Microsoft (MSFT) is Yahoo Finance Company of the Year for 2021. And while analysts point to the company’s cloud platforms as key to its $2.5 trillion market cap, it has a slew of business segments that have helped propel the tech giant to such stratospheric heights.
One of those businesses? LinkedIn, which Microsoft acquired in 2016, boasts roughly 800 million members, making it the world’s largest professional network. And yet, while Facebook (FB), Twitter (TWTR), and YouTube (GOOG, GOOGL) have been slammed by lawmakers and privacy advocates, LinkedIn has largely avoided the same kind of scrutiny.
That’s not to say that LinkedIn hasn’t had its share of problems. The data of some 700 million users was scraped, though importantly not hacked, by individuals seeking to sell it online earlier this year.
Scraping is different from hacking in that the data itself is usually publicly available already and aggregated when scraped. A hack would mean someone broke into LinkedIn’s servers and took private data.
The company has also been stung by the spread of disinformation and user harassment. But unlike more generalized social platforms, LinkedIn has been largely insulated from controversies related to privacy and data rights. And that, according to at least one expert, is thanks to its business model.
[See also: What we get right, and wrong, with our Company of the Year]
“A lot of the data that Microsoft can collect within their social platforms within LinkedIn..it's not geared towards advertising,” explained Ari Lightman, professor of digital media and marketing at Carnegie Mellon University’s Heinz College.
“A lot of it's geared towards 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’s not to say Microsoft doesn’t make money through advertisements on its social platform. It certainly does. In fiscal Q4 2021 advertising revenue surpassed $1 billion for the first time.
But it’s not only an advertising platform. 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. Those offerings still make up the majority of LinkedIn revenue, which totaled $10 billion, or about 6% of Microsoft’s total fiscal 2021 revenue.
On the other hand, Facebook parent Meta, Twitter, Snap, and TikTok are all about trying to siphon as much information from you as possible to specifically sell ads. And they’re incredibly good at it, especially Facebook, which, alongside Google, dominates that online ads industry.
[See also: Why Microsoft avoided antitrust scrutiny that plagued other tech giants in 2021]
“Snapchat, Twitter, and Meta are all highly predicated on advertising,” Lightman explained.
“[They’re] predicated on being able to be predictive with what consumers want, and this is meeting a perfect storm associated with privacy advocates, associated with consumer data and data rights and all those sorts of things that are out there.”
Microsoft, he explained, is a diversified company where advertising is only a small sliver of its overall revenue.
That’s also helped Microsoft avoid the kind of antitrust scrutiny that Facebook, now Meta, is facing. See, while Microsoft has been building out LinkedIn, an admittedly far smaller and more niche social network than Facebook, Meta has been buying up competing platforms for general consumers.
The Federal Trade Commission claims Meta’s moves, in particular to purchase Instagram and WhatsApp, amounted to anticompetitive practices. The commission is now seeking to break apart the social media giant.
LinkedIn has largely flown under regulators’ radar. It’s not a market leader in social, and its more niche, business-focused 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.
For now, LinkedIn is a massive win for Microsoft. It’s drawing billions in revenue, and has done so without facing the kind of backlash that its social media peers have. If it can keep growing while continuing to avoid the pitfalls of more general social sites, it could become the best acquisition Microsoft has ever made.
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