Microsoft Pays a Whopping $26B for LinkedIn Buyout

Microsoft has agreed to buy business networking site LinkedIn for $26 billion. Analysts are less than certain about what it plans to do with the site.

For those not familiar, LinkedIn works a little like Facebook but is designed primarily for business rather than personal contacts. It has a reported 100 million active users that access the site at least once a month. That compares to reports of 1.65 billion active users for Facebook.

One of the most popular uses is to find potential clients or employers through mutual contacts. It's also possible to "endorse" a contact for having a particular skill or experience, theoretically giving credibility to an individual's own claims.

Recruiters Main Source of Income

The site makes around 60 percent of its money from charging businesses and recruiters to carry out advanced searches for potential staff, 20 percent from selling advertising and 20 percent from people paying for premium membership, which is needed to send messages to people other than existing contacts. (Source: investopedia.com)

It appears however that LinkedIn does a poor job of keeping users interested in the site once they've signed up. The site claims 433 million registered users, meaning more than three-quarters of users either go more than a month between visits or have abandoned the site altogether.

Microsoft clearly thinks the deal is worthwhile as the purchase price represents more than $250 for every active member - money it will need to make back in the long term through membership fees, advertising or other revenue.

Microsoft Master Plan a Mystery

Exactly how Microsoft plans to monetize the deal is a bit of a mystery. One theory is that Microsoft will promote its office software to LinkedIn members - particularly collaboration tools.

Another is that it may use the data from user accounts and posts to add extra detail to its virtual assistant and customer relation tools. For example, somebody who has a business meeting with a client could automatically receive a briefing on either a client or their company prior to the meeting via their smartphone. (Source: slate.com)

Neither of those have really excited the tech community however, and it's hard to see how this justifies a purchase price that makes this Microsoft's most expensive ever takeover.

What's Your Opinion?

Have you ever used LinkedIn and if so do you still use it regularly? What do you think Microsoft has to gain from the deal? If you're a LinkedIn user, do you welcome or worry about the takeover?