Microsoft's big bet on LinkedIn not just about data

Microsoft this week reached deep into its coffers and made a massive bet on social media in the enterprise. The company says LinkedIn, which it purchased for $26.2 billion, will be a semi-autonomous entity under its ownership, but LinkedIn data will eventually be integrated with Microsoft's collaboration and productivity tools.

"As Microsoft integrates profiles, preferences and other data more fully, business users will have a more consistent and personalized experience across the suite of Microsoft tools," says Melissa Parrish, vice president and principal analyst at Forrester Research. "A LinkedIn-powered experience could start to look a lot more like a traditional B2C customer experience: smart and personalized."

LinkedIn will complement Microsoft's Skype for Business, Yammer and other enterprise-focused services, as well, according to Jack Gold, president and principal analyst at J. Gold Associates. The pairing is a "natural fit," and it will help Microsoft sell and expand Office 365 services, he says. "Microsoft buying LinkedIn also is defensive in that it keeps it out of the hands of Google, and allows Microsoft to more effectively compete with Google for the enterprise market where there is far more revenue to be had than in consumer web."

Microsoft buys LinkedIn data — and the platform

Microsoft has multiple motivations for making its largest acquisition since the company was founded 41 years ago, but first and foremost it stands to benefit from the data LinkedIn has on its 433 million users, many of whom are businesspeople. "With deep access to the LinkedIn social graph, Microsoft will be able to power new capabilities for accelerating work and collaboration across an employee's personal connections inside and outside the firm," Parrish says. "More context and better access to content and expertise means fewer emails and meetings and faster results. This will help Microsoft keep Google Apps for Work at bay and fend off challenges from the still-beta Facebook at Work."

Microsoft's Office Graph — essentially a map of every Office user, the data they share on social media, and how it all relates — in particular should benefit from LinkedIn's "treasure trove of information," according to David Lavenda, vice president of marketing and product strategy at harmon.ie, a Microsoft partner that integrates multiple collaboration tools into a single dashboard. However, Microsoft will have to overcome integration challenges and user concerns about the company owning even more personal information it if hopes to effectively utilize the data, he says.

"With LinkedIn integration, not only will Office Graph know who is sharing information with whom and about what, but there will also be a layer of information about the individual supplied by LinkedIn that will enrich the recommendations that Office Graph can provide," Lavenda says. Questions about Microsoft's ability to successfully integrate LinkedIn into its infrastructure also exist, particularly in light of its spotty track record and inability to bring Yammer further into the fold, according to Lavenda. Yammer "seems to be slowly dying on the Microsoft vine," he says, and that might not bode well for LinkedIn integration.

Shyam Oza, a senior product manager with AvePoint, a firm that helps enterprises manage Office 365 and Sharepoint deployments, says the greatest opportunity for Microsoft relates to the integration of Microsoft data with LinkedIn's social platform. "While there is a large pool of data available through the LinkedIn acquisition, I think it's the platform that they are most interested in — not the raw information," Oza says. "We underestimate how much telemetry data Microsoft already has from Windows, Office and Skype. They don't need to spend money on data."

LinkedIn data is rich, but largely static

The amount of professional data that LinkedIn has on its users is unparalleled, but the majority of that information is static, according to Manish Sood, CEO of data management company Reltio. LinkedIn has more than 433 million users, but only 24 percent use the site at least once a month, according to a Microsoft press release. "LinkedIn relies on the power of self-curated updates," and as such, the "data does decay due to neglect," Sood says.

"Depending on the need of the individual user and their own level of fastidiousness, updates to profiles may only occur if they are trying to find a new job or have achieved new status, or want to feature new perspectives," Sood says. "This is in stark contrast against true corporate profile data which is continuously renovated and maintained through a steady stream of internal and third party sources."

The $26.2 billion question: How will all these components fuse together and make their ways into Microsoft products?

"On the face of it this seems a ridiculous amount of money to pay for a company that wasn't exactly in a boom period and which still had a lingering air about it of addressing a market space that was both obvious and not so obvious to anyone tracking it," says Chris Marsh, principal analyst at 451 Research.

However, LinkedIn represents significant value for Microsoft, particularly in mobile design, social DNA, human resources, marketing and the potential for cross-pollinating Microsoft's collaboration apps with LinkedIn data, according to Marsh. In a report on the acquisition, 451 Research wrote, "By integrating LinkedIn, Microsoft will bring potential features, functionality and benefits to its software that take advantage of the shared infrastructure and connectivity that are unique to cloud offerings, and enable Microsoft's products to benefit from LinkedIn's network effects, which will make it challenging for competitors to match."