![]() Announcing the acquisition, Nadella made it clear that he’s buying the social-networking company because he believes it can improve Microsoft’s existing cloud-based services. In April, the company’s growth results for its cloud business disappointed investors and raised worries about how well it is adapting to the subscription-based model and competing with scrappier rivals. On the whole, Microsoft is doing well-its stock price has risen more than thirty per cent since Nadella’s appointment as C.E.O.-but the coming years could be challenging. And, in addition to the pressures that come with a different way of selling one’s wares, Microsoft faces competition from smaller office-productivity startups with built-in social features, like the messaging service Slack. That makes it especially important to give users a reason to stay-or, put differently, to make it difficult for them to leave. But unlike traditional software, which companies buy once every several years and then pay to maintain, subscription-based cloud services require customers to renew their commitments over and over, sometimes as often as once a month. Nadella’s strategy has instead been to focus on taking businesses where Microsoft has traditionally excelled and moving them to the Internet-based “cloud”-for example, selling subscription-based versions of Office that can be accessed either on a desktop or through the Internet. Facebook and Google have been so successful at consolidating ads on their services that their competitors, including Microsoft, have concluded that they don’t stand much of a chance at building big advertising businesses of their own. But the online-advertising business has come to depend heavily on scale: to attract significant advertising revenue, you must have access to millions, even billions, of users. Back when Ballmer was courting Zuckerberg, online advertising was seen as one of the most promising ways to make money on the Internet: you provided services for free, then charged companies to advertise to your users. But with this purchase Nadella’s motivation is different from Ballmer’s. It might seem surprising, in that context, that Nadella has now staked his career on acquiring a different social-networking company. In June, 2015, his successor, Satya Nadella, wrote in an e-mail to employees outlining his vision for Microsoft that the company would need to “make some tough choices in areas where things are not working.” The letter didn’t mention advertising by then, Microsoft was all but abandoning that business. This was seen as one of Ballmer’s big disappointments as C.E.O. Eventually, Microsoft failed not only at building or acquiring a prominent social-networking service of its own but also at creating a successful online-advertising business at all. Ballmer had an instinct that social networking was important, but he had no idea how to tap into it. ![]() In retrospect, the company’s inability to buy Facebook symbolized a broader failure to navigate an industry that was being radically transformed by new technologies. That was good for Facebook, which is now valued at more than three hundred billion dollars and has one of the most successful online-advertising businesses in the world, but terrible for Microsoft. Zuckerberg was intent on keeping his company independent. ![]() For this, according to the journalist David Kirkpatrick, Ballmer was willing to pay fifteen billion dollars, far more than Microsoft had ever paid for an acquisition. If Microsoft could acquire Facebook, it would gain a user base that could eventually rival Google’s-just what advertisers wanted. People were signing up for accounts in extraordinary numbers. But Ballmer, who wanted to catch up to Google in the online-advertising business, was beginning to see Facebook’s power. During Facebook’s first couple of years, bigger companies had dismissed it, and social networking in general, as a fad for college kids Zuckerberg had even admitted that he didn’t care how Facebook would eventually make money. of Facebook, to let Microsoft buy his company. at the time, Steve Ballmer, flew to Palo Alto to try to convince Mark Zuckerberg, the young C.E.O. Back in the mid-aughts, Microsoft’s C.E.O. Microsoft’s announcement, on Monday, that it would purchase LinkedIn-its biggest acquisition ever, at more than twenty-six billion dollars-brought to mind an earlier takeover attempt, almost a decade ago. PHOTOGRAPH BY JEFRI TARIGAN / ANADOLU / GETTY Microsoft announced this week that it would buy LinkedIn for more than twenty-six billion dollars.
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