LinkedIn is one of the most popular professional social networking sites in the world. It was founded in 2002 and has grown to have over 700 million members globally as of 2022. In June 2016, Microsoft acquired LinkedIn in one of the largest tech acquisitions ever for $26.2 billion.
The History of LinkedIn
LinkedIn was founded in December 2002 by Reid Hoffman, Allen Blue, Konstantin Guericke, Eric Ly, and Jean-Luc Vaillant. The founders wanted to create an online network specifically for professionals that would help them connect with other business contacts and further their careers.
The site officially launched on May 5, 2003 and quickly grew in popularity. By 2004, LinkedIn had over 1 million members. Some key milestones for the company:
- 2006 – LinkedIn begins allowing companies to post job listings
- 2008 – International expansion starts with versions in English, French, German, and Spanish
- 2009 – Membership reaches 50 million
- 2010 – Acquires presentation sharing platform SlideShare
- 2011 – Goes public on the NYSE, valued at over $4 billion
- 2012 – Membership reaches 200 million
- 2014 – Acquires job recruiting platform Connectifier
- 2016 – Microsoft acquires LinkedIn for $26.2 billion
Over the years, LinkedIn evolved from a simple profile and networking site to a robust platform for professionals. Key features were added like job listings, pulse for news, education profiles, expanded messaging capabilities, and more. The high valuations and eventual Microsoft acquisition demonstrated the power of LinkedIn’s professional network and the value it brought to both individual users and recruiters/companies.
Microsoft’s Acquisition of LinkedIn
In June 2016, Microsoft announced it would acquire LinkedIn for $26.2 billion in cash. This was one of Microsoft’s largest acquisitions ever, second only to its purchase of Skype for $8.5 billion in 2011. At the time, LinkedIn had over 433 million members globally.
Microsoft CEO Satya Nadella wanted to integrate LinkedIn’s professional social network data and capabilities into Microsoft products like Office 365 and Dynamics 365. This would provide additional benefits to users of those Microsoft business and productivity tools. Some analysts saw it as a strategic move by Microsoft to gain relevance and compete with Salesforce in the CRM space.
For LinkedIn, being acquired by Microsoft provided more resources and global reach to accelerate growth. LinkedIn CEO Jeff Weiner remained CEO after the acquisition while founder Reid Hoffman joined Microsoft’s board. Here are some key reasons Microsoft cited for wanting to acquire LinkedIn:
- Gave Microsoft access to LinkedIn’s 433M+ members and the world’s largest professional network
- Enabled new experiences across the Microsoft product portfolio by integrating LinkedIn data
- Leveraged LinkedIn’s job posting data to enhance Microsoft dynamics recruiting solutions
- Provided access to LinkedIn’s newsfeed and educational content for Microsoft users
The $26.2 billion all-cash deal closed officially on December 8, 2016 after securing all necessary regulatory approvals. This brought LinkedIn in as a wholly-owned subsidiary of Microsoft.
LinkedIn’s Growth and Status Since Acquisition
In the over 5 years since Microsoft’s acquisition, LinkedIn has continued to grow both its user base and level of integration with Microsoft products:
- Members: over 700 million as of October 2022. Major growth in international markets.
- Revenue: LinkedIn generated $10.3 billion in revenue for FY 2021.
- Microsoft Integration:
- LinkedIn profile data integrated into Microsoft Outlook contacts
- LinkedIn notifications and newsfeed appear in Microsoft feed sidebar
- Users can share documents directly from Office 365 to LinkedIn
- LinkedIn sales navigator and recruiting tools integrated into Microsoft Dynamics 365
Additionally, Microsoft has used LinkedIn as a launchpad to develop other professional/social offerings:
- Microsoft Viva – new employee experience platform leveraging LinkedIn profiles and networks
- Microsoft Loop – Office 365 modules for tasks and collaboration powered by LinkedIn data
Satya Nadella stated that the partnership had exceeded his expectations and called it a “slam dunk deal.” Clearly Microsoft has benefited greatly from having LinkedIn under its umbrella and has just begun exploring ways to further capitalize on LinkedIn’s professional social data and reach.
Financial Details of the Microsoft-LinkedIn Acquisition
Here are some of the key financial details surrounding Microsoft’s acquisition of LinkedIn:
- Purchase Price: $26.2 billion in cash
- Purchase Date: Announced June 13, 2016, closed on December 8, 2016
- LinkedIn Finances at Time of Purchase:
Year | Revenue | Profit |
---|---|---|
2015 | $2.99 billion | $166 million |
2016 (partial, pre-acquisition) | $3.6 billion | $142 million |
- Premium Paid: Microsoft paid around 14x LinkedIn’s projected 2016 revenue, a 51% premium over their share price
- Current LinkedIn Revenue: For FY 2021 as part of Microsoft, LinkedIn generated $10.3 billion revenue
The $26.2 billion price was considered very high at the time in 2016. However, in retrospect, Microsoft seems to have gotten good value from the deal given LinkedIn’s solid continued growth and integration benefits for Microsoft’s product line.
Conclusion
Microsoft’s acquisition of LinkedIn for $26.2 billion in 2016 was one of the largest tech deals of all time. It provided Microsoft with access to LinkedIn’s 433 million global professionals and the ability to integrate that highly valuable user data into Microsoft products like Office 365, Dynamics 365, and more. In the 5+ years since, LinkedIn has continued to expand, now with over 700 million users worldwide. The deep integration with Microsoft’s business and productivity tools has created enhanced user experiences and competitive advantage.
For LinkedIn, being acquired allowed the company to accelerate growth in memberships and revenue under Microsoft’s resources. Overall, Satya Nadella has called the partnership a “slam dunk” success as Microsoft continues to find new ways to leverage LinkedIn’s professional social capabilities across its product portfolio. The $26.2 billion acquisition price, while questioned at the time, seems well justified given LinkedIn’s financial performance and strategic value to Microsoft.