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How LinkedIn failed

Why it's better off inside Microsoft

Most big social networks are fun to use but tough to turn into businesses. Facebook struggled mightily before finding its fortune in mobile advertising; Snapchat’s television-like ad business is an open question; Twitter is in turnaround and likely headed for a sale. For a long time the work-centered social network LinkedIn, which was acquired by Microsoft yesterday for $26.2 billion, had the opposite problem: it was a reliable generator of cash, but is disdained by a large swathe of its user base.

Over the last year, contempt for LinkedIn became a bona fide cultural phenomenon. The company’s signature catchphrase — "Hi, I’d like to add you to my professional network on LinkedIn" — was posited, plausibly, as the perfect universal entry for The New Yorker’s long-running cartoon caption contest. LinkedIn also admitted that hackers had made off with 100 million email and (hashed) password combinations from its servers, which led to a number of high-profile Twitter accounts being compromised.

Meanwhile the company’s aggressive email tactics, which needlessly opted users in to receiving multiple messages every day, resulted in a $13 million settlement last year. They also led to what was arguably the best tweet of 2015:

All those emails seemed brilliant until they suddenly looked desperate — which mirrors the story of LinkedIn itself. Launched in 2003, LinkedIn is one of the oldest social networks still online. (It predated Facebook by a year.) Then, as now, LinkedIn was meant for professional networking. Create a profile, connect with people you know and trust, and maybe someday a job offer will come your way. The notion of posting what amounted to a resume online took while to catch on — some early users worried their bosses would assume they were looking for new jobs and punish them for it. It took three years for LinkedIn to reach 20 million users.

A dizzying array of growth hacks

But LinkedIn held true to its vision, built a very smart team, and used a dizzying array of growth hacks until it became ubiquitous. Today it has 433 million registered members, a quarter of whom visit it each month. And the company’s earnings before interest, taxes, depreciation and amortization (EBITDA, as we say in Silicon Valley) are projected to quadruple to $1 billion this year. Those revenues come from recruiters, who pay to get full access to your profile and send you messages, and salespeople, who pay to send messages to leads. The group of people who value using LinkedIn seems to be concentrated almost entirely in those two groups.

LinkedIn’s premium subscription service for those users is stable and profitable, but its growth is decelerating, and the company lost money in each of the past two years. The once-reliable generator of cash began to look vulnerable. And so over the past few years the company looked to expand: building a publishing platform cluttered with anodyne business advice; acquiring the online learning company Lynda.com; and building a series of underpowered, little-used apps. (The company imagined you would want to download a dedicated LinkedIn app for looking up coworkers’ phone numbers.) None of it clicked: in February, the company’s earnings report suggested its ad business was flattening, limiting its growth potential. The stock dropped 40 percent in a day.

linkedin messaging

Meanwhile, the company’s core products have remained a development backwater. LinkedIn’s top priority is to connect you with other users, but when that connection request comes, good luck figuring out who it’s from. The company has always given you the least information possible in those requests — a name, a title, maybe a company — leaving to you to guess whether this is someone who has ever emailed you before. (This despite asking early and often to store your contacts.) Want to look up an email address for one of your contacts? Sure! Just type in their name, tap their face, and scroll down a few miles, beneath a box of your mutual connections, their full resume, a list of LinkedIn Groups they belong to, and a list of unverified skills that their contacts say they have. Their email address will be right there.

A bunch of empty rooms for you to tap around in

A ballyhooed redesign of the flagship mobile app last year modernized the user interface in an effort to make it more useful to people who were not actively seeking jobs. The result was a Facebook-aping news feed which presupposed that (a) people in your network are achieving significant career milestones every day, and (b) you want to hear about them. (I do not!) And after encouraging users to build elaborate portfolios on the desktop web, the mobile redesign jettisoned them in favor of endless cards that beg for engagement at every turn. Would you care to message Sal? Or endorse him? Or view his activity? On its last earnings call, the company bragged that the new design had boosted engagement. But the app is hollow — a bunch of empty rooms for you to tap around in.

LinkedIn has now spent 13 years asking for our attention, to diminishing returns. I don’t doubt that it helps people find jobs every day — it wouldn’t be making $1 billion this year otherwise. But with every interaction, the company conveys its desperation. Most of us don’t simply need a service that bombards us daily with professional news and new job prospects. We need a trusted resource that’s there for us when we need it — and fades into the background when we don’t. LinkedIn is congenitally unable to fade into the background, which is perhaps why so many of us have wished it would just go away. And if it did, who would miss it?

It’s in that sense, I think, that LinkedIn failed as a standalone company. It loomed large but has never been essential, focusing on its paying customers at the expense of the users who make it valuable in the first place. The company makes grandiose claims about creating economic opportunity — CEO Jeff Weiner said this week that LinkedIn will be the answer for workers who lose their jobs to robots. But in practice it’s not much more than a way for white-collar workers to field occasional inquiries from recruiters and vendors who pay dearly for the privilege. Or, viewed from an acquirer’s perspective, a rich trove of data that would be better put to other uses. LinkedIn’s underlying vision may be much broader, but if the company can’t figure out where to put the phone number in a user profile, I’m not optimistic about its plans to vanquish Skynet.

The less independence LinkedIn will enjoy, the better

Lucky for us — and for LinkedIn — Microsoft has a much more practical vision for it. In his memo, Microsoft CEO Satya Nadella laid out plans for LinkedIn that, if accomplished, would make the service dramatically more valuable. It will bring Office 365 a bona fide social graph, making collaboration easier across a wide range of products (notably email). It could serve the same purpose for Dynamics, the company’s business software suite, giving Microsoft a true competitor to Salesforce. Over time, it will lead to new subscription- and advertising-based products and services. And other good ideas have been quick to follow — Paul Ford has a good list here, starting with letting you easily message second-degree connections through Outlook.

In the announcement of the acquisition, Nadella and Weiner talked up the independence LinkedIn will enjoy under Microsoft’s umbrella. But the less independent LinkedIn is from its new parent, the better: Nadella’s Microsoft is hell-bent on owning the future of work; and he just picked up 433 million workers.

Usually this is the part in the story about an acquisition where the writer lays out all the reasons that the acquisition could go wrong. But this is the rare case where nearly any change to the acquired company would seem preferable to the status quo. Weiner all but admitted as much in his memo to employees: "Imagine a world where we’re not pressured to compromise on long-term investment, hesitant to disrupt ourselves, or hamstrung in the way we can reward and acquire new talent," he wrote. That world has now arrived, and LinkedIn can begin putting its money where its considerable mouth is. It may never achieve its original vision, but it may very well help achieve Microsoft’s.