Coverage: Microsoft buys LinkedIn for $26 billion

Tech giant Microsoft Corp. agreed to acquire social media company LinkedIn in a deal announced Monday for $26 billion.

Kevin Kelleher of Time has the news:

The stakes are high for Microsoft and LinkedIn. This is one of the biggest tech M&A deals ever, topping even Facebook’s $22 billion purchase of WhatsApp. On paper, there is indeed reason for initial excitement about this deal, largely because there is little operational overlap between the two companies. Yet they have complementary, even converging, strategies.

This means jobs cuts could be minimal, and that LinkedIn can remain independent inside Microsoft – as WhatsApp and Instagram have within Facebook – while the potential for each company to help the other grow is evident. But reaching that potential depends on how exactly the two are integrated over the next couple of years. The devil, as always, will be in the details.

In announcing the acquisition, Microsoft and LinkedIn summarized the benefits as meshing LinkedIn’s 433 million members with the professional cloud that Microsoft CEO Satya Nadella has been building for Microsoft’s future. LinkedIn’s stock has tumbled this year as it seemed to run dry of ways to monetize its network. Microsoft has been looking for ways to get more people using cloud apps like Office 365, Skype and Cortana.

Among the examples Nadella and Weiner gave in a conference call with investors: LinkedIn could give Microsoft’s productivity software the social-network piece it’s always lacked, while Office and Outlook could make it easier to keep your LinkedIn profile updated. LinkedIn’s newsfeed could draw on, say, your Calendar schedule to become more engaging, which could in turn boost its ad revenue. Cortana could scour your LinkedIn network to create a quick brief about who’s attending your next meeting.

Timothy Lee of Vox writes about why Microsoft was attracted to LinkedIn:

Buying LinkedIn makes good sense for Microsoft too. It represents one of the most significant steps in Nadella’s effort to reinvent Microsoft from the leading PC software maker to a company that sells business technology services more generally.

Microsoft’s initial success came from selling software for PCs — most notably the Windows operating system and Office productivity suite. During the 1990s and 2000s, Microsoft built on its dominance of the PC market by selling a growing portfolio of licensed software that runs on corporate servers — like the Exchange email server, SQL Server database, and IIS web server.

But over the past decade, Microsoft has faced two big disruptive threats. First was the online app revolution led by Google. People increasingly used online products like Gmail and Google Docs instead of desktop software like Microsoft Outlook and Microsoft Office.

Next came the mobile revolution, led by Apple. People increasingly used smartphones and tablets running Apple’s iOS — or Google’s Android — instead of Microsoft software.

Kurt Wagner of Recode writes about why LinkedIn had to sell itself:

While recruitment services are the big sales driver at LinkedIn, advertising represents roughly 18 percent of LinkedIn’s business, a significant segment that has been trending in the wrong direction. When LinkedIn reported Q4 earnings earlier in February, one of the concerns was that its ad business grew just 20 percent for the quarter year over year; that compared to growth of 56 percent in the same quarter the year before. Research firm eMarketer predicted LinkedIn’s U.S. digital ad revenue would fall from 35 percent growth in 2015 to less than 10 percent growth this year.

In other words, LinkedIn wasn’t selling ads the way people expected it to. And joining forces with Microsoft might help, since LinkedIn may now be able to sell ads alongside Microsoft Office’s suite of products that reach a lot more people than LinkedIn’s current user base. Or, at the very least, Microsoft may be able to drive more users to LinkedIn, giving the company more eyeballs to entice marketers.

LinkedIn didn’t grow much in 2015 and it was a problem to investors used to more from the well-liked Weiner. The company continued to add more members, or people with LinkedIn profiles, but the number of unique visitors didn’t grow from Q1 to Q2 and then again from Q3 to Q4. The people who were visiting in Q4 were also looking at fewer pages on the site (see the ad issues mentioned above).

LinkedIn’s growth rebounded at the beginning of 2016, but as we’ve learned from Twitter, growth problems tend to stick around and are harder to fix going forward. If claims by Weiner and Microsoft CEO Satya Nadella bear out, the deal should be able to help grow LinkedIn’s audience through a combination of integrations with Microsoft Office and a possible subscription tie-up.