Microsoft up their game

Microsoft has just paid $2.5 billion for Minecraft – a lot of money for a game that wouldn’t have looked groundbreaking in the 80s. The deal is one of the largest in Microsoft’s history and therefore something of a risk for Satya Nadella, their relatively new CEO.

But the decision shows that Nadella gets the importance of online communities, and the value they hold in terms of marketing.

Microsoft says the deal will break even in a year, on a GAAP basis. This doesn’t mean they expect to make $2.5 billion, however. The GAAP caveat (which stands for generally accepted accounting principles) means they expect their investment to make more money in Minecraft than it would sitting in a bank generating interest. So more than $25 million – a pretty achievable figure.

Short-term profits are not what this acquisition is about. Microsoft has bought into a community that offers potentially staggering future growth opportunities and valuable data about online consumer characteristics and behaviours. The game has over 100 million (mostly young) users, and they’re loyal: nearly 90% of paid PC customers have signed in in the last 12 months.

‘Minecraft is more than a great game franchise,’ said Nadella, ‘it’s an open world platform driven by a vibrant community we care deeply about, and rich with new opportunities for that community and Microsoft.’

So what can smaller businesses learn from this multibillion-dollar deal?

That you need to pay attention to what your customers love, for one. That taking the time to understand their motivations and desires will pay dividends in the future. And that the future of online marketing will increasingly be driven by conversations, rather than campaigns.