Does LinkedIn Deal Signal Microsoft Wants Back In on the Ad Business?

This article was written by Mike Shields & published by The Wall Street Journal

Industry executives sees potential for software company to leverage LinkedIn data to push its own products, maybe help other business marketers

Almost a year ago, Microsoft largely exited the digital advertising business, outsourcing the task of selling ads on properties like its web portal MSN to AOL. So, does the software giant’s surprising $26.2 billion acquisition of LinkedIn change that dynamic?

“It’s not entirely clear,” said Dina Gowar, who oversees global technology and innovation at Dell and helps the company evaluate new outlets for advertising.

Ms. Gowar theorized that LinkedIn’s vast streams of data could be used to target people with ads across devices—a key competitive advantage for an ad company in an increasingly mobile world.

Or, Microsoft could cull information from LinkedIn’s data on its customers and use it to tailor products for different types of businesses. Under Chief Executive Satya Nadella,“they’ve been trying to look at their business model differently and change how they talk to customers,” she said. Microsoft could potentially package customized LinkedIn products with software targeted at different types of executives, such as CEOs versus IT managers, Ms. Gowar added.

Microsoft declined to comment on whether the LinkedIn acquisition indicates a new advertising strategy.

In LinkedIn CEO Jeff Weiner’s note to employees on Monday, which he posted on LinkedIn, he mentioned that advertisers using LinkedIn to deliver sponsored content would now be able to distribute this content across other Microsoft properties—one of several examples he noted of how the combined company could unlock opportunities.

Native advertising has been a source of revenue growth for LinkedIn. Revenue from sponsored updates more than doubled in 2015, and it’s one of LinkedIn’s most profitable ad products.

But Marshall Kirkpatrick, chairman of Little Bird, a firm that analyzes social data for businesses, sees a much larger opportunity. Microsoft could theoretically create a powerful digital ad network for the business-to-business world, he said.

“People are the best source of future knowledge and value in industries,” he said. “If you can tap into right people, that’s a big competitive advantage for businesses.”

Microsoft could help a company specializing in supply chain logistics, for example, target ads to a network of people who work in this field or regularly inquire about this subject on LinkedIn, Mr. Kirkpatrick suggested.

One top digital ad buyer doubted that Microsoft’s interest in LinkedIn was driven by advertising. As Microsoft pushes its full suite of cloud-based services for businesses, it’s grappling with a new generation of companies that have grown up using products like Google’s Gmail, Slack and LinkedIn—not necessarily Microsoft’s Office line of products. “This gives them a direct channel there,” this person said.

Tom O’Regan, CEO at Madison Logic, a business-to-business marketing technology firm, noted that LinkedIn could help Microsoft market its own products, and agreed that selling ads to other marketers was probably not much of a motivator for the deal.

“Marketing their cloud solutions to the largest database of business professionals in the world is what they do and need to continue to do,” he said. As cloud solutions become more of a commodity, “this gives Microsoft a competitive advantage to use LinkedIn’s data to more effectively cater to its current base and to grow new customers—in ways that they couldn’t just as a LinkedIn customer.”