For a while, we thought we’d seen the last of that run of lavish, billion-dollar business acquisitions. It seemed like the app market was slowing down, hardware was plateauing, and that maybe major players would be a little more gun shy after some high-profile and very costly acquisition failures in the tech world. Well, Microsoft put that notion to bed Ambien-style by announcing that they’ve entered into an agreement to purchase LinkedIn for — brace yourself — $26.2 billion. Yes, it’s the marathon of billion-dollar deals.
The deal in place would see Microsoft bringing LinkedIn into the fold with $26.2 billion in straight cash, which, according to Microsoft’s news release (see the similar LinkedIn release here), will be funded by taking on more debt. That’s a lot of debt, and it’s coming after Microsoft just finished writing off close to a $9 billion cumulative loss and killing off thousands of jobs after they finally threw in the towel on their acquisition of Nokia’s handset division. If you thought that would make Microsoft skittish about being a big spender, think the opposite.
While we’re far from bullish on an acquisition this expensive, it’s also not appropriate to draw a direct comparison to the Nokia deal. When Microsoft bought Nokia’s handset division in 2013, it was trying to play catch-up with Android OEMs and Apple. It was a desperate gamble at a time when the smartphone market had already matured — developers ignored the comparatively tiny Windows Phone user base, and the Lumia brand went nowhere as a result. The acquisition of LinkedIn, on the other hand, plays to Microsoft’s greatest strengths — enterprise services.
Indications are that Microsoft plans to integrate LinkedIn into their Office 365 products. Given how freelancing is becoming more and more common (for good or ill), it’s possible that, using Microsoft’s machine learning technology and LinkedIn’s database of professionals and freelancers, Office 365 products could recommend the right people for a job or task that needs to be completed for a project to continue. It could save businesses time and money in active headhunting, and anything that saves businesses time and money is bound to be valuable.
There are loads of questions that arise. While LinkedIn’s 433 million-strong subscriber base is nice, it’s going to have to become a lot more comprehensive to get more businesses to put their faith in it as a source of automated headhunting. A lot of businesses do use LinkedIn for this purpose already, but letting the machines take the wheel is a bigger step that might give some pause — as more human input is needed in an automated system, the system becomes worthless pretty quickly.
The other issue is how, exactly, freelancers and professionals will be recommended. We figure it’ll be based on a mix of availability, recommendations, and skills, but strictly speaking, there’s no rating system in place on LinkedIn. A lot of the promised automation could be threatened simply by people lying on their LinkedIn profiles, which would require enough human oversight to make automation pointless. If Microsoft can’t figure out how to make automated headhunting generate great processes and outcomes, this acquisition could become another blunder.
Even if it’s a success, man, $26.2 billion. We said it when Facebook acquired WhatsApp, but it’s hard to imagine an acquisition that big ever paying off. We recognize that the purchase is part of a long term strategy, but there are so many unknown unknowns in tech that it seems dangerous to make a gamble that reaches that far into the future. But, at the very least, Microsoft is trying to build on a lead here, rather than come from behind in a market previously foreign to them. Success isn’t guaranteed, but it sure is more likely this time around.