Why Microsoft Buying LinkedIn Is A Stroke Of (Data Making) Genius

Why Microsoft Buying LinkedIn Is A Stroke Of (Data Making) Genius
SHARE
THIS



Earlier in the week B&T took a look the reasonings behind Microsoft’s $A35 billion take over of LinkedIn. Today, Doug Laney, chief data officer from Gartner, says there’s really only one reason and that’s the staggering amount of data it will provide…

Throughout the day yesterday after the deal was announced we listened to financial and market analysts speculate about the announced acquisition of LinkedIn by Microsoft. Their ruminations ranged from: “I don’t see how this service is worth $26B dollars,” to “Microsoft clearly wants LinkedIn cloud capabilities,” to “Microsoft is finally in the social media business,” to “We’ll see what kind of technology synergies there are.”

All of these speculations totally missed the mark. It’s all about the data!

Content is King

It’s no surprise when  any cash-laden company today makes an information play. This is in line with IBM acquiring The Weather Co last year (See Gartner analysis: IBM Storms Information, IoT Markets by Buying The Weather Company) and Facebook acquiring WhatsApp the year before. Not that this is a copycat move, but Microsoft clearly realizes it’s a bit late to the information products party. Sure it has the languishing and relatively unknown Azure Data Marketplace, but not access to a massive and continually fed set of global market, employment, and industry topic content. And while I’m not sure what degree of monetizable content Microsoft pulls from Bing searches, it’s certainly a fraction of the search and Gmail data Google has in its content cofers.

What makes the most sense about this announcement is the untapped value of all that content, including “social graph” the linkages and insights. The biggest challenge likely will be whether Microsoft is or can be positioned quickly enough to monetize all this content. Information monetization requires all the same mechanisms and processes as monetizing any kind of asset. But the rewards can be far greater due to some of the unique characteristics of content: Compared to other kinds of assets, information assets offer the benefits of non-depletability, low creation costs (especially when users are creating content for free, i.e., every social media company), low inventory costs, low distribution costs, low repackaging costs, and scant regulations (especially in the US). And this content directly feeds other monetizable assets – apps that rely on collaboration around contact, which will be facilitated and extended within and beyond the enterprises Microsoft serves.

Sure, Microsoft is trying to overcome a couple of stumbles with social media, and sure there may be some mutually leveragable technologies and analytics from the combined companies. Examples already suggested by Microsoft and LinkedIn made it clear they are already thinking about application-level linkages. And while this will take time to execute upon, both companies have the requisite skills to do so.

But that’s not at all what this deal is about. Did we mention already? It’s all about the data.

What kind of data are we talking about here? Some LinkedIn stats compiled by Expanded Ramblings:

  • 433 million worldwide users
  • 128 million US users (which is more than the current number of individuals employed in the US)
  • 39 million students and recent graduate users
  • 33 million corporate pages
  • 2 new LinkedIn members per second
  • Presence in 200 countries and territories
  • 45 billion member pageviews per quarter (Q1 2016), up 22% since Q1 2015
  • 45,000 standard skills listed
  • 1 billion + endorsements
  • Over 8 per cent of Americans use LinkedIn during any day
  • Over 1 million professional post publishers
  • Over 3 million long-form posts to-date (130,000 per week)
  • 19.7 million SlideShares

$26.2 billion sure sounds like a hefty sum–a marathon stretch of cash to be precise. But is $60.51 per user excessive? Sounds like a good deal, especially when compared to the value investors placed on each Facebook user ($80.95) and each Twitter user ($101.70) at their last liquidity events. Ostensibly, most LinkedIn users publish less content, hence the “discount”.

What can Microsoft do with all that information?

Thus far, LinkedIn reports it has generated revenue from this content in just three ways: talent solutions (65 per cent of revenue), marketing solutions (18 per cent of revenue), and premium subscriptions (17% of revenue). Imagine the other ways Microsoft could monetize this content outside the limited HR space, up to and including giving data brokers like Dun & Bradstreet a run for its money. The business insights buried LinkedIn data are like no other.

But will Microsoft be allowed to leverage LinkedIn content in new and innovative ways? Short answer: Yup. Long answer: LinkedIn stated terms and conditions are pretty clear (just like WhatsApp’s and every other social media company), stating that it can do almost anything it  wants with your content, including transfer it. As LinkedIn’s user agreement reads:

3.1. Your License to LinkedIn
As between you and LinkedIn, you own the content and information that you submit or post to the Services and you are only granting LinkedIn the following non-exclusive license: A worldwide, transferable and sublicensable right to use, copy, modify, distribute, publish, and process, information and content that you provide through our Services, without any further consent, notice and/or compensation to you or others.

So Microsoft will be limited only by its imagination. Oh, and an ability to execute. It must also tread carefully. Toeing “the creepy line” would be ill-advised. Monetization methods which could alienate corporate users or violate regional PII regulations will result in platform abandonment nearly as rapidly as teens jump from one messaging app to another in today’s consumer world. An opt-in model that respects its participants, or involves an obvious quid-pro-quo, will have greater long term B2B value.

What’s the big deal with monetizing information anyway?

According to Gartner research, companies in the information product business have a 4-5x higher market-to-book value than the average company. (Actually the ratio is what’s called aTobin’s q). And thankfully for info product companies, information isn’t considered a balance sheet asset per antiquated accounting regulations (GAAP), so they don’t have to report it. In short, investors looooooove information product companies. They also love companies that leverage information to the hilt. Information savvy companies, according to our research, warrant a 2-3x higher q value than average.

As a result, IT and business leaders around the world are quickly coming to the realization that they need to stop gazing at their own navels, and are recognising the multifaceted benefits of exogenous data — data from partners, suppliers, customers, social media, open data, syndicated data, and even harvested web content. Curating all this information involves first identifying who’s got what, then determining how to assess its economic potential. Then having the chops to improve marketing and sales, improve business performance, reduce risks, develop new products and services, and/or license, barter or trade the data with others.

So smart technology companies with a legacy of hardware, software and/or services will be furiously forming alliances with or looking to acquire data brokers and other purveyors of highly monetizable information.

As our Gartner colleague Tom Austin quipped recently: “In a world of smart machines, content is the new code base.”

This article is republished with permission from Gartner

Please login with linkedin to comment

Latest News

Case Study: How Content Helped Tribal Marketing Come To Life Amongst Rev-Heads.
  • Opinion

Case Study: How Content Helped Tribal Marketing Come To Life Amongst Rev-Heads.

In this guest post, CEO of content marketing agency Edge, Fergus Stoddart (pictured below), says brands would do well to play on their customer’s loyal tribalism… Normally over Christmas, any downtime is spent asleep on the sofa, mildly lubricated with a belly full. This year, with the Ashes in the background, I managed to stay awake […]

Opinion

by B&T Magazine

B&T Magazine
Red Bull Holden Racing Team Unveils 2018 Cars On Sydney Harbour
  • Marketing

Red Bull Holden Racing Team Unveils 2018 Cars On Sydney Harbour

Red Bull Holden Racing team took the covers off its 2018 Holden Commodore Supercar today. Floating on a barge in Farm Cove, the harbour provided a stunning backdrop for the reveal. Teammates Jamie Whincup and Shane van Gisbergen have won the past two championships for the squad. Whincup, now the greatest of all time with seven Supercar’s titles, […]

Victorian Government Launches VR Bushfire Experience Via The Fuel Agency
  • Advertising
  • Campaigns
  • Technology

Victorian Government Launches VR Bushfire Experience Via The Fuel Agency

As part of its summer fire campaign, the Victorian government has launched a virtual reality (VR) bushfire experience and content series via The Fuel Agency. The VR experience places the user in the midst of a large bushfire, and is designed to encourage people to leave early on high-risk days before it’s too late. The […]

Local Ad Tech Company VeNA Partners With RugbyPass
  • Advertising
  • Media
  • Technology

Local Ad Tech Company VeNA Partners With RugbyPass

ad tech company VeNA has signed an exclusive reseller partnership covering Australia and New Zealand with digital rugby network RugbyPass. Across Asia and parts of Europe, RugbyPass is the exclusive digital rights holder and over-the-top broadcaster for live rugby, including the Super Rugby, the Rugby Championship and autumn internationals, the Six Nations, the Aviva Premiership, […]

SpotX Appoints Gavin Buxton As Asia MD
  • Advertising

SpotX Appoints Gavin Buxton As Asia MD

Video advertising platform SpotX has announced it has appointed Gavin Buxton as managing director of Asia to lead the company’s expansion in the region. Buxton has over 17 years’ global experience in the digital advertising space, having worked in leadership roles at tech and publishing companies, including Microsoft, Turner Broadcasting, and LinkedIn, with the last […]

Big Mobile Doubles Down On Ad Tech & Rebrands
  • Advertising
  • Technology

Big Mobile Doubles Down On Ad Tech & Rebrands

B&T Awards 2017 finalist Big Mobile has unveiled a fresh look to reflect its new ad tech credentials. The company successfully pivoted its business from ad network to mobile ad tech vendor when it announced a joint venture (JV) with Widespace in October last year. As a result of the business changes, Big Mobile wanted […]

March One Appoints New Senior Account Manager
  • Advertising

March One Appoints New Senior Account Manager

Independent ad agency March One has appointed a fresh face to the team, with Melanie Tozer to reinforce its mission to put humans first as a senior account manager. Tozer (pictured above), an up-and-coming talent from New Zealand, will align her extensive experience in FMCG marketing with March One, having worked on accounts for Bunnings […]