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Tuesday, June 14, 2016


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Chanson de Roland

So Microsoft just agreed to pay $26.2 billion dollar in value for LinkedIn, an unprofitable company that just suffered a catastrophic data breach. Why would it do that?

Well the answer is in the value of the personal information, the particular type of personal information, that acquiring LinkedIn will contribute to the particular stack of personal information that Microsoft is developing about professionals and other knowledge workers' work and professional and business associations. While not as broad as Facebook or Google's stacks of personal information, it is nonetheless large and is immensely valuable, but especially valuable for Microsoft.

And why is LinkedIn's information about professionals and other knowledge workers so much more valuable for Microsoft than it is for LinkedIn as a standalone company. It is because Microsoft can cross reference and combine LinkedIn's particular type of personal information in ways that will give Microsoft an intimate profile of who each of the user of LinkedIn and its productivity products are, who they associate with, what their needs and wants are as related to their work and careers, and even what projects they happen to be working on at the moment.

It doesn't take much imagination to see the immense value of that, which is so much greater when Microsoft can combine LinkedIn's personal information with its own collection of such information, so the value of LinkedIn's personal information to Microsoft is x times $26.2 billion dollar, where x is some number significantly greater than one. So the value for Microsoft is clear.

What is less clear but just as powerful is the loss of privacy for professionals and knowledge workers. To make this deal work, Microsoft must fully exploit and monetize its new super collection of personal information about workers. It will do that, inter alia, with targeted advertising and marketing of goods and services. Now, aside from the personal loss of privacy and the annoyance of solicitations that one didn't seek, there is the great danger of the loss of privacy about one's work and career and one's client's and customers, as Microsoft will now be able to draw highly accurate inferences about all of those things in their most important and confidential aspects.

As a lawyer, I can tell you that there is nothing quite so exciting as the prospect that either Microsoft or someone, who has licit or illicit access to its data, will be able to infer with a high degree of accuracy what I am working on and/or who I am working for, who my associates are, and what career moves I might be contemplating. And it will do all of this at its discretion for the purpose of maximizing its profits, and with very little restriction, if one accedes to the terms for using Microsoft/LinkedIn's products and services. And Microsoft will seduce or coerce the assent to this collection of personal data by either eliminating the option to purchase its standalone products or by making the terms of such a purchase much more expensive than subscription to its goods and services.

At least with one’s partners and associates, you have agreements and/or duties of loyalty and confidentiality, and with clients, it is in their self interests to keep their secrets. But with Microsoft, one has nothing but the certain knowledge that it will exploit one’s professional information in every way permitted by law to maximize its profits, constrained only by the business risks and risks to its reputation of exploiting one’s professional information in ways that cause manifest harm to its customers.

So now Microsoft’s products, such as its office productivity suite, services, and its new professional networking service, LinkedIn, will be collecting our professional information as we work and network.

Well, at least law enforcement will be happy with this deal, because it will now have a new rich source of information to either subpoena or search and monitor subject to warrant of law.


Another point of view:

"There is a third acquisition model that in a way is a hybrid of the strategic remix and the private equity models. It’s the Google model – or rather the Alphabet model. In this strategy, the company acquires businesses or technologies that have promise but are still risky, and it nurtures them to see where they lead... It is striking that in his letter to employees, LinkedIn’s CEO cites Google’s acquisition of YouTube as a model for his deal. That acquisition folded YouTube into Google but allowed the video company to exist relatively independently... If that is Microsoft’s intent with LinkedIn, then this deal is the first installment of Microsoft’s own “alphabet.” The company may be creating a collection of businesses that are distinct from each other but support the same broad vision. And, if it works, the collection could expand. Skype, acquired by Microsoft in 2011, would fit this strategy..."

Is the LinkedIn Acquisition Microsoft’s Attempt to Build Its Own Alphabet?


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