Microsoft MSFT is Yahoo Finance Company of the Year for 2021. While analysts point to the company's cloud platforms as the key to its $2.5 trillion market cap, it also has a lot of business segments that have helped propel the tech giant to such stratospheric heights.
Microsoft acquired LinkedIn in 2016 and has over 800 million members, making it the world's largest professional network. While Facebook FB TWTR and YouTube GOOG, GOOGL have been slammed by lawmakers and privacy advocates, LinkedIn has largely avoided the same scrutiny.
It is not to say that LinkedIn hasn't had its share of problems. Some 700 million users' data was scrapped by individuals who tried to sell it online earlier this year.
Scraping is different from hacking in that the data is usually publicly available and aggregated when scraped. A hack would mean someone broke into LinkedIn's servers and took private data.
The spread of disinformation and user harassment has hurt the company. LinkedIn has largely remained insulated from the controversies related to privacy and data rights, unlike more generalized social platforms. According to at least one expert, that is thanks to its business model.
Microsoft can collect a lot of data from their social platforms within LinkedIn. It is not geared towards advertising, according to Ari Lightman, professor of digital media and marketing at Carnegie Mellon University's Heinz College.
It's a focus on making the product better, engaging with consumers and understanding holistic customer management, and it's retained within the organization as opposed to shared with a variety of other folks. That is not to say that Microsoft doesn't make money through advertisements on its social platform. It certainly does. Advertising revenue exceeded $1 billion for the first time in fiscal Q4 of 2021, according to advertising revenue.
LinkedIn also offers paid tiers for enhanced features, like being able to send unlimited messages and browse people's profiles, as well as job and job seeker capabilities. The majority of LinkedIn revenue was made up of those offerings, or about 6% of Microsoft's total fiscal 2021 revenue.
Facebook parent Meta, Twitter, Snap, and TikTok are all about trying to siphon as much information from you as possible to sell ads. They are incredibly good at it, particularly Facebook, which dominates the online ads industry, along with Google.
Lightman explained that Snapchat, Twitter, and Meta are all heavily predicated on advertising.
They're predicted on being predictive with what consumers want, and this is meeting a perfect storm associated with privacy advocates, consumer data and data rights, and all those things that are out there. He explained that Microsoft is a diversified company where advertising is only a small portion of its overall revenue.
That helped Microsoft avoid antitrust scrutiny that Facebook is facing, as well as the kind of antitrust scrutiny that Facebook is facing. While Microsoft has been building out LinkedIn, an admittedly smaller and more niche social network than Facebook, Meta has been buying up competing platforms for general consumers.
The Federal Trade Commission claims that Meta's moves to purchase Instagram and WhatsApp, amounted to anticompetitive practices. The commission is trying to break apart from the social media giant.
LinkedIn has largely flown under the radar of regulators. It is not a market leader in social, and its more niche audience means it doesn't have to deal with the kind of issues that Meta has with its younger users. You're not going to find many kids who say LinkedIn makes them feel bad about their body image, unlike Instagram.
LinkedIn is a huge win for Microsoft. It is drawing billions in revenue, but it hasn't faced the kind of backlash that its social media peers have. If it can keep growing while not being tempted by the pitfalls of more general social sites, it could become the best acquisition Microsoft has ever made.
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