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Microsoft’s acquisition of LinkedIn is an entree into services

I’m going to try something new. I’m not in an environment where I can write a full blogpost about Microsoft’s planned acquisition of LinkedIn for $26.2B. But, rather than not commenting at all, I’m going to post a few thoughts for your consideration:

  • Everyone will say this is about Microsoft entering the enterprise social media sector, much the way they bought Yammer to enter the enterprise collaboration space. Of course, this is true. But it’s not mutually exclusive from other longer-term strategies.
  • I think the significance of this acquisition is more about Microsoft entering the services space.
  • This is the first Microsoft purchase of a non-software/hardware company that I can think of.
  • Microsoft sees what Apple has built, and it clearly sees their pivot into a services company. iTunes, App Store, iCloud, Apple Pay, … these are where Apple pegs its future, as existing customers will continue to buy from them over and over without the self cannibalization effects of their products and software. No matter how luxurious, all software and hardware eventually become commodities. If Apple realizes that, then Microsoft surely realizes that.
  • LinkedIn owns some of the most valuable data about enterprise consumers out there. They’ve tried, fairly unsuccessfully, to leverage that into an advertising business. Microsoft thinks it can do better. I believe Nadella can.
  • While advertising may not have worked completely successfully for LinkedIn as of yet, there are many more ways to leverage this data (including better advertising models). One example is their Sales Navigator service. Imagine that combined with Microsoft Dynamics. That’s just one of many options.
  • This doesn’t even touch on the media/publishing aspect of LinkedIn, which has yet to really be tapped revenue-wise. While many traditional publishers are throwing their hands up as they try to figure out how to pivot in a digital world, Bezos, Zuckerberg, and now Nadella are not investing in digital publishing because they’re fools. There’s a lot brewing here. But subscription models ain’t it…

Those are my high-level thoughts. I’d love to hear yours.


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