Microsoft’s acquisition of LinkedIn and what this means for the future of B2B social media marketing

David Bryan, MD of Opace, discusses Microsoft’s acquisition of LinkedIn and what this means for the future of B2B social media marketing

On the 13th June, Microsoft acquired LinkedIn for $26.2 billion, or $196 per share, in what is one of the biggest tech deals ever, and while this may have been a smart business move, it has led many to ask what this means for the future of social media marketing.

LinkedIn, founded in 2002 and launched in 2003, is essentially a professional, business-orientated social networking platform and was seen as the beginning of a new wave of social media companies when it went public in 2011. Although it is clear that LinkedIn is very much for businesses, a social media platform, by definition, is a website or application that allows users to create and share content, and LinkedIn very much falls into this category.

Microsoft, as we all know, is a technology company mainly specialising in computer software and personal computers, so why have they decided to make the move into social media? We’ve seen similar transactions in the past, such as Facebook acquiring WhatsApp and Instagram, but this makes sense as it’s all within the same industry, while Microsoft seems to be spreading their wings and branching out. Could this change the future of social media?

Why did Microsoft acquire LinkedIn?

Many believe that the main reason that Microsoft decided to acquire LinkedIn was that they wanted a business that was within a growth industry, and the social media industry is this. Naturally, Facebook and Twitter are too large to acquire, and are unlikely to be willing to sell, so LinkedIn was the next most logical step.

But there are other reasons alongside this. There seems to be a real synergy between the two companies, with Microsoft believing that they have a shared, common mission, as seen from the image below.

Microsoft can make use of LinkedIn’s user base in delivering its now mostly online productivity suite, essentially “the coming together of the professional cloud and the professional network” as Microsoft’s CEO Satya Nadella said. It seems that LinkedIn’s users; the professional businessmen and women, are Microsoft’s core demographic. It also gives Microsoft a network with which their users can now relate to and identify with.

Having access to this database is of course highly beneficial to Microsoft, as they can now use this large amount of data to gather new information, insights and plans for future products. They can also integrate their products with LinkedIn’s, including the LinkedIn-owned company Lynda, an online company teaching business.

Did LinkedIn need acquiring?

With over 430 million members, did LinkedIn need acquiring? Despite this large user base, LinkedIn was struggling in many ways. Its stock was down more than 43 per cent since July 2015, and it didn’t seem like it was going to be increasing anytime soon, especially after a gloomy February forecast from the company. Alongside this, its ad business, which makes up around 18 per cent of its revenues, had noticed a slowdown in growth; only 20 per cent in Q4 2015, compared to 56 per cent in the same quarter in the previous year. Microsoft Office’s products can reach a lot more people than LinkedIn can, and so the joining of forces of the two means that more people could be directed towards LinkedIn’s ad business.

Finally, alongside the slowdown in the growth of their ad business, LinkedIn was also experiencing a slowdown in growth for its member base. While they continued to have new members sign up, the actual number of unique visitors, and the number of pages that they were visiting was slowing down, and 2015 represented a poor year for them regarding this level of growth.

So yes, LinkedIn was in need of saving in some senses. While it will remain an independent entity and Jeff Weiner, the CEO, will remain, the company needed more stability and support. Most employees will also keep their jobs with the same titles and same managers. Weiner said on the acquisition “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.”

What does this mean for the future of B2B social media?

While for both Microsoft and LinkedIn this deal seems to make perfect business sense, does the merging of these two companies have a wider impact on the future of B2B social media marketing? LinkedIn isn’t the only social media company that is seeing a slowdown in growth; Twitter is currently experiencing a great number of problems with its stock falling and the number of users signing up slowing down.

Does this spell a wider problem for social media platforms to perform once hitting a peak level of performance? Of course, this isn’t always the case, given the huge success of Facebook, which now boasts over 1.23 billion users. But Facebook aside, the acquisition of LinkedIn by a large, multi-billion dollar, non-social media company could pave the way for the future acquisition of other struggling social media companies such as Twitter. Seemingly supporting this point, the Twitter stock rose by 8 per cent following the news of Microsoft’s acquisition of LinkedIn.

Similarly, Yelp supposedly looked into a sale in 2015, after which its stock rose 15 per cent, and Zynga and Groupon have always been in company’s targets as a potential acquisition company. It seems that if you’re a social media platform that isn’t named Facebook, you eventually have struggles with growth. And growth is ultimately what investors and shareholders are constantly and consistently looking for in a business that they are involved in.

Social media platforms themselves aren’t exactly monetising power-houses. They aren’t selling a product and so have always had to look for new ways of making revenue; such as with featuring adverts from companies or allowing users to sponsor posts. LinkedIn has tried several different routes, such as with a Facebook newsfeed and the introduction of Influencers, which weren’t entirely successful ventures.

Microsoft acquiring LinkedIn wasn’t a random investment as we looked at earlier; they had legitimate reasons for being able to incorporate the business-networking platform into their current service offerings. This may now start a snowball effect of cross-industry acquisitions where businesses begin to look at how they could incorporate social media platforms into their businesses, hence the reason for the jump in Twitter’s shares after Microsoft’s news.

Even Facebook, despite their seemingly untouchable success, does have its own problems, with users now stepping up privacy and sharing less; the very foundation that social media platforms are built upon. Of course, sharing isn’t the main income generator for a social media platform, and so Facebook will most likely be fine, but it seems to highlight further the problems that social media companies can face, and why they may need big corporations like Microsoft to swoop in later down the line.

Social media platforms are now some of the most important platforms on the planet, and because of that, there are higher expectations when it comes to performance, revenue and growth. Social media marketing has changed the way that we do business, but it is more than likely that now businesses will also change the way that social media companies operate, and indeed, survive.

Image credit: Microsoft