Microsoft said last week that it would acquire LinkedIn in a $26.2 billion cash deal. The acquisition, by far the largest in Microsoft’s history, unites two companies in different businesses: one a big maker of software tools, the other the largest business-oriented social networking site, with more than 400 million members globally.
As you would expect, there's been a lot of hot takes related to the reasons from the acquisition, the potential of the deal and what happens next. See my post for 3 ways Microsoft could change the corporate talent scene with LinkedIn by clicking here. For the most part, everyone's guessing about the impact and what's next.
That's why this post from John Sumser was my favorite take on the Microsoft/LinkedIn deal. You can always count on John to get deeper than most observers. Observe and learn:
"The single largest limitation to growth for LinkedIn is the inability to monetize the real value it delivers. LinkedIn preps knowledge workers for the next meeting. It expands the individual human capacity to recall and interact with others. It shaves time off the warm up cycle in conversations. It creates multiple additional points of stickiness between people who are not so close. This is how non-mediated job hunting works.
The problem for LinkedIn and its struggling stock is that there is no hard cash in this productivity improvement. LinkedIn turned out to be the single greatest monument to PowerPoint dollars – PP$ (those savings and ROIs that only exist in the presentation justifying a large enterprise purchase.) LinkedIn increased individual efficiency in a way that must be worth trillions of PP$."
You can go read the rest of John's post here. Smart stuff. Now take a look at LinkedIn's stock since going public (email subscribers click through if you don't see the image):
LinkedIn's stock dived from 250 to 100 in 4 months as the market started holding it accountable for results in the absence of earnings. As REO Speedwagon once said, I believe it's time for me to fly.
To John's point, the things that make LinkedIn most valuable are the ones that are impossible to monetize on their own. But they are things that the right strategic (as well as giant) partner could justify monetizing as part of a deal.
LinkedIn did what they had to do. Can Microsoft find a way to monetize the real value of LinkedIn? It's hard to say, but finding ways to unlock the value of LinkedIn that John alludes to - perhaps across the Office product line and the CRM business - might be the best chance to print those vapor dollars.
After all, a dollar of retention is cheaper than a dollar of new revenue.