Microsoft’s Two Big Challenges
Microsoft reported strong earnings this evening, indicating that the Redmond, Washington-based company is on its way to recovery, thanks in part to the success of Azure and its other cloud products. But the company still has two major challenges to address: what to do with its acquisition of LinkedIn and what to do about its mobile strategy. Worryingly, these represent the intersection of two of Microsoft’s greatest weaknesses to date: the company has a poor track record when it comes to fully integrating acquisitions into its product line, and an even weaker history with its mobile business.
The Acquisitions Game
Last month, Microsoft bought LinkedIn for a whopping $26 billion, making it the largest acquisition to date for the company best known for its Microsoft Office Suite of workplace productivity tools (and our CEO thinks the deal could have been worth even more). While LinkedIn co-founder Reid Hoffman has gone on record to explain his decision to sell the company, Microsoft has been far more tight-lipped to explain their motives and future plans for the enterprise social network.
Verto Analytics data shows that Microsoft continues to maintain a strong presence in the U.S., with a reach of nearly 91%, and almost 225 million users accessing Microsoft products during the month of June. Unsurprisingly, given Microsoft’s strong track record in enterprise and workplace productivity tools, Verto Device Watch data reveals that the largest proportion (193.7 million) of users who spend the most time using Microsoft products use PCs; their mobile numbers still lag.
“Microsoft is one the most puzzling big technology company at the moment,” says Verto Analytics CEO Hannu Verkasalo. “Microsoft currently reaches 190 million monthly users in the U.S. on desktop, mainly because of Windows PCs. They have more users under desktop reach than any other app/web publishers, including Google, Yahoo, or Facebook. However, at the same time, they are only number six in terms of their mobile reach, behind Twitter or Amazon, for example.”
While it has a much smaller number of monthly users than its new owners, LinkedIn seems to have made much better progress with attracting mobile users – more than half of its monthly users access its services via a mobile device, and the number of users who primarily use a smartphone (37.3 million) is nearly equal to those who primarily use a PC (38.7 million) to access LinkedIn.
The Mobile Challenge
Microsoft’s weaknesses in the mobile sector also extend to its greater corporate strategy: “[Microsoft] has done serious M&A in trying to get back in the mobile game including the acquisition of Skype and Nokia, but with little remarkable success,” observes Verkasalo.
Disappointing sales figures for the Windows Phone and continued restructuring of its mobile phone business following its $7.2 billion acquisition of Nokia are just two examples of how Microsoft has continually mishandled its opportunities at gaining traction in the mobile market.
“Out of all time spent with Microsoft, only 11% takes place on mobile devices, while the same is 40% for Facebook, and 19% even for Yahoo,” notes Verkasalo. A quick glance Verto’s data for Skype (the VoIP company which Microsoft acquired for $8.5 billion in 2011) tells a similar tale: in all major user engagement metrics (reach, retention, and engagement) it lags significantly behind Microsoft’s other major products, such as MSN and Bing.
Can Microsoft turn its mobile strategy around? Perhaps its best bet is to borrow a few lessons from its successful cloud team: “Microsoft is putting a lot of executive support behind its cloud-based strategy – the same as it has for mobile,” says Verkasalo. “The difference is that the tactics and execution have been much better for cloud-based solutions so far. The question remains whether they will be able to repeat the same in mobile after some trial-and-error years”