Microsoft: LinkedIn Bet Is Paying Off Better Than Expected - 11 minutes read

Microsoft: LinkedIn Bet Is Paying Off Better Than Expected - Microsoft Corporation (NASDAQ:MSFT)

90% of the social traffic is driven by big three networks and half of it comes from LinkedIn.

In the era of social media dominance LinkedIn is probably the only platform where people paying ~ $30 per month to get some premium features unlike other social media platforms like Facebook, Twitter etc. What makes LinkedIn so worthy that convinced Microsoft to pay $26B . If you read Microsoft earnings reports and its commentary you will notice a common recurring trend, they never talk much about LinkedIn performance including revenue generated, profit margin from different product segment and what are some of steps LinkedIn management has taken recently to improve the platform. I wonder if that is a deliberate strategy to underplay its 2 best performing business after cloud.

"LinkedIn connects the world’s professionals to make them more productive and successful, and is the world’s largest professional network on the Internet. LinkedIn offers services that can be used by customers to transform the way they hire, market, sell, and learn. In addition to LinkedIn’s free services, LinkedIn offers three categories of monetized solutions: Talent Solutions, Marketing Solutions, and Premium Subscriptions, which includes Sales Solutions. Talent Solutions is comprised of two elements: Hiring, and Learning and Development. Hiring provides services to recruiters that enable them to attract, recruit, and hire talent. Learning and Development provides subscriptions to enterprises and individuals to access online learning content. Marketing Solutions enables companies to advertise to LinkedIn’s member base. Premium Subscriptions enables professionals to manage their professional identity, grow their network, and connect with talent through additional services like premium search. Premium Subscriptions also includes Sales Solutions, which helps sales professionals find, qualify, and create sales opportunities and accelerate social selling capabilities.”

What makes LinkedIn so vital for Businesses:

Relationship matters more than ever in today's business world. People distinct themselves from irreverent marketing campaign but they do want to engage with companies that focus on sharing pertinent information and content. Companies that provide an enriching platform like LinkedIn are not just selling tool, but are the real building block of business relationships.

LinkedIn is where, by far, the largest number of professionals gather to stay connected and informed, engage for new prospects, advance their careers, and work smarter. More than 630M professionals are on LinkedIn including the decision makers, influencers, and leaders of today and tomorrow - the people you want to target all are in one place.

Professionals are engaging here with a vast purpose. They’re coming explicitly to connect to networks, products and prospects by engaging with high-quality content across the LinkedIn platform. This is a very different approach and intent from other social media platforms; LinkedIn is driven by its member's professional ambitions. If you look at the LinkedIn financials more closely it's probably the best case of turning people skills/profiles into a cash generating machine just by providing them a platform which has something to cater to everyone in the ecosystem – recruiter, employees, student, marketers, professional, business and beyond.

The world’s professionals come to LinkedIn for:

LinkedIn is a platform allowing marketers to build associations with professionals. In fact, this is the first time in the history of media you can connect with the world's professionals in one place. It’s no sensation LinkedIn has rapidly become the go-to content publishing platform for marketers. With LinkedIn, you can engage with a quality audience in a very powerful way: by sharing valuable content with products tailored to how professionals engage. By doing so, you also become part of your audience’s conversations and education on the platform. All it takes is a scholarly marketer who grabs the opportunity to engage with the audience.

Image Sources: "B2B Marketing 2016 Benchmarks, Budgets, and Trends — North America," Content Marketing Institute/ Marketing Profs. Webbiquity, 2013. "LinkedIn for B2B Lead generation" infographic, Oktopost as shared by, 2014

Future belongs to the ones who owns Data/Content:

Unlike the land, oil, machines - data(content) is everywhere it can move with the speed of light and can easily be copied/mined to cater different needs. In thrust of capturing the quality content(DATA) where does LinkedIn platform stands now? - Obviously its content size is much smaller than Facebook and Twitter both in the terms of absolute and monthly active users. But its potential to generate money per user is way higher because LinkedIn control a quality audience ~ 49% of the LinkedIn users earn more than $75000 in a year. LinkedIn user’s willingness to pay a higher price for a premium service is much higher than other social media giants.

LinkedIn is also very successful in evolving its platform offering as per the changing landscape. While most of the social networking sites make most of their revenue through advertising, LinkedIn has a unique business model in place ,and they charge for providing certain premium services unlike other social media platforms like Facebook & Twitter, users even pay to stand out.

It's a one-stop shop to boost your professional network and find new prospects. Every user on LinkedIn has a different set of needs. Be it finding new networking prospects, possible employees, advertising of new campaigns, looking for a sales lead or learning new business ideas/skills, LinkedIn business solutions has offerings to cater most of these needs.

Business solutions is a collective name given to the premium services offered by the LinkedIn to its members. It comprises of :

Talent Solution: Subscription based service which accounts for ~ 60% of platform revenue. It includes premium recruiting tools LinkedIn Recruiter which helps companies and professionals search, connect and find the most suitable employee/partners for their business

Marketing Solution: Help you reach out to the your ideal customers by generating leads, driving website traffic and building brand awareness. There are many products available tailored on how different businesses chose to engage with its customers, for example:

It also provides a dashboard which is highly effective for campaign managers in streamlining their marketing efforts.

Premium Subscriptions : Premium subscriptions are premium offerings tailored to users of LinkedIn. It enables users to unlock certain features that are not available to its standard users. The premium plans are designed to provide specific needs of the users. The premium subscriptions include :

LinkedIn faces competition from online recruiting companies, talent management companies, and larger companies that are focusing on talent management and human resource services; job boards; traditional recruiting firms; and companies that provide learning and development products and services. Marketing Solutions competes with online and offline outlets that generate revenue from advertisers and marketers.

LinkedIn focuses on services which is going to transform the way customers hire, market, sell and learn. LinkedIn standalone revenue in Microsoft suits of business will be close to $10 billion by 2020 as per a multiple of 16.

In Fiscal year 2018 , LinkedIn revenue increased by $3.0 billion to $5.3 billion compared with Fiscal year 2017 revenue of 2017. Fiscal year 2018 includes a full period of results, whereas fiscal year 2017 only includes results from the date of acquisition on December 8, 2016. LinkedIn revenue primarily consisted of revenue from Talent Solutions.

Data Source: LinkedIn Annual report before acquisition, Microsoft Annual 2018 Report , No revenue for acquisition year 2016 as no standalone LinkedIn Revenue data available for 2016

LinkedIn – a bet which will pay off better than expected for Microsoft

LinkedIn will become as important platform to engage the world’s professionals and create economic opportunity for every member of the global workforce. LinkedIn now has more than 630 million members, and they will continue to transform to provide new means to connect and engage with one another — from increasing the relevancy of the LinkedIn feeds to a enhanced mobile experience, to introducing new videos and messaging capability.

LinkedIn will change how businesses manage talent, training, sales and marketing with new solutions powered by the LinkedIn and Microsoft Graphs. Dynamics 365 for Talent with LinkedIn Recruiter and Learning will provide human resource specialists a comprehensive solution in an increasingly competitive talent marketplace, and deep integration of LinkedIn Sales Navigator and Dynamics 365 redefines social marketing, allowing sales professionals to radically improve their efficiency by illustrating on the connections in their private networks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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