And it’s been a long time since Microsoft designed and dominated a big new market category on its own. So if you can’t, buy someone who can.
And LinkedIn isn’t just a company that created a new category, it is a category king. LinkedIn designed and now dominates the professional social network space. Today, that category is massive and for all practical purposes LinkedIn has no competition.
Microsoft Needs More Category King Positions
If it wants to grow and be important again Microsoft needs to lean way forward on its skis. Get into new spaces. That’s why they bought Skype (web calling category king) and Yammer (at the time an emerging social business category king) for example. Of late the company has been investing in the “Microsoft Cloud.” More cloud beef (purposely weird analogy) helps. And LinkedIn has the added marketing benefit of making Microsoft look more serious about the cloud.
Microsoft Needs More Enterprise Category King Positions
Make no mistake, MS Office, MS Windows, MS Exchange & Outlook still pay a shit ton of the bills in Redmond. CIOs generally like Microsoft. Microsoft must do more to become a leader in new enterprise categories Vs. being viewed as milking their old cash cows.
Microsoft is Now The NSA of Your Career Data
Once a company wins a position as category king, a gap widens between the leader and the rest. The leader, for example, increasingly has the best data. And LinkedIn has fuckin’ data.
We willingly have told LinkedIn where we went to school, where we’ve worked, where we work now, and all who all of our business relationships are. Think Microsoft could use that data? Think when a CIO updates her LinkedIn profile showing a job change, that a Microsoft sales rep could put that information to good use fast? Never mind the machine learning Microsoft could leverage to figure out a scary amount about every business professional on LinkedIn. Who knows what predictive analytics evil plans they have in store.
In today’s world, data is power. Uber knows way more about us than taxi companies ever did. Netflix knows more about us than HBO could ever dream of knowing. And of course if Google and Facebook ever exposed our data, we’d all become transformed into uncomfortable digital nudists.
Data drives the economic power of modern category kings.
The economic advantages gained by a category king are staggering. While working on our new book, we analyzed data on U.S. venture capital–backed tech startups founded from 2000 to 2015 and found that category kings earned 76 percent of the market capitalization of their entire market categories.
Tech analyst Michael Walkley of Canaccord Genuity looked at the earnings of smartphone companies in late 2014 and found that Apple took in 93 percent of the industry’s total profits that quarter.
Eddie Yoon, a principal at the Cambridge Group, analyzed the top 20 of Fortune’s 2010 list of fastest-growing companies. Those companies received an average of $3.40 in incremental market capitalization for every dollar of revenue growth. But half of those 20 were category creators, Yoon determined, and those 10 companies got $5.60 in incremental market cap for every dollar of revenue growth. “Wall Street exponentially rewards the category creation companies,” Yoon wrote.
By owning the category king in professional social network there are an untold number of ways Microsoft could leverage LinkedIn to drive new category potential. If the integration goes well. And as we all know, that is a giant IF. That said, under new CEO Satya Nadella who knows. We may see a more fierce, effective Microsoft.
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Joshua B Lee
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