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In our previous article we discussed the benefits and uses of LinkedIn. In this article we’re discussed Microsoft recent acquisition of LinkedIn, the professional, business-networking platform for $26 billion, which represents one of the largest technology-industry deals ever. It is also Microsoft’s biggest acquisition ever, with the LinkedIn deal having a value of $24 billion (excluding cash), and their previous acquisition of Skype being just over $8 billion.

It’s not the first time that Microsoft have made an acquisition, and it undoubtedly won’t be the last. In fact, since the acquisition of LinkedIn they now have 196 to their name, with the majority of these businesses being in some kind of software. LinkedIn also isn’t the first social networking company that Microsoft have acquired, with their previous acquisition being of Yammer in 2012 for $1.2 billion. But the size of the LinkedIn deal, and indeed the size of LinkedIn as a company itself, dwarfs this previous deal. This has left many asking why Microsoft acquired LinkedIn, and also what this means for the future of other social media companies.

Microsoft “the acquirers”

With almost 200 acquisitions, Microsoft have more acquisitions than Apple and Facebook combined, and marginally more than Google. They have made small acquisitions of unknown companies, such as 5th Finger for just over $3 million, as well as larger deals such as the previously mentioned acquisition of Skype for $8.5 billion in 2011 and Nokia in 2013 for $7.6 billion. Clearly, Microsoft isn’t afraid to branch out and expand their business portfolio. But this new deal with LinkedIn represents their largest deal by a long stretch and is only the second time they have put their foot into the social networking pool.

The benefits of LinkedIn to Microsoft

So what reasons did Microsoft has for acquiring LinkedIn? One reason seems to be as a result of Microsoft’s failed move on Salesforce, the CRM software and cloud computing solutions company. As of 2016, and with a market value of above $55 billion, it is one of America’s most highly valued cloud computing companies. Microsoft knew this when they offered exactly $55 billion, only for Salesforce’s CEO Marc Benioff to counter with a $70 billion offer. Microsoft couldn’t or didn’t want to match this, and had originally planned to acquire Salesforce to help boost their cloud CRM product. A survey followed shortly which showed that Microsoft was now Salesforce’s biggest competitor within the market.

The purchase of LinkedIn could strengthen Microsoft’s position in this market. Not only could they make use of LinkedIn’s member base, which boasts over 430 million members, to garner new data, insights, and information, but they also have a new group of people to target and align with for their products. LinkedIn is made for professionals, and this is Microsoft’s core demographic, so they’ve just snapped up 430 million potential new customers.

Despite being in different industries, there also seems to be a common overlapping of goals and visions between the two companies, with Microsoft touting themselves as the “World’s Leading Professional Cloud” and claiming that LinkedIn is the “World’s Leading Professional Network.”

As Jeff Weiner, the CEO of LinkedIn said; “just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works.” Microsoft is still allowing LinkedIn to operate as an independent entity, with Weiner remaining as the CEO and the majority of the staff and managers remaining within the business too.

A final benefit to Microsoft is that it allows the company another foot into a growth industry, which social media platforms are due to their (usual) free sign-ups, as well as the need for individuals and businesses to be on a wide range of platforms these days. Despite being a growth industry, LinkedIn seems to have struggled with growth over the recent months, and so LinkedIn needed support from somewhere. With their gloomy forecast published in February 2016, shares fell to a three-year low by more than 43 percent. This follows on from the less-than-positive news that their growth in Q4 2015 was 20%, compared to 56% in the same quarter in 2014. Despite a clear business strategy of acting as a place to connect professionals and prospective employees, and attempts at expanding the business with LinkedIn Influencers and marketing ‘Who’s Looking At Your Profile” e-mails, LinkedIn has struggled to attract new unique visitors each month; this is something that Microsoft hopes to turn around.

Is Facebook the only social media company safe from acquisition?

One such social media company noticing similar struggles at the moment is Twitter, with its value down $11 billion and Apple, Google and Facebook all being touted as potential acquirers for the company. It has been struggling with growth and has found its user base hardly growing over recent months.

Most social media companies have a difficult time monetising their services. They generally allow users to subscribe for free, and beyond this, there isn’t a great deal they can do in the way of making money consistently. Users can choose to ignore paid adverts, posts, and tweets, and a survey from Gallup found that the majority of consumers use social media channels primarily to connect with family and friends. Users don’t want to log on to be sold to or to purchase items; they simply want to view their friend’s latest holiday snaps or catch up with family.

Facebook on the other hand seems to be the anomaly and enjoys high levels of growth and revenue, but they too are experiencing their own problems with users sharing less content; the whole foundations that Facebook is built around. However, this doesn’t put them at risk of acquisition anytime soon, but with LinkedIn having been acquired, Twitter looking to go that way (their shares rose 8% after the news of LinkedIn’s acquisition), Yelp exploring options of a sale in 2015, for which their stock rose 15%, and other companies like Zynga and Groupon being targeted for acquisitions, all social media platforms seem to be heading one way.

Social media platforms have become one of the main dominant forces in both our personal and business lives, and there is no doubt that they are here to stay, but many feel that the golden age for social media outlets is now over. While this most likely won’t change how these platforms operate for users, they’ve experienced their rapid rise now; those who have heard of them and liked the idea have signed up, and now growth has (mostly) stagnated. These platforms now need to find new ways to attract users they couldn’t previously attract or new ways to increase revenue and monetise their services to keep shareholders and investors happy.

Conclusion

Here at Opace we don’t expect to be changing our social media offerings anytime soon as businesses still need to connect with their consumers and social media provides a great platform to allow this. That said, the way in which the platforms themselves connect with their own users will most likely change. Expect to see some changes in the market over the coming months and years ahead as these social media companies look for new ways to increase growth, reach new users and monetise services.