Microsoft Buys LinkedIn at $26.2B But is This a Juicy Disaster!!!

LinkedIn CEO Jeff Weiner

 

Its with mixed feelings that I write this piece. First and foremost I am very much impressed by the progress that the social media platforms have registered since 2000. To make a little more sense is the higher price that these platforms are given, it clearly indicates that the future of businesses has to blend with these social web applications. When the news broke that Microsoft was buying LinkedIn at $26.2B , it fully confirmed my doubts that indeed social media is not a passing fad.

 

First of all congratulations to the entire LinkedIn team headed by CEO Jeff Weiner  that has built a platform from scratch to now one of the biggest acquisitions that Microsoft has acquired in years. You all need to agree that LinkedIn has invested a lot of time and money in making the platform survive up to this day though it was very clear that their profitable years in business were numbered due to numerous challenges that the company was facing.

 

LinkedIn has had several challenges during its operation which include but not limited to;

 

1.LinkedIn’s stock was struggling.

 

LinkedIn’s stock was down more than 43 percent since July of last year, and there wasn’t much reason to believe it would regain that value anytime soon. Clearly, Weiner and LinkedIn’s board agreed, starting talks just after its troubled February report in which the company had lowered its forecasts.

 

2. LinkedIn’s ad business was slowing down.

 

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.

 

3. LinkedIn’s growth was a concern.

 

LinkedIn didn’t grow much in 2015 and it was a problem for investors that are 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.
 

With the above challenges in mind, one is tempted to ask whether , Microsoft is really ready to revamp the platform and bring it to speed so as to fully realize their Return On Investment ( ROI ) as expected. Its not the first time we have seen huge organizations deal with certain platforms and they completely gain minimum results. Take an example of Google and its social platform Google+ which many economists had predicted that it would be a game changer as far as the social web is concerned but the opposite occurred.

 

 

I am very optimistic that Microsoft is going to try as much as possible to address the above challenges so as to restore the profitability and growth of LinkedIn, however that will only happen if they consider some of the factors below which need a high degree of attention so as to remain relevant and competitive,

1. Microsoft needs to address the issue of the balancing the categories of people using the platform. This includes the current consumers and future consumers through striking a balance in the age groups that use LinkedIn. Its no doubt that the youths around the world are the next consumers.
2. LinkedIn needs to also cater for the unemployed fresh graduates who may be seeking for employment and this call for massive collaborations between Microsoft and other organizations that usually offer industrial/ Internship trainings.  As for the current status , the platform has been very helpful to those who already have jobs or experience yet those seeking employment and graduating from universities are more.
3. Consistently redesign the applications to suite standards and styles of the users. Key to note is that LinkedIn had already started improving on the formats of content that one can now post to the platform like text, images and video.

With the above factors looked into LinkedIn is more than likely to shine back again BUT should Microsoft keep the current status of operations at LinkedIn , the juicy purchase could turn into disaster in a very short period of time. The Microsoft CEO Satya Nadella should not forget that whatever improvements his planning to bring to LinkedIn need to be done in motion.

 

By Mwebya Fred

mwbyfred@gmail.com

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