Tuesday, June 14, 2016

What Does MS Takeover Of LI Mean?

Microsoft announced a 26 billion-dollar deal for Linked In, the leading social media network for professionals.  It probably will doom both companies.

Why would I be so bearish on such a mega-deal?  Because Microsoft doesn’t have a great record when it comes to making deals. It partnered with Barnes & Noble on the Nook and that dissolved into a failure.  Its multi-billion-dollar deal for Nokia was written off as a gigantic failure.  Remember the six billion it dumped for a Quantive?  Exactly.

Microsoft is not alone in big-deal busts, especially in the technology industry.  AOL-Time Warner was a disaster.  Nobody is bidding too high for Yahoo.  HP made a big mistake buying Compaq.

Microsoft’s last big acquisition not to go bust - yet - was Skype in 2011 for 8.5 billion bucks.

So what does this mean for Wall Street, for the book industry, for consumers, and mass media?

Google owns You Tube.  Amazon is independent and owns Good Reads.  Facebook is independent and owns Instagram.  MS has Linked In.  Twitter would appear ripe for acquisition.  Yahoo owns Flickr and Tumblr.  Apple is independent but doesn’t own any hot social media properties.

With Linked In bought by MS it may indicate other tech and media giants will respond by looking to take over Twitter or some other popular property.  Or, the MS deal will prove to be a cautionary tale.  The purchase price went for 50 times earnings, meaning at its present rate, it would take decades for a pay-off.

Consumers may not care who owns whom but there is always concern when one giant buys up an independent, decreasing the field of competition.

The book industry relies on social media to sell books, brand authors, and acquire quality properties.  Linked In is different from the Twitter, Facebook, You Tube, and the like, so this may not impact the book industry much.  On the other hand, maybe MS plans to turn LI into something bigger or different, in a way that it will compete more with FB for mass public appeal rather than just more of a playground for job-hunters to connect.

It’s just hard to fathom that Linked In is now worth more than most traditional media properties.  It’s also hard to believe that a company like Linked In, with over 400 million subscribers only netted on average, a dollar per subscriber last year. The Internet continues to mystify us with its fuzzy numbers, but if history is any guide, the MS acquisition is destined to end miserably.  


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Brian Feinblum’s views, opinions, and ideas expressed in this blog are his alone and not that of his employer. You can follow him on Twitter @theprexpert and email him at brianfeinblum@gmail.com. He feels more important when discussed in the third-person. This is copyrighted by BookMarketingBuzzBlog © 2016

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