Salesforce CEO Marc Benioff lost out famously to Microsoft in bidding for LinkedIn, and in the wake of it lodged concerns with U.S. and European regulators over whether Microsoft would impede third-party access to the business social network's vast trove of user data.
But the EU this week gave final approval to the $26.2 billion acquisition and in doing so, stated that for CRM vendors, "access to the full LinkedIn database is not essential to compete on the market." This can be looked at both as a rejection of Benioff's antitrust concerns, but also as a knock on the value of LinkedIn's data set.
"Moreover, Microsoft is a relatively small player in the customer relationship management market, where it faces strong competitors, such as Salesforce, the clear market leader, Oracle and SAP," the EU added. "The Commission therefore considered it unlikely that the transaction would enable Microsoft to foreclose these players and eliminate competition in this market."
Finally, the EU determined that LinkedIn's sales intelligence product "is one of several on the market and does not appear to be a 'must have' solution."
The EU did extract a set of "commitments" from Microsoft:
ensuring that PC manufacturers and distributors would be free not to install LinkedIn on Windows and allowing users to remove LinkedIn from Windows should PC manufacturers and distributors decide to preinstall it.
allowing competing professional social network service providers to maintain current levels of interoperability with Microsoft's Office suite of products through the so-called Office add-in program and Office application programming interfaces.
granting competing professional social network service providers access to "Microsoft Graph", a gateway for software developers. It is used to build applications and services that can, subject to user consent, access data stored in the Microsoft cloud, such as contact information, calendar information, emails, etc. Software developers can potentially use this data to drive subscribers and usage to their professional social networks.
The commitments are good for five years and echo the compromise made between the EU and Oracle over its 2010 acquisition of Sun Microsystems.
Getting back to the EU's comment about LinkedIn's database, however: It would be interesting to know the internal reaction at Redmond, given how much the rationale for buying LinkedIn depended on it. But is there merit to the EU's position? It's worth some discussion.
For one thing, a growing number of vertical business social networks are thriving even as LinkedIn continues growing. They include Doximity, a social network for doctors that says it has more than half of all U.S. physicians signed up; Spiceworks, a popular community for IT professionals; Edmodo, a site aimed at educators that claims 67 million members; and ResearchGate, for scientists, with more than 11 million members.
These specialized sites can offer members more value than LinkedIn. Take Doximity, which provides HIPAA-compliant messaging, and doesn't share or sell any user data with third parties. Spiceworks couples its community features with actual IT administration tools.
One could argue that the depth and quality of the data captured by specialized social networks is superior to LinkedIn's, but the latter's horizontal reach is its true asset. LinkedIn now has more than 450 million users. Even though only about 25 percent of them actually visit the site each month, that's still a vast amount of user data spanning 200 geographies and a wide array of industries and roles.
The Bottom Line
The EU's view of LinkedIn's database may have focused on the CRM use case, overlooking the fact that most of LinkedIn's revenue comes from HCM and recruiting functions. It also doesn't take into account the deep analytical insights its data set provides.
"A lot of companies should be worried that MIcrosoft has trending data no one else has access to," says Constellation Research founder and CEO R "Ray" Wang. "The aggregate data provides powerful demand signals. It's not the individual data but the metadata and the neural net. Just like Glassdoor can tell you when your employees are unhappy, if you see that 10 percent of employees are updating their profiles at a company you know something is going down. You may want to know what, and this triggers a deeper examination."
"I do believe at an individual level, Microsoft has done a stellar job with their privacy policy," Wang adds. "What I'm talking about here is the competitive advantage Microsoft will have with aggregate data, just like Facebook has. It is stone soup as the individuals get what they need for free, and Microsoft gets the insights. The value of the Linkedin-Microsoft data is the insight from the graph and how they use that network to build powerful insight platforms across all industries and business. They will be able to launch very targeted HR products based on that insight."
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