Lynda.com: LinkedIn gets it right again
When LinkedIn buys a company, it’s news. The business social network founded by Reid Hoffman makes relatively few acquisitions compared to other businesses of its size, and in an industry in which purchases are very much the norm. The price tag is pretty unusual as well, making this by far the biggest acquisition in its history: previous buyouts were in the hundreds of millions, not the billions. But when LinkedIn does buy a company, it gets it right: in May 2012 it bought SlideShare, and it was clear that what it was looking to do was incentivize the search for people through the presentations they created. It was the same with Pulse in April 2013, a news reader that has played a key role in allowing LinkedIn to go from being a simple data base of contacts to a service for finding people or companies, a place to read content selected on the basis of our contacts and experience, to try to overcome that instinctive FOMO, Fear of Missing Out.
Lynda.com is a peach of a company, one of those radical pioneers created way back in 1995 by Lynda Weinman, an expert in digital animation and multimedia who set up the site with her husband to teach online.
This is an outfit still ahead of its time, with a training model that prioritizes the use of knowledge over the qualification it provides, and that has done really well as a result. It reached profitability in just three years, and was financed though its own operations for 17 years, enjoying reasonable growth as a result, and didn’t bother looking for money from outside until 2013, when it was able to raise an impressive 103 million from Accel & Spectrum. A few months ago, in January, it closed a second investment round with 186 million from TPG Capital.
The company has consolidated itself as the benchmark in its sector by creating its own audiovisual and documentary materials, giving its courses a clear identity of their own that are universally recognized as being of the highest quality. It is pricier than most of its competitors: a license can cost between twenty and thirty dollars a month depending on whether it is basic or premium (which allows users to download materials and to access the site offline), but there is a flat rate allowing use of its catalogue of more than 90,000 videos. This subscription model has allowed it to generate earnings of more than one hundred thousand dollars annually over the last two years, and its earnings will continue to rise, reflecting the continuing growth of the online teaching industry, which is now widely accepted and no longer seen as a substitute to face to face learning.
LinkedIn’s acquisition of Lynda.com makes perfect sense: it establishes training needs based on professional profiles that are increasingly complete, prescribing them in recommendation terms supposes a fairly obvious fit-in, as is trying to generate social dynamics associated with these training processes. Going from recommending articles so that professionals can keep up with what’s going on in their sector to recommending courses with the same goal is a good idea. Given the current economic climate, we could see the price of the operation, which is basically 15 times that over income, as questionable, which means that LinkedIn clearly has more ambitious plans, but that it intends to carry them out with the same prudence it has until now.
Managing acquisitions in a strategic context is not easy, and few companies learn the skill. It’s about making the right choice, making sure that the management team won’t leave after the buyout or that it simply sits tight but does nothing until it can legally do so, as well as integrating the company’s activities into that of the purchaser without too many clashes: very important skills. And in this case, LinkedIn seems to be setting the pace.
(En español, aquí)
