Bob Van Dijk, chief executive officer of Naspers Ltd., hits the gong to signify the opening of ... [+]
In yet another sign that the world is software-driven, Prosus N.V., one of the world’s largest tech investment firms operating as the international Internet assets arm of South African multinational Naspers, announced on June 2 that it’s acquiring Stack Overflow, a global knowledge-sharing platform for developers and technologists, for $1.8B. Prosus already owns significant stakes in online education companies Udemy and Codecademy, in addition to a number of other tech companies—most notably, Tencent.
I’ve consistently argued in previous articles that all companies must think and act like software companies. As software becomes central to the strategy of non-software businesses, they must build core competence in software. This, in turn, has increased the importance to developers of keeping up with modern software-development practices. With technology advancing relentlessly, software developers must keep learning new skills.
This is where Stack Overflow comes in. No matter whether you are a rookie or a skilled software developer, you are going to run into problems that you can’t solve by yourself. Unlike most online learning companies that offer courses and certifications in specific domains, Stack Overflow is, fundamentally, a Q&A site. Software development is a field where learning-by-doing is essential; books and formal coursework can only get you a part of the way. So the business offers just-in-time help for challenges that developers are encountering in their work. The questions are usually very technical and can be answered only by experienced developers. It’s not uncommon to see sophisticated snippets of code in the answers.
To help ensure swift and accurate responses, Stack Overflow awards reputation points both for asking a good question and for providing a useful answer to one posed by another person. Up and down votes from other users determine the actual reputation points awarded.
A research paper published in the prestigious journal Management Science shows that developers value the reputation that Stack Overflow affords them. They engage more enthusiastically in reputation-generating activities while they seek a new job, but reduce their contributions by nearly 24% after they find one (disclosure: one of the authors of this study is my co-author on a different study). By focusing on liquidity—ensuring that good questions are asked frequently and answered promptly and effectively—the company has become an essential resource to an engaged developer community with over 100 million people accessing its website every month.
Like many multi-sided platforms, Stack Overflow is free to use for developers. Its revenues come from advertising by companies looking to hire developers and to sell products to this community in a targeted way. With a growing archive of content and new questions posted continuously, the company has built a potent flywheel, attracting more developers, which in turn enhances its offering to advertisers, which then generates more resources to fund improvements to the platform that attract more users.
There is yet another benefit that will accrue to Prosus, with its existing investments in EdTech companies and as a tech investment company. It will be able to capture market insights from the Stack Overflow community to learn which technologies are becoming more valuable and where skills development may be necessary.
For example, the most popular tags today are javascript and java, with over 2.2 million and 1.7 million questions respectively, but it will also be able to gauge the demand for training in newer and emerging coding languages. It can use these insights not only to offer relevant courses at its portfolio companies, but also to inform future investments in tech businesses.
Moreover, as Stack Overflow became an important resource for developers, some companies began to ask for a similar product to facilitate collaborative efforts only among their in-house developers. This offering, which began somewhat informally, has become Stack Overflow for Teams. Companies including software giant Microsoft, digital natives like Instacart and Box, and traditional businesses like Chevron and Siemens, use the product. With more and more companies looking to build in-house software capabilities, platforms that allow developers to collaborate internally have high growth potential.
With US companies serving as a leading indicator of the rising importance of software, it’s only a matter of time before ones everywhere else will embrace platforms that facilitate collaboration among developers. The acquisition follows in the tradition of Microsoft’s purchase of GitHub and LinkedIn, which had previously acquired tech learning provider Lynda. Prosus believes it can help Stack Overflow reach “a wider international community, while also further scaling the company’s Teams product to position Stack Overflow at the center of product and technology development within major enterprises globally.”
Prosus is making a smart bet on the trend towards building software as a core competence in companies worldwide. The deal serves as yet another reminder that CIOs and other top C-suite executives must recognize software as a critical asset.
