In 2007, Microsoft attempted an acquisition of Facebook for $15 billion. But it failed, and the firm ended up picking up a meagre 1.6 per cent stake for $240 million. That was what experts view as Microsoft’s first attempt to expose itself to social networking, which commands millions of eyeballs for targeted advertising.
Microsoft has been associated more with personal computers and its Windows operating system than with internet-based services, especially in India. On Monday, the firm agreed to pay $26.2 billion to acquire LinkedIn, the world’s largest professional networking community. While this is seen as a success for Microsoft in getting a share of the social media pie, the deal also brings a lot on the plate for a slackening LinkedIn.
Since Satya Nadella took over Microsoft as its CEO, the company’s alignment has seen a shift towards professional enterprise products and services. Nadella’s intent was made clear in his first email to Microsoft employees as CEO in February 2014.
“The coevolution of software and new hardware form factors will intermediate and digitise many of the things we do and experience in business, life and our world. This will be made possible by an ever-growing network of connected devices, incredible computing capacity from the cloud, insights from big data, and intelligence from machine learning,” Nadella had written.
LinkedIn brings with it 400 million users and over 100 million active monthly users, which would act as a booster for services like Office 365 and Dynamics on which Microsoft is pegged to be placing huge bets.
“LinkedIn has the biggest social network of professionals such as job seekers, recruiters, human resources, etc. Microsoft will try to position two of its products — Office 365 and Dynamics — in a way that LinkedIn gives a far wider reach to Microsoft for these professional products,” said Gartner analyst Vishal Tripathi.
Nadella also made it clear that LinkedIn would bring in a complementing facilitation to Microsoft’s own products. “This deal is all about bringing together the world’s leading professional cloud and the world’s leading professional network. If you think about how people work today, it’s split between these two worlds. they are using office on a daily basis, they are using systems like Dynamics for their CRM (customer relationship management) and human capital management and then of course, they are using the professional network,” Nadella told CNBC.
However, the ball does not stop rolling at Microsoft’s court. The firm said that LinkedIn would continue its core operations independently. After all, those are what prompted Microsoft to offer such a premium for LinkedIn’s stock. On the face value of it, an alliance with Microsoft is indeed expected to bring in financial stability for LinkedIn that was lacking due to the laggard job market led by global economic slowdown, and its practices of aggressive stock compensation to employees.
However, if we delve deeper, the acquisition is likely to open up new vistas for LinkedIn in the form of software development prowess that Microsoft brings to the table, which LinkedIn was beginning to miss over the past few years.
“Once there is a platform that brings together the professionals with Office Suite, there is a lot of opportunity for the developer community that can use APIs and create value added services both of businesses and professionals,” said R Chandrashekhar, president of industry body Nasscom.
“Microsoft brings in a wider clientele and access to a wider business community. As far as LinkedIn is concerned, being on a connected platform allows the developer community to add value. It’s easy to see the kind of new services that this joint platform can provide. You can rope in thousands of developers who will build different kinds of apps that will add value to the services you provide,” Chandrashekhar added.
LinkedIn itself has catered to a niche segment of professional users, thereby losing out on the numbers game. A deal with Microsoft could also be seen as a step in the bigger ocean it was deprived of. LinkedIn’s CEO Jeff Weiner in his e-mail to staff on Monday, said: “Imagine a world where we’re no longer looking up at tech titans such as Apple, Google, Microsoft, Amazon, and Facebook, and wondering what it would be like to operate at their extraordinary scale — because we’re one of them.”