Microsoft announced a deal last week to acquire LinkedIn for $26.2 billion. That’s a lot of money.
What in the world will Microsoft do with a social media platform that caters to recruitment? Is it a good idea and how will it affect the rest of us?
These are some of the questions that most had when the deal was announced.
Ruth Reader of Fast Company seems to think it is a good idea.
“In the world of enterprise business and the burgeoning software-as-a-service industry, Microsoft seems to be trying to keep pace with Google and Amazon.”
Andrés Cardenal of Montley Fool thinks it’s a good move as well. One reason is that LinkedIn is a solid, self-sustaining business in its own right. Cardenal says:
“LinkedIn is a textbook example of a company benefiting from the network effect. Individual users and companies searching for job candidates attract each other to the leading platform in the business, and the service becomes more valuable to both parties as the network gains size over time. This creates a self-sustaining cycle of growth and increasing customer value.”
What will we get with this acquisition? What will emerge from this acquisition? What kind of model?
Benjamin Gomes-Casseres of the Harvard Business Review discusses three different possible models.
The first possible model, he says, is the strategic remix. Gomes-Casseres says, “In this model, the acquired assets and capabilities are combined with existing assets to generate new business or to save costs.”
The second model is private equity acquisitions. “The model here is to buy low and hope to sell high after injecting the business with resources,” he says.
The final model is what he refers to as the Google model, or the Alphabet model. This model is a hybrid of private equity and the strategic remix models.
Is purchasing LinkedIn a good idea? The Economist weighs in and says it may be problematic.
“There are three hitches in Microsoft’s plans,” the article says, the first being financial.
The article continues, “It is shelling out the equivalent of around $260 for each monthly active user of LinkedIn. To keep shareholders happy, it will need to add users to LinkedIn’s platform more quickly or be clearer about how it can make more money from their data.”
The second hitch, the article claims, is operational.
The Economist points to less than stellar deals with aQuantive purchased in 2007 and Skype which was purchased in 2011. Neither purchases have worked well for Microsoft, but, alas, this was before Satya Nadella was with the company. His claim to keep the company independent may actually happen.
The third hitch, according to The Economist, is behavioral. LinkedIn already is viewed negatively by some companies because of the platform’s use by recruiters to poach staff. Thus, the article says:
“They will not want to let LinkedIn further embed itself at their companies. Already some large firms block or restrict access to LinkedIn on their networks. Users may also grow uncomfortable if Microsoft deploys their data elsewhere and could stop using the service. Mr. Nadella has acknowledged they will have to treat what they know about users ‘tastefully’.”
You can read the article here.
Thoughts from a former employee
Leo Polovets is a former employee of LinkedIn. Plovets was a software engineer in 2003. He gave an answer to a question on the acquisition of LinkedIn by Microsoft on Quora, and Forbes used it as an opportunity to create an article.
According to Polovets:
“For me, there are two aspects to this question: what do I think about LinkedIn being acquired in general, and what do I think about them being acquired by Microsoft specifically.**”
He delves into each question.
He explains why Microsoft makes more sense than some of the other big tech companies, gives a little background on the history of his time at the social networking site, and discusses how he feels about the merger. It is an interesting take on what an early employee thinks about the situation, and, as he says, he has no insider knowledge of the situation.
You can read the article on Forbes here.
What are your thoughts about the acquisition? Will you keep using LinkedIn? Do you have any apprehensions in the wake of the acquisition?