Microsoft Acquires LinkedIn: A $26 Bln Investment With An Eye on $315 Bln Market

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The Windows behemoth, Microsoft Corporation (NASDAQ:MSFT), is set to strengthen its social media presence with the acquisition of LinkedIn for $26.2 billion. Microsoft is reportedly buying LinkedIn for $196 per share. The deal is slated to be completed by the end of the year and is the costliest acquisition by Microsoft till date overshadowing the $19 billion dollars that Facebook paid to acquire WhatsApp.

Jeff Weiner will remain the CEO of LinkedIn and will be reporting to Satya Nadella, Microsoft CEO. Reid Hoffman, chairman of the board, and Weiner both are ecstatic citing the deal. Microsoft has said that the company is committed to maintaining LinkedIn’s ‘distinct brand, independence and culture’.

This is the largest acquisition ever done by the Microsoft till date. Back in 2013, the company had acquired  Nokia for $7.6 billion and Skype in 2011 for $8.5 billion. Investment in Nokia, however, proved to be a disaster for the Windows behemoth.

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Nadella sees it as the merger of world’s largest cloud platform and world’s largest professional social media platform. Weiner emphasized that from the beginning LinkedIn platform concentrated on a better network of professionals which will eventually harness their productivity and success. He also looked enthralled with the acquisition as he believes it is an opportunity to change the way the world works.

“The LinkedIn team has grown a fantastic business centred on connecting the world’s professionals.” Satya Nadella, CEO – Microsoft.

Microsoft has earlier invested around $250 million in Mark Zuckerberg’s Facebook before it went public. The investment is worth nearly $3.4 billion now. Since then the Windows giant had a hard time piercing the Facebook-dominated-world. But this is not the first investment for Microsoft in business networking; earlier Microsoft acquired Yammer for $1.2 billion, a social networking firm for enterprises.

The rising number of social media networks like Snapchat has pushed LinkedIn downwards. According to Statista, Facebook, undoubtedly dominates the charts with 1.59 billion monthly active users. LinkedIn has to expand its network through as the competition is intensifying at a tremendous rate.

LinkedIn Growth So Far

LinkedIn is serving 200 countries across the globe and boasts a whopping 105 million active users monthly. Registering 19% YoY growth in 2016, the professional platform now houses 433+ million registered users worldwide. The most striking feature of LinkedIn is its staggering 7 million plus job listings which have grown by 101% over the past year. 60% of the total traffic on LinkedIn is through mobile devices.

The SEO (Search Engine Optimisation) ranking of the professional social media giant is much higher due to 45 billion quarterly page views. The revenue rate is ecstatic for LinkedIn as the Professional social network registered 35% YoY surge in its revenue amounting to $3 billion last year. On the other hand, with the acquisition of LinkedIn, Microsoft now has $315 billion worth of Total Addressable Market (TAM).

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Looking into Microsoft, the Windows’ giant boasts 1.2 billion Office users and 300 million Windows 10 monthly active users.

Mutual benefits?

Microsoft’s over-eagerness can be deciphered by citing the buyout numbers, $26 billion is huge money and it clearly signals the desperation of Bill Gates’ company to expand its wings on the social front.

According to Nadella, the deal will provide a nitro boost for Microsoft’s cloud network especially Office 365 and Dynamics as LinkedIn has the largest professional user base. Apart from that, the focus will be on improving productivity, marketing, selling and ‘talent management business process’ of the professionals.

The letter also provided the underlying reason behind the acquisition. Firstly, LinkedIn, in turn, will help in expanding Microsoft’s businesses especially its cloud network. Secondly, the professional network is at par with the current technological trend and above all the aspirations of both the companies are parallel to each other.

Most importantly, the combination of LinkedIn, Office 365 and Dynamics will enhance the user experience like LinkedIn NewsFeed that will serve the ‘articles based on the project you are working on’. The most important aspect is the revenue which will be catered through ‘individual and organisation subscriptions and targeted advertising.

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