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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