Microsoft’s purchase of LinkedIn this week got us thinking. LinkedIn, the pioneer business social network, was a brilliant idea, one that should have occurred to other online companies before 2003, when LinkedIn launched. It’s a truly global company with a remarkable penchant for hiring the right people and growing quickly — fully 60% of the employees have been with LinkedIn for less than two years. It has a net revenue growth rate of approximately 65.2%, with over $1 billion in ad revenue expected this year.
Microsoft isn’t just buying a company. It’s buying 5,700 wired employees from every major online hotspot and a major improvement of its programmatic advertising prospects. Marketers know that advertising to 433 million people who post huge amounts of information about their business side is valuable on so many levels we lose count.
Why didn’t Microsoft itself come up with LinkedIn? Why did they wait 13 years to buy it? For that matter, name the innovations coming out of Microsoft since Windows, the operating system which itself was copied from Apple, some observers charge. Not coming up with much? It’s easier to list all the things that Microsoft did come up with that are now mostly forgotten or marginal.
Remember Bing? How about MSN? Internet Explorer? Take a look at the Microsoft home page. Every product pitched there, including Office, Windows, its SQL Server, is a refinement of one that first debuted decades ago. Let’s face it, Microsoft is not an innovative company anymore, if it ever was.
Note also that many executives at LinkedIn come from Google, Yahoo! and Microsoft They probably wanted a more entrepreneurial future. Even Apple is having difficulty living up to the outsized genius of its founder, Steve Jobs.
Jeff Weiner: ‘Intense’
I first encountered LinkedIn CEO Jeff Weiner in 2000, when he was working with Jim Moloshok at Warner Brothers’ fledgling online unit. He later went to Yahoo! when WB’s Terry Semel and his buddy Moloshok took over the reins. I thought at the time that he was one of the most brilliant guys I’d met in the online space; sort of whip-smart, with the same half-grown beard he still sports. (Did he pioneer that trend?) In 2002, I called him “an intense young man” who had joined WB in 1994. Now, he’s a very rich man — and doubtless still intense.
“He is one of the smartest guys I ever worked with and could read 10 companies’ quarterly statements and three weeks later recall specific details on anything you might ask him,” Moloshok comments. “Very smart guy. When we were at Warner Bros., he would message me from the office at 9:30 or 10 p.m. saying he just walked out of his office to get something from the soda machine and wanted to know why nobody else was at the office.”
For LinkedIn, this is a remarkable reversal of fortune from March, when Weiner went on Bloomberg TV and had to answer questions about a 43% share price drop after a “disappointing” earnings report, and listen to snarky comments from the likes of TechCrunch about how LinkedIn was a “delivery service for spam.” Weiner had showed his commitment to the company by putting $14 million of his stock award for the year into a pool shared by employees. That move paid off.
Prediction: Much More Consolidation Ahead
LinkedIn rocks, that’s why Microsoft paid over $26 billion for it. Fair enough, but at this point we have to notice that there is a huge consolidation going on in the online media and advertising space. In our view, everything out there that’s not already part of a big conglomerate is going to be sold — companies like Mode Media, Snapchat, Yahoo! (natch), BuzzFeed, Twitter.
Here’s an easy prediction: A year from now, all these companies will be sold. Who is going to buy them? Probably Google, Facebook, Microsoft, Verizon, Amazon, Comcast, Apple, CBS, maybe Time Inc. or Hearst. Mix and match these names, and you’ve got the big M&A headlines of the next year.
Why all the consolidation? It’s obvious that big companies generally lose their innovation DNA. When was the last time IBM did anything interesting? But, as long as the cash flow is in the billions, big companies can buy innovation, and they’re doing it.
What does this mean for programmatic advertising? It’s all going to get a lot easier to buy programmatic ads because, as we have been saying in this space, there are going to be fewer and fewer choices ahead. Right now, money talks and you know what walks.
(In the interest of disclosure, I worked for a year or so as a consultant to Corbis Images, then owned by Microsoft founder Bill Gates.)