Why LinkedIn is Worth $26.2 Billion to Microsoft

LinkedIn's announcement of its blockbuster acquisition by Microsoft this summer was greeted with skepticism in many quarters, including Fortune, Forbes, and Barron's -- but not by me. The fact that the hard-working financial press does not get it, far from making me doubt the deal, actually made me suspect that Satya Nadella and Jeff Weiner -- two of the savviest and most committed operators in the game today, according to friends I trust inside their orgs -- could be setting up their joint venture to accomplish things that aren't obvious yet because they are so far-reaching. My conclusions left me excited about how the two CEOs are moving their chess pieces into perfect position to profit from the next 10 years of computing and societal changes. 

Let's get one thing out of the way first: Satya Nadella is by all accounts a disciplined visionary and as much of an intellectual as any top CEO today, and he did not pay $26.2 billion for all of the world's resumes. Every single move he makes has to be interpreted through his colossal bet on the "intelligent cloud": value-added services that will "empower every individual and organization on the planet to achieve more".

On the other side of the deal, Jeff Weiner has been subtly but powerfully driving LinkedIn for years towards its destiny of becoming the onus, the locus, and the focus of people's professional lives. LinkedIn's data is already uniquely valuable, but it could become exponentially so if linked (see what I did there?) to a bigger business model than recruiting -- like AI-enhanced cloud services.

A concrete use case will help focus my thoughts. Call it: The Case of the Giving Panda.

For more than 12 years I've been running one of Silicon Valley's largest technical entrepreneurship meetups, 106 Miles, in service of which I've been asked to help thousands of hopeful startup founders. A few years back I was recognized for my efforts as a "giver" with an extended writeup as "The Panda" in Wharton professor Adam Grant's bestselling and inspiring business book Give and Take. Since then I've also been deluged with requests from all over the world from business people who want to become givers and expand the practice of giving in their organizations.

I should emphasize that although my role in 106 Miles is a big part of my professional identity and takes up a lot of my time, it has never been my "profession" in the sense of monetizing. The whole point of 106 Miles has always been that our members would freely help each other progress professionally and entrepreneurially. Yet it is important enough to me that I would pay for various services around it, especially if those services would help save my time while growing the community of entrepreneurial givers.

Right now I manage my "customer relationships" very unscalably: by face-to-face interactions -- I'm frequently astonished to learn that people have come from across the country or around the world to attend 106 Miles meetups -- and through my personal Gmail. Obviously the person-to-person nature of these interactions makes it much harder to enlist a community of helpers; and the lack of any persistent featureful home for such an ad-hoc community makes it impossible to collect and share case-studies amongst ourselves. And despite my reputation for helping entrepreneurs, I often find that fairly obvious connections go unmade because I just didn't think of them at the exact right moment and the process of making connections still has too much friction.

But what if Microsoft and LinkedIn could help me with all these needs? I could easily see how they could offer me value-added services on top of the LinkedIn platform and Outlook mail. Just a few examples:

• Anyone who contacts me by email or on LinkedIn with certain keywords (e.g. "Give and Take", "Adam Grant", "106 Miles") would be automatically invited to join our community on LinkedIn. That would help me scale my time 10x right there.
• This community is insulated from trolls by being a real-names real-reputations professional group, which LinkedIn has always staunchly defended. I wish I could just set a policy that prevents unwanted commercial interests from contacting me about 106 Miles too!
• Like many professionals I could use more help managing multiple mailing lists, social media accounts, notifications, and communications of every kind from a centralized spot. For example, let's say I want to somehow archive the best stories of giving from our discussion forums in a "library" or "best of" collection... that would have huge value for new members of the community.
• I wish chatbots could be enlisted to make the process of managing professional connections more natural. Like I could just say "Don't let new members post their own topics until they respond to three other people's threads" or "Introduce this entrepreneur warmly to this VC" and all the permissions would just be magically taken care of and intros sent... that would be wonderful and give me back so much time!

What I am asking boils down to: What if LinkedIn and Microsoft became THE prosumer CRM platform for our professional lives? I'd pay for that.

Self-service applications are the hottest business model today: get prosumers to start using cloud services (e.g. Slack, Github, Looker), and then monetize at scale. People don't remember it well now, but the giant Amazon Web Services (AWS) behemoth started with tiny rogue groups inside big companies who were so fed up with their own hamstrung IT departments that they busted out their own personal credit cards to solve their own problems.

The amazing thing is that there are so few contenders in position to capitalize on this giant market opportunity. AWS has the computing power but they don't have a great prosumer-facing gateway (yet). I briefly thought Salesforce + Twitter might make a run at it, but that deal didn't work out for reasons allegedly including the horrendous abuse problem on Twitter -- which is really a proxy for misaligned business objectives. Plus Twitter never seemed like more than a consolation prize to Salesforce, which urgently wanted to acquire LinkedIn's valuable "troves of highly personalized data about businesspeople" -- a goal that drove a wedge between Salesforce and Microsoft as they work to grow the $26 billion CRM market.

And this is just the table stakes for the REALLY exciting stuff: making LinkedIn data the basis for even more valuable AI-inflected products. To be continued...

Edit on Dec 15: Here is Part 2: How AI and LinkedIn can Transform Microsoft