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This Is The Real Reason Microsoft Bought LinkedIn

With apologies to Bill Clinton’s electoral guru James Carvell: it’s all about the content, stupid. That’s why Microsoft MSFT -0.22% has just made one of the boldest moves in its history by spending more than $26 billion on LinkedIn.
In an age of hyper-connections, the acquisition – which values LinkedInLNKD -0.18% at $196 a share – is a smart one. It needs to be after a series of high-profile failures, such as Microsoft’s doomed $6 billion acquisition of the Nokia mobile business.
This new deal means Microsoft can embed LinkedIn with Skype, its email system and other Microsoft enterprise products so that, in the words of one Silicon Valley expert, it will be able ‘to recreate the connective tissue for enterprises.’
SAN FRANCISCO, CA – MARCH 30: Microsoft CEO Satya Nadella delivers the keynote address during the 2016 Microsoft Build Developer Conference on March 30, 2016 in San Francisco, California. The Microsoft Build Developer Conference runs through April 1. (Photo by Justin Sullivan/Getty Images)
But I think Microsoft Chief Executive Satya Nadella has bought something far more precious than what some commentators patronizingly call a social network for people looking for a job. Yes it’s a goldmine for recruiters, freelancers and those looking to ingratiate themselves with influential executives.
But that’s like calling Google GOOGL -0.09% a search engine. LinkedIn is a content company. In effect, Microsoft has just bought one of the world’s most influential, specialised, highly read, constantly-updated (and, it must be said, occasionally annoying) digital media companies around. And, unlike some on Forbes, I don’t think Nadella has wasted his money.
Reportedly, LinkedIn has 433 million users, more than a quarter of whom are in the United States. Two new members join every second – when LinkedIn was founded in California in 2003, 4,500 members joined after its first month. There are 106 million monthly unique visitors to the website and in the first quarter of 2016 there were 45 billion page views on the site, up from 37 billion the previous quarter.
But it’s not just the numbers that matter – and this is where some journalists have got it wrong. Much of the value of the company derives from the content that’s published on the site. Its 2015 revenue was $2.9 billion, which was a 35% increase on the previous year.
So this morning I switched on to read a fascinating statistical analysis by one of Britain’s top economists, Mark Gregory, of why the top tier of British soccer is destined for a prolonged period of upsets as the also-rans catch up on the powerful clique that used to win everything. I learned from one of the most senior executives at pharmaceutical giant GSK, Eric Dube, how corporate leaders can transform their skillsbetween America, Japan and the UK. And I was sent a piece from Henry Blodget, the CEO of Business Insider about why the slump in wages means it’s time for a ‘better capitalism.’
Yes, I was also told that Lucinda has a new job, somebody I once met ‘likes’ a goofy video and also that a mysterious, unnamed figure from the market research industry has been looking at my profile. But I’m sure that Nadella, like me, knows that those bits are all fluff. The real value of the site is as a content-publishing platform in which key executives can expand their networks, their influence, their fame, their knowledge, their personas and their opportunities for a better-paid job by providing original content.
But some don’t get it. Here’s one business report I read this morning, from a journalist on one of our most prestigious newspapers, the Daily Telegraph. He opined that whilst LinkedIn is a ‘fact of life’ it’s also the ‘dull cousin’ of Facebook, ‘tolerated rather than loved and forgotten once we leave the office.’ No doubt the fact that the writer has fewer than 500 LinkedIn connections and has never had to hustle for a job in his life point to his bemusement at the site’s popularity.
His assessment is woefully inaccurate. Like all the best digital media companies, LinkedIn has pivoted smartly to ensure that its originalraison d’etre – a job-seeking social networking site – has morphed into something far more powerful, which perhaps its founders hadn’t anticipated. Reid Hoffman, by the way, who helped to create LinkedIn 13 years ago, stands to make $2.8 billion from his 11% share of the company.
After pornography, gambling and shopping, content is the most valuable service internet companies provide. What LinkedIn does – as opposed to, say, Facebook – is that it produces content that people actually want to read and, who knows, may actually want to pay for. They key word is ‘produces’ – it doesn’t just steal and redirect, though it does perform those acts admirably – it allows users to create material that intellectually nourishes.
Admittedly, a lot of the content is poor, some of it is blatant advertorial and there is a creep towards the banalities of Facebook. So one most hope that Microsoft will work on trying to maximise the best material and refashion the layout so that it provides a more intuitive, user-friendly experience.
Which is something that Microsoft really ought to know how to do…

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