Can Microsoft preserve and protect LinkedIn's value? It has to

Up until today, Microsoft's biggest acquisition was its $8.5 billion purchase of Skype. Perhaps its biggest-in-retrospect mistake was the $7.6 billion buyout of Nokia's phone business. Neither of these, however, comes close in scope to Microsoft's whopping $26.2 billion cash acquisition of LinkedIn. That's a wow on just about every front.

Microsoft's revenue last year was a little over $93 billion. It has assets in the $176 billion range. So Microsoft spending $26.2 billion on LinkedIn is roughly the equivalent of a moderately well-paid programmer buying a Tesla. Not chump change, but not bank breaking.

Why Microsoft just bought LinkedIn: It's all about the data

Even so, with LinkedIn's income of a little under $3 billion a year, and net income in the $166 million range, it's clear Microsoft didn't acquire LinkedIn for its income. By doing a buyout, Microsoft's also adding a pretty hefty 9,200 employee load to its current 118,000+ body count.

For those interested in doing the math, Microsoft (without LinkedIn) makes about $750,000 per employee. LinkedIn, by contrast, brings in less than half that amount, or about $315K per employee.

And yet, today's Satya Nadella-led Microsoft isn't stupid (well, except for scheduling today's Xbox reveal opposite Apple's WWDC - that was dumb). Nadella has made numerous positive moves to bring Microsoft into the modern, cloud-centric world, including doubling down successfully on services like Office 365 and Azure, adding a wide range of apps for iPhones and Android devices, and even making peace with open source.

Both our own Microsoft watcher extraordinaire, Mary Jo Foley, and ZDNet editor-in-chief, Larry Dignan, shared reasoned theories for the LinkedIn acquisition. Mary Jo says it's all about the data. Larry observes LinkedIn opens the door wide open for human resources activities.

I agree with both of them. Microsoft has essentially just bought itself a constantly updating map to the employees (and their working relationships) for pretty much every moderately relevant company on the planet.

LinkedIn is a storehouse of updated resumes for just about everyone that anyone will want to do business with. Yes, there are some working people who are not on LinkedIn, but almost none of them control any kind of budget or influence.

There are also a few unconnected, Internet-averse Luddites who don't show up on LinkedIn. But aside from some of my colleagues in the national security apparatus who can't decloak, almost everyone else has a full job history on LinkedIn.

LinkedIn does do more than just host job histories. It has tools for recruiters and job hunters, and relatively recently acquired the well-respected online video training service Lynda.com.

Even so, for most of us, LinkedIn's primary value has been the information it provides on its members' work history.

I use LinkedIn pretty much every day

I spend an absurd amount of time in phone meetings with enormous invite lists. It's not uncommon for a phone meeting I'm participating to have 17-20 participants, usually from three or four companies. Adding to the chaos is the fact that outside of the three or four people on my team, most of the participants are strangers.

I make active use of LinkedIn for help. This, by the way, is one of my Jedi-level secrets, so please only use it as a force for good.

As soon as I get the meeting invite, which almost always contains the complete participant list, I copy that full list to a new note in my Client Work section of Evernote. Then I point my browser to LinkedIn.

I look up each person and record a few notes in Evernote. This process helps me very quickly determine who the three or four key players are in the meeting, and which folks are providing support.

If you've ever seen a congressional hearing, you've seen the main congress critters at the bench, and their assistants and support team sitting behind them. You don't get cues like that in a phone meeting, but a few minutes with LinkedIn gives me a good working dossier on everyone I'll be dealing with.

For the key players, I'll spend some time digging through their histories. Did we ever share work situations, or know some of the same people? Does the person have a strong technical or business background, or will I have to explain a lot during the meeting? Does the person list any interests, schools, hobbies, or organizations that might give me a bead on his or her personality?

I find this practice extraordinarily useful. I come into meetings with a clue. Since I'm not the most naturally social person in the world, doing my LinkedIn homework ahead of time gives me the confidence that I can not only keep track of who's who, but can also avoid getting the players confused.

Another LinkedIn tool I rely on is a Gmail plugin for Chrome and Firefox called Rapportive. Rapportive displays detailed context information about people you're currently corresponding with in Gmail.

So, for example, when I get an email from someone and open the message, on the right side of the screen I automatically get the main points from that person's LinkedIn profile.

Rapportive's engineers originally built the plugin outside of LinkedIn and, I'm guessing, scraped the site. But in 2012, LinkedIn ponied up $15 million and brought Rapportive in-house.

What Microsoft needs to do to preserve LinkedIn's value

So let's recap: First, Microsoft spent beaucoup (yes, that's how it's spelled) bucks on LinkedIn. Second, LinkedIn makes a whole heck of a lot less annually than Microsoft paid. Third, both Mary Jo and Larry think LinkedIn's value to Microsoft is its data - the graph of about 400 million professional relationships LinkedIn has built up over the past 13 years.

In other words, all our resumes make up the reason LinkedIn is valuable to Microsoft.

That brings us to now. Until now, LinkedIn was a non-partisan company. Professionals from Microsoft and Dell and IBM and SAP and Apple and Google and all the other companies who compete against each other and Microsoft have been comfortable putting their resume information up on LinkedIn.

Heck, it's pretty much a professional necessity. Like I said earlier, if you're anyone of even the slightest consequence and you don't have a LinkedIn profile, somethin' ain't right.

But what happens now? Do people working for Microsoft competitors stop updating their information in LinkedIn? Will Microsoft stop offering Rapportive to Gmail users because Outlook is the mail mechanism of choice for Redmond? Will Microsoft block access to some of the most useful information now available to us (whether for free or as premium users)?

In other words, will Microsoft's acquisition of LinkedIn diminish its usefulness as the online resume of record?

Or will Microsoft go the other way, the open-is-the-new-closed strategy that Microsoft has been parading in the current post-Ballmer period? Will Microsoft make some of LinkedIn's premium features available to everyone as a way to add value to LinkedIn users?

Here's the bottom line. If it doesn't want another mind-blowing write-off for another holy-cow-look-at-all-them-zeroes acquisition, Microsoft must protect the golden core of the LinkedIn acquisition: LinkedIn's unique map of professional histories and relationships.

In order for Microsoft to do that, it has to make sure it protects the value of LinkedIn membership, even for its own competitors. Microsoft must not be predatory and must make sure it's safe for professionals working at competing companies to continue to use LinkedIn as the resume of record.

To do this, Microsoft has two major advantages going for it.

First, anyone currently working for a competitor is probably going to be moving jobs sometime or another. In other words, because these days hardly anyone works for the same company until gold watch time, it's good for almost everyone to have an active profile on LinkedIn.

Second, Microsoft actually has a long history of coopetition, its ability to work and get along with its competitors. Sure, the company can be a ruthless fighter. But now the company's culture has once again made it okay to work with competitors and users on other platforms. And Microsoft really does know how to work and play well with others.

Before I end this, I'll share one final word of caution to Satya: don't rename LinkedIn to something like Bing Jobs or, taking a page from previous naming styles used by Microsoft, such as Job Profile Index Mechanism for Professionals With Relationships Pro.

Just don't do it. Let LinkedIn be LinkedIn.

By the way, I'm doing more updates on Twitter and Facebook than ever before. Be sure to follow me on Twitter at @DavidGewirtz and on Facebook at Facebook.com/DavidGewirtz.