In buying LinkedIn Corp. today for a stunning $26.2 billion, Microsoft is making an unprecedented bet that social data can supercharge its Office and cloud businesses.

The central question: Is it too big a bet on an asset of uncertain value that depends on kind of adroit execution Microsoft has rarely shown on big acquisitions?

Either way, the promise clearly was too much for Microsoft to ignore, especially at a time when the importance of social data is becoming apparent in such widely varying areas as advertising, machine learning and enterprise applications.

“There’s a chance the deal could redefine and give a second chance to Microsoft,” said Konstantin Guericke, a cofounder of LinkedIn who’s now an angel investor not involved with the company. “It comes down to profile information and social connections that can make productivity applications more useful.”

Indeed, on an analyst call today on the deal, both LinkedIn Chief Executive Officer Weiner and Microsoft CEO Satya Nadella were animated in discussing the potential of combining LinkedIn’s database of 433 million members with Microsoft’s productivity tools.

Social fabric

“LinkedIn essentially becomes a social fabric across all of Microsoft, including Outlook, Excel, Skype, PowerPoint and Excel,” Nadella said. “You’ll have the ability, whenever looking up a contact, to not only see what’s in Active Directory but to get the full richness of information about their professional network and about all the others who are in their professional network.”

That’s potentially powerful, some observers said. “Social data assets are starting to become recognized as premium assets” for companies, said Will McInnes, chief marketing officer of the social intelligence firm BrandWatch, who called the deal a “landmark moment.” He cited other examples such as Foursquare’s location data, Amazon reviews and Wikipedia, all created through social interaction. “In playing around on social networks, we were building these valuable assets.”

For Microsoft, the biggest opportunity is in customer relationship management (CRM), a market in which it has struggled for years with its Dynamics CRM services while watching in frustration as Salesforce.com Inc. has rocketed to a market capitalization of nearly $55 billion. LinkedIn’s rich member database is an asset no competitor can match.

Weiner also effused about Microsoft’s collaboration and machine learning capabilities. “Now we’ll be able to take our business intelligence tool – Sales Navigator – and deeply integrate that into Microsoft Dynamics,” he said. “We believe that will be a game-changer.”

Both executives spoke about the strength of graphs, or the networks of tools and relationships that characterize professionals and the businesses they work for. Microsoft’s graph includes elements like collaboration, email, customer accounts, contacts and messaging. LinkedIn’s features prospects, employers, jobs, relationships and insights about how companies and people work. Combined, the two executive spoke about creating a comprehensive “economic graph” that combines the best of both.

Little to lose

For LinkedIn, the deal was simply too rich to ignore. Microsoft lifts the yoke of inflated investor expectations from Weiner’s shoulders while also giving him a golden opportunity to realize the potential of LinkedIn’s most precious asset.

LinkedIn has little to lose in the deal besides its independence, though Microsoft promises even that will remain. The business networking company gets a 50 percent premium on its current stock price in an all-cash deal, along with air cover from persistent accusations that its business model is fragmented and unsustainable. It also gets access to Microsoft’s vast wealth to experiment with new ways to apply its rich data trove without the unrelenting pressure of quarterly earnings.

LinkedIn’s business has always been a chimera. It generates significant revenues from recruitment advertising, display advertising and member subscription fees, but that diversification has been as much a problem as an asset. Recruitment advertising and membership fees are both economically sensitive, and the display and direct advertising businesses are brutally competitive. When LinkedIn missed earnings expectations and issued a weak outlook for 2016, its shares dropped 44 percent on Feb. 5. Despite a solid first quarter, it has struggled since then.

The company has also suffered from perceptions that it is a distant second to Facebook in social networking despite its avowedly dissimilar business model. Tying up with Microsoft gives it room to scale in new markets. “LinkedIn has access to a lot of new channels they didn’t have access to before,” said Chuck Hester, a marketing communications executive who has spoken and written extensively about LinkedIn.

Now LinkedIn also has air cover to mine the gold in its member database without worrying about quarterly earnings. Exactly how it leverages that database is an open question. LinkedIn has jealously guarded its member data, refusing to license it for any sales or marketing purposes other than its own. That strategy should work to Microsoft’s benefit by giving it a proprietary resource to combine in creative ways.

For example, Weiner spoke about having the capability to connect a customer name in an Excel spreadsheet information to information about people in that person’s social graph. Recruiters can mine data about applicants and jobs to make better staffing decisions.  And sales professionals, who are sometimes vexed by LinkedIn’s complex web of connections, can get simpler information delivered to their CRM dashboard.

Conversations as platforms

In placing himself front and center in the announcement of today’s news, Nadella spent some of his considerable personal capital on convincing the market of the deal’s value, expounding at length upon the value of customer engagement.

That’s consistent with what Paul Greenberg, owner of CRM consultancy The 56 Group and author of CRM at the Speed of Light has been hearing lately. Greenberg noted that Nadella recently commented that Microsoft “needs to look at conversations as platforms” for “personal network productivity” and that ‘”revenue and profit come after customer engagement.”

“Take those two statements, add glue and you have the reason he bought LinkedIn,” Greenberg said. “Integrating with Office 365, and using Azure as a backbone, gives him exactly what he is talking about — the platform, applications and the data to achieve higher levels of customer engagement and highly personalized outcomes that improve productivity — if they do it right.”

That’s a big if, though. Microsoft’s 196 acquisitions since 1987 have featured few blockbusters and some notable failures, such as its disastrous 2013 acquisition of Nokia Oyj for $7.2 billion, an investment that Microsoft later wrote off. The LinkedIn deal is more than three times as large as the biggest buyout Microsoft has ever done, and the sale price nearly nine times the size of LinkedIn’s 2015 revenue. Microsoft’s shares fell 2.6 percent after the news as investors and some analysts questioned the deal.

Microsoft may be paying a lot to get into the game late, said Trip Chowdhry, an analyst with Global Equities Research, who believes we’re at the tail end of social networking as a growth business. “Microsoft is always late to the party,” he said, noting that as a result, the deal may not turn out any better than its acquisitions of Nokia, Skype, aQuantive and Yammer. “I’m quite concerned about Microsoft being able to prove it out.”

Other analysts, however, were more positive because LinkedIn services look more complementary to Microsoft’s. “This isn’t the 50-year-old uncle trying to get down on the dance floor with the kids,” said McInnes.

And LinkedIn expands Microsoft’s goal to become more of a services company, wrote Jack Gold, a former Meta Group Inc. analyst who now runs his own company. “Unlike problematic acquisitions in the past…this should provide Microsoft with a highly leverageable product base and qualified user base to market to.”

Microsoft has been interested in LinkedIn for a long time. Way back in 2006, Microsoft approached LinkedIn venture investor Sequoia Capital asking for a chance to bid in the event the smaller company contemplated selling, said Guericke. Ten years later, that time finally arrived.

Additional reporting by Robert Hof

Microsoft photo of (from left) LinkedIn CEO Jeff Weiner, Microsoft CEO Satya Nadella and LinkedIn cofounder and Executive Chairman Reid Hoffman