As part of its expansion plan, LinkedIn has agreed to purchase Lynda.com, an e-learning company, for $1.5bn. This will be LinkedIn’s largest acquisition and 52% of the purchase will be financed by cash with the remaining 48% in stock.

Why did LinkedIn purchase Lynda.com?

Comparing the Q4 numbers from 2009 to 2014*, LinkedIn’s membership growth rate has been falling:

• 2009 – 2010: 64%
• 2010 – 2011: 61%
• 2011 – 2012: 39%
• 2012 – 2013: 37%
• 2013 – 2014: 25%

 *statistics from statista

These declines in growth rates led to the acquisitions of Slideshare for $119m and Pulse for $90m in 2012 and 2013 respectively, in an attempt to expand LinkedIn beyond its roots of being merely a hub in which job seekers and recruiters can network. These previous acquisitions allow users to consume content more easily, but the Lynda.com purchase will now allow LinkedIn to go further and produce its own content.

The acquisition is an example of how social media platforms are moving towards creating content. At a macro level, most of the growth numbers for the different social media services are not what they used to be so many are now beginning to focus more on retention rather than pure growth. They have penetrated the market but, if companies do not innovate, fatigue of their services leads to stagnation and, with how rapidly the sector develops, this can result in their demise. All platforms recognise that, to avoid becoming the next Myspace, they need to add value and the best way to do this is by giving users content.

Lynda.com offers over 5,700 courses and 255,000 video tutorials for professional development, and sells to both individuals and corporate clients. The synergies between the two companies are therefore clear and the purchase will allow LinkedIn to go from merely possessing data about what skills their users have and need, to being able to offer users the support to help them to develop their required skills.

Potential in Emerging Markets

Much like how Facebook is developing Internet.org to establish internet connectivity in emerging markets such as India, the acquisition gives LinkedIn the opportunity to enter into the same high potential markets. In areas where education is prohibitively expensive or where appeal for online learning can be found, LinkedIn could be the first to offer courses that are professionally-geared. Being the pioneer in these countries would allow LinkedIn to gain disproportionate value and, similar to how Internet.org is powered by Facebook, establish an educational ecosystem that is dependent on LinkedIn. The long-term benefits of becoming a major educational figure in these international markets would far outweigh this initial $1.5bn investment.

Conclusion

Because of how compatible LinkedIn and Lynda.com are, this acquisition boosts LinkedIn’s ability to create content and will become a key foundation of LinkedIn’s business strategy. The opportunities for entry into online education in both domestic and international markets will only consolidate LinkedIn’s market-leading position.

As for the social media sector in general, there will be continued developments regarding how companies produce content. Although CEO Jeff Weiner suggests that LinkedIn will now be growing content organically because, “in many regards, [the acquisition] is that last piece of the puzzle and at this point it’s just a question of scale and time”, the industry will continue to see further drives to deliver content either through acquisitions or via in-house development.

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