedIn has and our distribution.”

But then, of course, not to forget, Office 365 usage, which Nadella said remains “at the core” of Microsoft, and the LinkedIn usage.

“So this is how we realise that total addressable market,” Nadella explained. “And our share of this total addressable market is just nine percent, so we see plenty of opportunity going forward.”

With regard to the LinkedIn’s membership figures, now up to north of 433 million, China remains the company’s fastest growing market, which is not surprising given the size of the addressable opportunity there.

“One in five of the world’s knowledge workers and students, pre-professionals, if you will, reside within China,” LinkedIn CEO, Jeff Weiner, added. “So that continues to be a focus area for us.”

Weiner said LinkedIn currently has 105 million monthly actives taken from its worldwide pool of members, with such year-over-year growth rate reflecting an acceleration not only in mobile but desktop as well.

“It’s a byproduct of the recent investment we made in a re-imagination of our mobile application,” Weiner explained. “You can see the carryover effect in terms of the growing engagement in the section below that.

“Mobile now accounts for about 60 percent of our traffic, and we continue to expect that to grow. And talent solutions comprises roughly two-thirds of our overall business.”

Furthermore, Weiner said 2015 was up 41 percent year over year, with sponsored content within its marketing solutions line continuing to be the fastest growing business at scale.

Connecting the professional world

By the numbers, Microsoft has over 1.2 billion users of Office, now over 300 million active devices running Windows 10, 70 million monthly active users of Office 365 and eight million paid Dynamics seats.

In comparison, LinkedIn taps into a pool of 433 million members, of which 105 million are active monthly and two million are paid subscribers, accessing over seven million active job listings, nine million company pages and over 50,000 university pages.

For Nadella, by connecting the professional Cloud and network of both Microsoft and LinkedIn, the combined entity has the potential to accelerate the realisation of the global economy.

“What we have at Microsoft today is what we refer to as the Microsoft Graph, where people and their relationships, their calendars, their work artifacts, their projects, as well as what’s inside of business systems, whether it be leads and prospectives, all of that is connected as one information graph,” he said.

“And, of course, LinkedIn has a similar graph. It is about the professional network. It’s about you, your job history, your skills, the people you know in your profession.

“And if you connect these two graphs, that’s when the magic starts to happen in terms of how digital work gets completed. We really can transform the life of professionals in terms of completing it.”

When merging Microsoft’s corporate graph with LinkedIn’s professional graph, Weiner said the end result is a digital mapping of the global economy, which envisions a profile on LinkedIn for every one of the three billion members of the global workforce, a digital representation for every company in the world, somewhere on the order of between 60 and 70 million companies, when including small and medium sized businesses.

“A digital representation for every one of the job availabilities made possible by those companies, on the order of 20 million-plus,” Weiner explained.

“Digital reflection representation of every skill required to obtain those jobs, and through our Lynda acquisition the coursework to make that possible, a digital profile for every university or higher-education organisation, vocational training facility that enables people to acquire the skills they need to get the jobs offered by those companies.

“And then lastly, a publishing platform that facilitates the sharing of professionally relevant knowledge between individuals, companies and universities to the extent they’re interested in doing so.”

Going forward, Weiner said the goal is to “take a step back” and to allow capital, all forms of capital, intellectual capital, working capital and human capital to flow to where it can best be leveraged and in so doing help transform and lift the global economy.

Illustrating potential - Office 365

When delving into how the usage of Office 365 and LinkedIn will help drive greater engagement on both sides of the acquisition, Nadella started with the “most obvious” example, centred around the concept of profile.

“LinkedIn essentially becomes the social fabric across all of Microsoft, whether it’s in Outlook, in Excel, or Skype, or PowerPoint, or Word, or SharePoint,” he said.

“Now you have the ability whenever you’re looking up a contact not only to see that contact with the information that’s contained in Active Directory, but you can get at the full richness of their information in the professional network.

“And who are all the others in their professional network. So that’s sort of what we mean by the social fabric of your digital work and Office 365.”

Another scenario, as Nadella explained, is the newsfeed, the fastest growing engagement part of LinkedIn.

“Imagine that feed being informed even by the projects you’re currently working on, the calendar information, essentially all the meetings into the next month that you have,” he said.

Nadella said the relevance of that feed, in utilising Artificial Intelligence and machine learning technology from Microsoft, represents an ongoing opportunity for the vendor, tapping into one of the fastest growing businesses in LinkedIn.

“Of course, the next one is Cortana,” he added. “Just imagine you’re walking into a meeting and Cortana now wakes up and tells you about the people you’re meeting for the first time, but tells you all the things that you want to know before walking in and meeting someone, because it has access to the professional network.

“Cortana is about knowing everything about you, your organisation, the world and now the professional network.”

End-user benefits aside however, Nadella said the deal represents business process usage, through CRM, HR, talent management and learning.

Illustrating potential - Dynamics

Historically at LinkedIn, the company’s overarching value proposition has been focused around connecting to opportunity, a statement which rings true for both members and customers.

“But I’m going to turn now towards customers,” Weiner added. “And historically it’s been about several different areas of focus, hire, market, sell and learn.”

Consequently, Weiner believes this combination has the opportunity to tap new addressable markets, creating a new level of differentiation in the marketplace.

With regards to social selling, a concept LinkedIn has been focused on for a few years through its sales navigator tool, the acquisition provides a wider platform to provide business intelligence to sales people, thus enabling them to take selling to social selling.

Jeff Weiner - CEO, LinkedIn
Jeff Weiner - CEO, LinkedIn

“It means being able to identify exactly the right prospect by virtue of leveraging data flowing through LinkedIn on a proprietary basis,” he said.

“It’s connecting with that prospect, turning cold calls into warm prospects by virtue of leveraging your network to get the introduction, which can make all the difference in the world.

“It’s tapping an understanding of who that prospect is to best engage with them and reach out to them and all of this is done in service of greater sales efficacy and closing the deal. Now we’ll be able to take that business intelligence tool, sales navigator, deeply integrate that into Dynamics and CRM and we believe we can change the game that way.”

In turning to organisational insights and transformation, Weiner told analysts that LinkedIn possesses “arguably the most unique and proprietary set of insights in the world of recruiting.”

“As a result of that we’ve been able to transform and disrupt the way recruiting works, specifically able to scale what we call passive candidate recruiting, which has disrupted the industry in a significant way,” he claimed.

“We are also able to provide insights to customers and a show stopper historically has been what we call talent inflow and outflow.

"So you’ll sit down with a company and their executive team, the CEO, at an executive briefing and we’ll show them where their talent is going to, in terms of the competition, where the talent is coming from.”

Looking ahead, Nadella said plans are already in place to use the Microsoft field and distribution channel to scale the LinkedIn business, in a move to reach more audiences and customers.

“We have a scaled cloud infrastructure; we fully expect LinkedIn to be able to use that stack,” he added.

Follow Us

Join the New Zealand Reseller News newsletter!

Error: Please check your email address.

Tags MicrosoftCloudLinkedInsocial media


Show Comments