Two possible ways the LinkedIn acquisition may play out
LinkedIn just got acquired by Microsoft. Over the last several years, LinkedIn has been tentatively trying to move into the enterprise CRM space on the strength of its extensive data. In this guest post, Myk Pono, an entrepreneur, marketing and product growth consultant, analyses LinkedIn’s strengths in enterprise vs. Salesforce’s play in that space. Towards the end, I lay out two possible scenarios that will either grow or weaken LinkedIn’s enterprise platform stack. Over to Myk.
TLDR: Linkedin owns the most accurate professional data on over 400M professionals, but it lacks tools and infrastructure to unlock real value from that massive pool of raw data.
Understanding LinkedIn vs. Salesforce
Salesforce has infrastructure and functionality; Linkedin has data
The Salesforce CRM is still the company’s core product despite their diversified product line marketing cloud, data solution, customer support and success. The CRM acts as a hub to connect to other products.
Salesforce CRM provides deep functionality while taking significant resources to get companies started. However, upon implementing Salesforce for your organization, you’re beginning with a clean sheet as no customer data is available to you. Salesforce tried to solve this problem with the Data.com acquisition. However, Data.com’s lead data is not high on freshness and accuracy.
Salesforce has data accuracy issues
The success of lead nurturing, account based sales, and marketing all depend on accurate lead data and tracking. Salesforce has had its own share of data accuracy issues. Salesforce gets this. Many products built on top of Salesforce were built to solve the problems of lead duplication, data accuracy, and enrichment.
Linkedin has what Salesforce is desperately missing – accurate and fresh data.
The Platform Stack, developed by Sangeet Paul Choudary, helps us visualize how Linkedin and Salesforce differ. Linkedin has a tremendous advantage in the network/community layer, which enables it to build a sizeable personal data on its users. Still, Linkedin finds itself without the infrastructure or more specifically tools to use this data to capture Salesforce customers.
LinkedIn as an open API play
Salesforce has tools, and Linkedin has data. It is far easier for one to build tools than for the other to acquire data. If Linkedin makes its API more open and accessible to third-party developers, it will boost SaaS companies in the sales enablement market to build on top of its platform. Linkedin will be able to instantly charge a percentage of revenue generated by the products using its API. Companies that rely heavily on build Chrome extensions to export Linkedin data will be at a disadvantage if they don’t move to the platform. Linkedin can take a cut of these transactions.
LinkedIn will do more than bring in a new source of revenue when moving to a platform business model by expanding the infrastructure layer. It will also encourage many companies in the sales ecosystem to move away from Salesforce.
Outbound email solutions, such as Outreach.io, Sendbloom, Yesware, Toutapp, Replyapp, make up an active niche in the sales enablement marketplace. Access to Linkedin’s data layer would provide these companies and others like them with the opportunity to reach larger markets and integrate contact data into their existing solutions. Linkedin can ask for a percentage of revenues and learn data on open rates to enhance their user profiles.
I agree with Myk’s overall point about data being the more difficult asset to replicate. That is central to the idea of the platform stack. Accordingly, building out the infrastructure layer to move into CRM makes a lot of sense. However, with the Microsoft acquisition, there are two varied scenarios that might play out.
1. Weakening of the network and data layers: Microsoft, that has never quite understood the network and data layers, mismanages the acquisition and kills the two layers that already work well for LinkedIn.
2. Rise of the infrastructure layer: Microsoft, with its deep prowess of building developer ecosystems, lets LinkedIn continue to independently manage the network and data layers and augments that with its ability to foster a developer ecosystem to build the infrastructure layer.
It will be interesting to watch and see how this plays out.
Lecture at the MIT Media Labs discussing platform economics and growth.