What do YouTube, Instagram & GitHub have in common?

I have had a few days to think about Microsoft’s decision to buy GitHub for $7.5 billion and I am increasingly convinced that this is a good deal for Microsoft, as long as they don’t pull the same shenanigans they did with Skype. The acquisition makes a lot of sense, especially when you see it from the lens of two of the most successful “buys” of recent years.

In 2006, google bought YouTube for $1.65 billion. It was a good deal because it helped the company become the epicenter of the video web. YouTube is also the second largest search platform and has more younger customers than its original platform (Google). Then, in 2012, for about a billion dollars Facebook bought the visual web, future customers and what has now become the second largest social platform. Just like Google, Facebook too, bought the next generational (and version) of its core competency.

Microsoft has been an operating system and applications company. But what made it a force was the fact that it was a platform that was all about developers. The past generation of developers – those who developed for a client-server world and many web developers — bet on Microsoft and its tools.

However, the emergence of open source, mobile and the cloud has shifted developer affections. Amazon, in particular has captured the imagination of these new generation of developers. Microsoft needed this new generation of developers and GitHub brings precisely that to the table. It will help Microsoft’s Azure cloud become and stay relevant in the near future.

I wouldn’t be surprised if in six years, the GitHub deal will look as astute as the YouTube buy or the Instagram acquisition.

A letter from Om

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