Microsoft gets social with Yammer

Microsoft may be running late to the party, but the company is betting it can Yammer its way into the business of social networks for, well, business. On June 25, 2012, Microsoft announced plans to buy Yammer, a San Francisco-based startup that runs private social networks that are used as business collaboration tools. The $1.2 billion deal gives Microsoft access to a fast-growing and still evolving market: social media for the business world.

The competition is fierce, with companies like IBMOracle, and salesforce.com all vying to develop social media services for enterprises. Still, there are relatively few big players in the social networking collaboration space, most notably Citrix Systems via its Podio online platform and VMware through its acquisition of Socialcast. Other competitors include social relationship software maker Moxie, community portal software developer Jive Software (which released its first cloud option in 2012), and Palo Alto-based microblog and wiki platform provider Socialtext.

In the four years since its founding, Yammer’s corporate user base has grown to five million; close to a million of those are employees of companies that eventually upgraded to its premium paid services. That means around 80% of its customer base continues to use the basic free service under a so-called “freemium” pricing model that lets people set up networks for free using a corporate e-mail address, then charges companies that want to continue to use the service once employee usage increases.

Microsoft hopes to monetize that 80% through a sales model that counts on consumer demand – where consumers are the employee end users – to drive adoption in the workplace. It plans to continue to offer Yammer both as a stand-alone product and as an integral part of some of its own collaboration and communications offerings, including Microsoft SharePoint, Office 365, Microsoft Dynamics, and Skype.

Yammer will be part of Microsoft’s Office division, and will help fill in the gaps in social in some of its other products. CEO and former PayPal executive David Sacks will continue to lead Yammer. With estimates that the enterprise social media market could grow into a party worth more than $6 billion over the next five years, there should be enough cocktails and hors d’oeuvres for everyone.

Lesley Epperson

Lesley Epperson covers the semiconductor and electronic component industries for Hoover's. After all those chips, she often needs to engage in a less esoteric pursuit: hunting down the perfect margarita.

Read more articles by Lesley Epperson.

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