Why LinkedIn is doomed after acquisition by Microsoft

It took everyone by surprise. LinkedIn, the 400 pound social network gorilla, was an unlikely target and the Redmond based tech giant was an unlikely suitor. Had it been Slack instead of LinkedIn OR Facebook instead of Microsoft, it would have been a routine affair.

But not all surprising acquisitions are doomed. In 2014, Facebook acquired a lesser known WhatsApp for an astounding 19 Billion. And it all worked out fine for both of them.

But this acquisition looks different. Microsoft is not Facebook and LinkedIn is certainly not WhatsApp. It looks as if this $26.2 Billion acquisition is doomed from the day go and will likely lead to the death of LinkedIn. Here is why:

Microsoft has an awful record at acquisitions

Before acquiring LinkedIn, Microsoft has made 8 acquisitions worth over a billion dollars -  Skype (2011), aQuantive (2007), Fast Search & Transfer (2008), Navision (2002),Visio Corporation (2000), Yammer (2012), Nokia (2013) and Mojang (2014). None have been particularly successful yet. Two of them have been particularly loss making Nokia (-$7.6Billion) and aQuantive (-$6 Billion). Most other are nowhere near their peaks.

Some of these acquisitions, such as Nokia, have been plain bad investment decisions. But most have suffered at the hands of Microsoft's inability to make them work. For instance, Yammer, a professional social network bought by Microsoft in 2012, has lost all its mojo. And then there is that negative brand image that refuses to leave Microsoft. What else could explain the huge drop in App store rating of Acompli from 4.5 to 3.2 in just days after it got acquired by Microsoft in 2014?

(Ironically, the best investment Microsoft had made was a $150 million investment in Apple in 1997. That would have been equivalent to $20 Billion today, had they not sold all those shares by 2003. Ouch.)

There is nothing much for LinkedIn in this acquisition

In an email to employees, Satya Nadella cited two examples of possible user benefits of this acquisition:

• A LinkedIn newsfeed that serves up articles based on the project you are working on
• Office suggesting an expert to connect with via LinkedIn to help with a task you're trying to complete

I can't imagine how these features would help.  But even if they do, they would still be incremental improvements for LinkedIn users. Hardly the game changing outcomes you expect from a $28 Billion acquisition. 

It seems clear that this acquisition is for the treasure trove of personal data that LinkedIn sits on. LinkedIn users will hardly get any benefits beyond superficial use cases like above. In his blog post, Reid Hoffman, the founder of LinkedIn, was all praises for Microsoft but couldn't hide this bare truth. While describing the future, he could only cite examples of how will this acquisition help Microsoft by using LinkedIn "as a platform of identities that could be plugged into Micorsoft's services ranging from Office to Dynamics to Communications to Cloud to Windows to Cortana to Bing".

A marriage of two struggling giants

Microsoft and LinkedIn may be in different businesses but have quite in common. They both built their empires largely based on early mover advantages. Their products have been comparably more conservative, team culture more traditional and rate of innovation much slower than the competition.

And they both have hit a rough patch.

Microsoft's travails are well known. After losing the mobile and search wars, they are now mostly focusing on productivity and cloud services. But it would be difficult to beat Google and AWS on those turfs too. It's loud and clear - Microsoft is short of life changing ideas and is fighting on multiple fronts to stay relevant.

LinkedIn's case is not so depressing. But it was struggling to grow revenues and user base beyond 430mn members while fighting spam and fake profiles. Its shares dropped by almost 50% in Feb. The last thing it needed was to lose its focus on find itself working on some crappy integration with MS Office.

Anybody who has been through an acquisition knows that integrating businesses is incredibly hard.  Integrating two mammoth struggling businesses having misaligned goals and failing teams is 100 times so.

Good-bye LinkedIn. Welcome new forces.

It will be unfortunate if LinkedIn comes undone. Millions of professionals use it and will get affected.

But here's the good news. For the first time in 10 years, LinkedIn will lose its monopoly. For the first time, many innovative startups in this space will get a level playing field to prove themselves. Can't wait to see a new future!

(Disclosure: I run CutShort, a young, no-nonsense place to find the right talent. It uses superior matchmaking, gamification techniques and the power of your combined network to do this. You may find them biased, but the above are my honest views. Check us out!)