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What Does Microsoft Stand to Gain From its $26.2 Billion Acquisition of LinkedIn? We'll give you a hint: It gives the Windows maker a network of professionals that will potentially buy its services.

By Nina Zipkin

entrepreneur daily
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Microsoft announced today that it bought LinkedIn in a $26.2 billion deal, the tech giant's largest acquisition in its 41-year history by a wide margin. So what value does Microsoft see in the professional social networking site?

LinkedIn CEO Jeff Weiner, who is staying on in his role and will report to Microsoft CEO Satya Nadella, wrote in an open letter to his employees that the plan is "to operate LinkedIn as a fully independent entity within Microsoft, a model used with great success by companies like YouTube, Instagram and WhatsApp."

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As a basis of comparison, Google purchased YouTube for $1.65 billion 10 years ago. Facebook ultimately paid $715 million for Instagram back in 2012 and most notably bought WhatsApp two years ago for a sizable $19 billion. This new deal between Microsoft and LinkedIn not only surpasses those three examples, but there is also that big gulf between this purchase and the tech giant's second biggest acquisition to date -- its $8.5 billion purchase of Skype in 2011.

In an email of his own, Nadella explained his vision for the partnership. "With the new growth in our Office 365 commercial and Dynamics businesses this deal is key to our bold ambition to reinvent productivity and business processes. Think about it: How people find jobs, build skills, sell, market and get work done and ultimately find success requires a connected professional world. It requires a vibrant network that brings together a professional's information in LinkedIn's public network with the information in Office 365 and Dynamics."

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Analysts who spoke with Entrepreneur tend to agree with Nadella's view.

Scott Denne, a research analyst at 451 Research, says "by acquiring LinkedIn, Microsoft believes it can leverage the world's most used business network to basically drive usage of its already widely used apps for business professionals." But since Windows isn't the monopoly it once was, Denne says that "Microsoft can't rely on that to secure the future of its office products," so it makes sense that Microsoft is moving to integrate LinkedIn with those enterprise applications, and use that information to power business-to-business sales and marketing.

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However, he thinks that whatever integration will take place will roll out very slowly as to avoid alienating users. "The last thing [Microsoft will] want to do is start scaring off LinkedIn's current audience."

But that could happen anyway. Forrester analyst Dan Bieler noted that while the deal could go a long way towards bolstering Microsoft's social networking offerings, "there will be LinkedIn users that are not keen to become sucked into the Microsoft ecosystem as part of their social collaboration activities."

Related: The One Thing You're Doing Wrong on LinkedIn

Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, says he believes LinkedIn's 49 percent increase in mobile users over the last year was very appealing to Microsoft. "The intent here is to drive more mobile ad revenue and build more platforms, which will use the capabilities of [products such as] Office 365 and extend these marketing solutions that already are there with LinkedIn."

However, Bieler cautions that LinkedIn isn't going to be a cure all when it comes to Microsoft's mobile woes either. "Microsoft's weak position in mobile ecosystems could dramatically undermine LinkedIn's longer-term opportunities. If Microsoft underestimates the mobile dimension for LinkedIn, the future for LinkedIn could be very questionable. Users are fickle and there is no loyalty to outdated social media platforms."

Related: 18 Tips to Create Your Perfect LinkedIn Profile (Infographic)

But Denne says that while Google Drive and some of Google's other enterprise offerings are certainly a threat to Microsoft, the LinkedIn buy "gives Microsoft a potential set of capabilities and features that Google just doesn't have and is unlikely to ever be able to get. It definitely gives Microsoft a little bit of an edge."

Looking ahead, Gogia believes that while the move puts Microsoft in league with Google and Facebook, the Windows maker is going to have to perhaps make another deal to cement its place in the mobile arena. "Google and Facebook have invested tremendously in mobile ad networks, whereas Microsoft has absolutely nobody, so I would assume next that they would go out and acquire a company to be able to make up for that."

Related: 5 Ways to Stop Embarrassing Yourself on LinkedIn

Gene Marks, president of the Marks Group, a company that sells customer relationship management systems including Microsoft products, characterized CRMs as a market worth $24 billion, and says that this move is a big one that puts Microsoft ahead of the game -- and not just with Google, but with major competitor Salesforce.

"This is a huge value add that will separate [Microsoft] from what Salesforce offers. The biggest failing these [CRM] systems have is that they are not integrated with social media at all," Marks says. "If [you] had a conversation on LinkedIn, none of that would go into the CRM. [That information] is all off on another island. … I always thought that LinkedIn was going to go into the CRM business. But they were bought by Microsoft."
Nina Zipkin

Entrepreneur Staff

Staff Writer. Covers leadership, media, technology and culture.

Nina Zipkin is a staff writer at Entrepreneur.com. She frequently covers leadership, media, tech, startups, culture and workplace trends.

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