With roughly 400 million users, LinkedIn is one of the biggest household names in social media. But households weren’t what Microsoft had in mind when it agreed to pay $26 billion to acquire the company.
For all of LinkedIn’s brand recognition with consumers, its real value is in the stuff it supplies to businesses.
About two-thirds of LinkedIn’s $2.9 billion in revenue last year came from services sold to human resources departments to find the right candidates for job openings, a business that LinkedIn refers to in its earnings statements as “Talent Solutions.”
It’s a good thing LinkedIn isn’t just focused on its consumer business. Only about 25% of LinkedIn users actually check the network every month, and only a fraction of those pay for LinkedIn’s premium service, which allows users to message people they don’t know, among other benefits.
The business-to-business focus happens to be right in line with the focus at Microsoft, another huge consumer tech brand with far more profit potential as a commercial concern.
Just over a year ago, it was reported that Microsoft was interested in acquiring Salesforce, but talks to buy the customer-relationship management software behemoth eventually fell through. Some are suggesting that in buying LinkedIn—for far less than it would’ve paid for Salesforce—Microsoft is getting serious about sales software.
Microsoft has its own Salesforce-like software platform, called Dynamics—which CEO Satya Nadella specifically mentioned in announcing the LinkedIn acquisition—and now it’ll have the power of social connectivity behind it.
As The Information suggests (paywall), LinkedIn already is a go-to site for salespeople looking to learn more about clients, leads, and companies. Now it’ll be part of a suite of products that Microsoft’s salespeople can hawk to business customers. A big piece of the proposition: Why use products from dozens if not hundreds of suppliers when the HR, IT, sales, marketing, and customer service departments can all just use Microsoft? They’re probably on Office and Outlook already, after all.