LinkedIn is social media for business nerds. That seems like a thoroughly good thing when Facebook is mired in controversies. These include spyware on its WhatsApp service and disputes over promotional posts. But curriculum vitae are no match for pouting selfies from “influencers” – even if some of their fan accounts are as fake as their tans.
Facebook launched in 2004, one year after LinkedIn. It made $56bn in revenue from 2.41bn users last year. LinkedIn made just over $5bn from 654m users.
There was scepticism when Microsoft paid $27bn for the professional networking site in late 2016. The software giant paid a 50 per cent premium in a deal that valued the workplace-focused network at around 80 times ebitda.
LinkedIn did well out of the deal. So did company founder and Silicon Valley nice guy Reid Hoffman. Microsoft claims it has been just as good from its own side. User numbers have jumped over 50 per cent since 2016. Last year revenues increased 28 per cent, with record levels of engagement. LinkedIn appears far less successful as a profits generator.
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The website makes money selling adverts, recruitment services, and membership. Now that it is bundled into Microsoft’s “Productivity and Business Processes” segment, there are few details in quarterly earnings reports. But filings with the Securities and Exchange Commission for the full 2018 year show LinkedIn operates at a bottom line loss. The business owned a raft of intangible assets when Microsoft bought it. LinkedIn’s operating loss was close to $1bn last year after amortisation charges were deducted.
Microsoft takes customers down the road less travelled. Search engine Bing is mocked by many but still used for about a quarter of online searches on desktop computers in the US. Microsoft Teams is bigger than office messaging service start-up Slack.
LinkedIn remains the most trusted social platform, according to an annual digital trust report from Business Insider Intelligence. Even so, it is clear that Microsoft overpaid.
