Why LinkedIn spent big on Lynda.com

LinkedIn strengthened its foothold in the career advancement and networking market last week with its largest acquisition to date and the fourth-largest deal ever in social media. The company’s $1.5 billion acquisition of Lynda.com also catapults LinkedIn into the educational technology market virtually overnight.

The move is significant for LinkedIn as it looks to generate more revenue from its 347 million users and expand on what CEO Jeff Weiner described in a blog as LinkedIn’s fundamental value proposition: connecting people to opportunity.

“This is a very smart move for LinkedIn because it increases the value that the professional network provides to its members, recruiters and marketers,” Forrester senior analyst Kim Celestre told CIO.com in an email interview. “It also helps LInkedIn expand into the schools, businesses and governments that are currently using the Lynda.com platform for large e-learning initiatives.”

Integration strategy key to success

The extent to which this deal boosts LinkedIn’s value and drives growth will depend on how it promotes and integrates Lynda.com’s catalog of nearly 3,500 online video courses.

“The way LinkedIn integrates Lynda.com will be absolutely critical to the success of this deal. The more tightly integrated the better the experience will be for LinkedIn and Lynda.com members,” Celestre says.

Celestre says she expects completed Lynda.com classes and professional certificates to be prominently displayed on LinkedIn status updates and members’ profiles.

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LinkedIn could also display a status bar on profiles to indicate individual course progress as a percentage and provide details about those recently acquired skills or specialties, Celestre says.

“I think the most interesting aspect of this deal is that LinkedIn will be able to directly attribute e-learning to career opportunities and advancement.”

The company also gains access to a significant volume of data that will contribute to its Economic Graph project.

Money talks big for LinkedIn’s future

The acquisition price of $1.5 billion highlights the massive value and opportunity LinkedIn sees for itself and Lynda.com in expanded learning and professional certification.

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It tops the $1 billion Facebook paid for Instagram three years ago and the $1.1 billion Yahoo paid for Tumblr two years ago. Only Google’s $1.65 billion acquisition of YouTube and Facebook’s acquisitions of Oculus at $2B and WhatsApp at $19 billion for WhatsApp top the LinkedIn-Lynda.com deal

“We have a shared vision of connecting relevant knowledge to those in need of new or stronger skills,” Lynda.com cofounder Lynda Weinman wrote in a LinkedIn Pulse post.

Weinman also notes that she and Weiner “both believe that the skills gap is one of the leading social issues of our time — technology changes fast and people need to keep their skills up to date.”

While some of LinkedIn’s acquisitions have fortified its existing business, Lynda.com gets the company in the burgeoning $30 billion professional certification market, financial analyst firm CB Insights posed in its blog.

3 paths to ROI

LinkedIn will be taking a crack at three major opportunities once the deal for Lynda.com closes, according to Forrester’s Celestre.

By integrating Lynda.com tutorials into its platform, LinkedIn could increase the frequency of member visits, the amount of time spent on the network and improve engagement rates overall, she says.

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LinkedIn can also begin gathering deeper insights on the skills members are developing through Lynda.com courses. Recruiters could then tap into LinkedIn’s database to target users who have completed specific training most relevant to the position they’re trying to fill, according to Celestre.

“This data also provides an ability to predict what career path one may choose, which will help LinkedIn provide a more personalized experience,” she says.