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Microsoft Acquiring LinkedIn for $26.2 Billion

On June 13th, Microsoft announced that it will be acquiring LinkedIn for $26.2 billion. The two companies described the acquisition as bringing together the world's leading professional cloud with the world's leading professional network - focused on the pursuit of a common mission centered on empowering people and organizations.

The explanation for the acquisition was essentially the combining of two market leaders with complementary strengths: LinkedIn is how people job search, grow skills, sell, and market. It's a key tool in the professional work space boasting 433 million members and 2+ million paid subscribers. Microsoft has more than 1.2 billion Office users, but it has no social graph and has in the past relied upon Facebook, LinkedIn, and others to provide that key connection. LinkedIn's solid social graph of professionals also matches most closely with the services Microsoft provides. 

* The Verge, 2016

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"This combination will make it possible for new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and Office suggesting an expert to connect with via LinkedIn to help with a task you're trying to complete," said Microsoft CEO, Satya Nadella. "As these experiences get more intelligent and delightful, the LinkedIn and Office 365 engagement will grow. And in turn, new opportunities will be created for monetization through individual and organization subscriptions and targeted advertising."

 

Nadella also said that the intent is to "accelerate LinkedIn's growth and the value it brings to its members with Microsoft's assets and scale," and evolve Office 365 and Dynamics by, "reinventing ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes."

 

4 things you need to know.

 

The acquisition is substantial for both companies. And many positive reasons are being cited in support of the move. Among them, the addition of LinkedIn strengthens Microsoft's enterprise collaboration stack in areas of expertise, contact management and content publishing. Since many large companies have been using LinkedIn as their informal organizational directory for years, formal integration with Microsoft back office technologies can only help.

 

1. The value of LinkedIn lies in its active user base and wealth of data

LinkedIn spans 200 countries with 105 million monthly active users, and 433 million registered overall. The company has about 60 percent of all traffic on mobile, and 45 billion quarterly page views. One could argue that the deal was primarily driven by a huge data set. But it is far more than that.

The plan is for Microsoft to leverage LinkedIn's social graph - an integrated sales tool coupled with its CRM products, which may seriously threaten competitors in professional cloud-based services.

Microsoft Dynamics CRM users will likely want to use LinkedIn's Sales Navigator to, according to Microsoft, "transform the sales cycle with actionable insights." -- basically, utilizing background information about users to help find leads, open conversations and close deals.

 

2. LinkedIn will serve as the central professional profile.

LinkedIn profiles will become a central identity across all Microsoft apps (Outlook, Skype, Office, as well as Windows) and a user's newsfeed will become an intelligent stream of data that will connect professionals to each other through shared meeting, notes, and email activity. What we end up with is the utilization of a strong social graph that is linked directly into machine learning and understanding.

The wealth of data that LinkedIn brings is expected to also aid Microsoft's digital ad unit target influential business-decision makers. It instantly elevates Microsoft in B2B marketing and advertising data authority for programmatic content aimed at professionals.

 

3. LinkedIn gains a competitive advantage.

The acquisition solves the question of how LinkedIn can compete with other companies that are building software on top of their social graphs, which threaten their market position. Initially, this was the direction that LinkedIn was moving in, but more recent problems with user and revenue growth, and a subsequent dropping share price, have resulted in the company slowing those efforts.

 

4. The Cloud at the center.

The larger play involves "machine learning." While most consumers experience machine learning as voice-based artificial intelligence (AI) (Apple's Siri, Amazon's Echo, Microsoft's Cortana, IBM's Watson), it is also the foundation of most emerging technologies, from the Internet of Things and self-driving cars to anti-fraud and security systems. As Microsoft evolves from being a packaged software provider to a cloud services provider, machine learning is what the company aspires to in order to drive its core value to professionals: productivity.

Ostensibly, the LinkedIn social graph and user base would play a key role in training an AI on workplace productivity challenges such as expertise location and team dynamics to parse out interests, passions and abilities from user's profiles, determine the organizations in which they thrive, rate the content they've produced, discern their values from their background and influences, and calculate hundreds of other factors. The key to making this a reality is in leveraging LinkedIn's huge database of text-based content and transforming it into a resource that is searchable, discoverable and applicable to an AI environment.

 

Conclusion 


LinkedIn owns your professional identity because you have shared your business and personal information with it. It knows who you are, what you do, where you have worked, as well as your interests and skills.  

433 million people have done the same making LinkedIn the professional human genome project, a live map of the world's career development. By owning and mapping business identity, LinkedIn has sequenced the business world with an almost real-time database of companies' most important assets, their employees.

This layer will only strengthen each and every one of Microsoft's business lines to drive their core value of productivity. Products matter, but people matter more. So Microsoft's offerings will be more personalized and more widely distributed to the captive audience that is LinkedIn's user base.

Owning the world's largest, most used and most valuable professional network is worth $27 billion. Our bet is that it may be worth even more down the road to Microsoft.


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