Microsoft’s Big Data Bet On LinkedIn
As a business owner and premium LinkedIn account holder, I value the focused data details they deliver on all of my connections. LinkedIn has always felt like the Facebook of the business world to me and since I don’t personally use Facebook, that makes LinkedIn all the more important to me. Aside from email, it’s my primary social outreach network for the people I communicate with 10-12 hours a day. As of Q1 2016, LinkedIn boasted upwards of 433 million members. Now that Microsoft has swooped in and bought Linkedin for $26.2 billion in cash, I can’t help but to feel a little worried about the future of LinkedIn and my nearly 5,000 connections. At the same time, I think I see where Microsoft is going with this big data bet on Linkedin.
So what’s the attraction?
Microsoft is smart enough to see the value in the customer base that LinkedIn provides as well as some synergies with it’s own offering. LinkedIn has been migrating away from banner ads and focusing more on sponsored content. Sponsored content are posts that specific companies pay to place in specific user feeds and on their own page. Sponsored content has been growing at the rate of about 80% over the past year alone and now represents some 56% of LinkedIn ad revenue. This makes sense as people and business leaders consume and value content more then ads. The migration we are seeing away from ads and toward sponsored content makes sense. Users are doing more on their mobile devices than ever before. Mobile platforms typically sport small screens – not the best solution for pushing small ads. Sponsored content melds more naturally with our workflows and can be read and digested on any platform.
So what’s the REAL attraction?
The core of Microsoft’s enterprise and consumer future is Office 365 and Cortana, their digital assistant. Cortana is an interesting product that provides AI so you don’t miss your next appointment, for instance. Data like that is pulled from a user’s device or Outlook Calendar app. But what about big data from LinkedIn? Most LinkedIn members profiles contain a wealth of information. Just look at Google; Google collects data on shoppers, location, search queries, email, device data, cookies and anonymous identifiers as well as personal data. It’s all a bit scary but Google can harness that big data and offer products, services, and yes, targeted content ads to users. Now look at the growth of Amazon that utilizes purchase history data for all of its customers and Facebook that capitalizes on its huge userbase for targeting ads. Meanwhile, Microsoft has been steadily moving away from its consumer base by killing off products such as their Surface Phone. They need to focus on the markets that have always earned them the most revenue – enterprise. Microsoft will surely capitalize on LinkedIn’s strong (B2B) Business to Business data.
The more data Microsoft has, the more it can directly use to feed machine learning in applications such as Office Delve which is part of Office 365. There are currently 1.2 billion Microsoft Office users and 70 million Office 365 monthly subscribers. With LinkedIn’s 433 million users Microsoft feels it can bring the two customer bases together and grow the business with the enormous amount of data at it’s fingertips.
So what are the risks ?
Besides spending a whopping $26.2 billion dollars cash, (the single largest acquisition Microsoft has ever undertaken) there are numerous risks that come to mind. Microsoft does not have the best track record with acquisitions:
2002 – Nervation $1.45 billion
2007 – Quantize $6.3 billion
2007 – Tellme Networks $800 million
2012 – Yammer $1.2 billion
2013 – Nokia takeover cost Microsoft over $7 billion
In fairness, the acquisition of Skype for $8.5 billion in 2011 seems to have turned out well for Microsoft and effectively doubled their user base to over 50 million since then. Acquisitions are costly, but shareholders get impatient when there is alot of cash and it is not being used to grow the business. This may be part of the reason that Microsoft is planning on keeping the LinkedIn distinct brand and independence which I agree with.
Are all those connections real?
I also wonder how current, and thus, valuable is the LinkedIn data such as email address? Often, when users set up their LinkedIn profiles, they use a personal Gmail or Yahoo email address as they don’t want their work email (or their boss for that matter) to see a job search. LinkedIn / Microsoft would still have the personal email of an individual but in reality unless someone is regularly looking for a job they infrequently check their personal email account. Most of my LinkedIn connections rarely publish their phone number or address since they are mostly with cybersecurity-minded business leaders that are sensitive with putting out too much information on themselves. But I would wager that this trend also applies to most users who value their privacy and security. LinkedIn already has access to premium member data because they provide complete billing information.
There are also a lot of fake LinkedIn profiles but all social media apps have their share. I would not even speculate on how many millions are fake, but I find it strange just how many beautiful female “recruiters” I regularly see on LinkedIn. This is tough to effectively police on any social network but I think it is important that LinkedIn address this better before more users leave the platform. With Microsoft acquiring LinkedIn, I do expect more focus on legitimate users and the security of all user data.
Corporate acquisitions used to be about re-branding and talent but these days, it seems more focused on our personal data. So long as we all understand the privacy and security trade-offs involved, we can hopefully avoid the gamble of things like identity theft, ransomware and spam. But it’s getting harder and harder to count the cards when the decks keep getting re-shuffled.
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