In June, Microsoft announced that it would acquire business-oriented social network LinkedIn for $26.2 billion. The acquisition has now been approved by regulators.
Microsoft CEO Satya Nadella has said that the company is a fit with the company’s “identity and purpose”. But what is Microsoft actually getting from the deal?
Data has been the main focus of discussions around the acquisition. The buy-out gives Microsoft access to the data of 433m users, of which 105m are active every month.
Like other social networks, LinkedIn holds crucial personal information about people, in this case including their names and job titles.
This data is valuable to Microsoft for simple marketing reasons: the ability to advertise products to these users based on their preferences.
However, it is also uful intelligence that Microsoft can build into its products.
Microsoft’s push into the artificial intelligence will make crucial use of data, for example, with the programmes analysing personal information and making automated decisions based on this.
The access to user data was raised by Salesforce as its main objection to the deal. Salesforce had been another possible buyer of LinkedIn, but lost out to Microsoft in a bidding war which forced Microsoft to pay nearly $6bn more for its acquisition.
As Nadella points out, most of Microsoft’s apps and services are first and foremost business-oriented.
In this context, being a business-focused social network, LinkedIn fits comfortably into the Microsoft suite.
Business customers of the Office apps will be able to purchase social networking services through the same provider. There is potential for Office documents to be interoperable with the social network: for example, CVs could be created on Word and sent through LinkedIn.
Let’s not forget the basics here: buying out LinkedIn creates a new revenue stream for Microsoft. LinkedIn made $3 billion in revenue in 2015.
Social networks are primarily valuable for their advertising revenue. Due to the information available about the users of the platform, companies can use the platforms to serve up targeted marketing to them.
Advertising on LinkedIn focuses on job postings. Since potential employees on the site usually advertise the field they work in, the jobs can be directly targeted at those who might be likely to apply.