An Underdog In A Mobile-First World, Microsoft Needs LinkedIn To Connect Smartphone Users And B2B Advertisers

Microsoft and LinkedIn

Remember when Microsoft bought Skype ($8.5 billion)? That was the key to Microsoft’s mobile strategy.

How about the time Microsoft bought Mojang, the creator of Minecraft ($2.5 billion)? The title’s loyal, premium-paying following and cross-generational appeal was the key to Microsoft’s mobile strategy.

Then Microsoft bought Nokia’s smartphone business ($9.465 billion). Now THAT was the engine that would propel Microsoft to mobile relevance.

More than $20 billion dollars left the corporate vault for these three assets, and yet they’ve done little to reverse Microsoft’s mobile fortunes. In fact, Microsoft’s legacy businesses, including Office for mobile and Azure’s cloud platform for app hosting, have done far more to make Microsoft relevant in mobile, even if many in the media haven’t noticed.

The reason why so many overlook their impact: they are no substitute for a mobile ecosystem. By that, I mean a distinct space where participants can connect and transact with other users at scale (as in hundreds of millions of users) and consume and create content.

Even with the power and resources of Windows, Microsoft couldn’t create one of its own. That shows just how hard they are to build. Not surprisingly, therefore, few viable mobile ecosystems exist, but the ones that do have virtual duopolies or monopolies within their market segments. Think Android and iOS, Facebook, Google, Amazon, and LinkedIn.

It’s in that context that Microsoft’s $26.2 billion acquisition of LinkedIn makes sense. Though it costs 30% more than the company paid for Skype, Nokia and Mojang combined, LinkedIn gives Microsoft its best chance yet at its own mobile ecosystem.

LinkedIn has 433 million members, 58% of whom use the service’s mobile offering. (See the company’s most recently quarterly filing here.) Most of its revenue comes from its Talent Solutions (hiring and learning) with meaningful contributions from its Premium Subscriptions and perhaps the most interesting growth opportunity: Marketing Solutions (advertising).

It’s on this element that Microsoft needs to focus its resources and attention, connecting the service’s smartphone users and B2B advertisers. Investments here would strengthen the platform’s relevance, engagement, and app quality.

A colleague of mine refers to LinkedIn as “Facebook’s long lost cousin,” a comparison that I love. The “cousin” part refers to their similarities, e.g. a personal network, a feed of content that is tailor-made for mobile consumption, and an ad-supported business model. The “lost” part refers to the ways in which Facebook’s ad platform is more capable than LinkedIn. For example:

  • LinkedIn’s in-feed advertising option supports only promoted content, e.g. a company’s whitepaper. They do not support video, dynamic product or carousel units, which are proven to be more engaging than static content.

  • Advertisers have only two bidding options: cost per click (CPC) or cost per thousand (CPM). That won’t satisfy performance marketers, who want to bid on users who are most likely to convert.

  • Targeting on LinkedIn is limited to what its members report about themselves in their profiles and doesn’t support custom audiences, in which a marketer can upload a database of its consumers to find others that resemble these customers or to exclude them from marketing.

All the things LinkedIn lacks (and that Facebook offers) enable marketers to deliver highly-targeted ads to customers who are more likely to welcome them because of their relevance. This also has forced Facebook to refine its mobile offerings relentlessly so that all its advertising infrastructure just works. It’s a virtuous cycle that propels Facebook’s user and revenue growth.

The best thing Microsoft could do, therefore, with its newest mobile play would be to invest in a rapid improvement in the LinkedIn ad platform. The good news: Facebook has already done the heavy lifting. Simply copying its approach on bidding, ad products and targeting would enable LinkedIn to give Microsoft the most compelling B2B advertising platform on the planet, to say nothing of the robust mobile ecosystem it lacks today.

 

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One comment

  1. Hi, I really like your article about an underdog in a mobile-first world. My friend and I’s blog does posts about technology and futuristic inventions that are already invented. The link is https://tech7533.wordpress.com/, and feel free to give any feedback, whether it is anything we did well or anything we could improve on.

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