July 4, 2012 Cam Levack
Is it worth $1.2 billion for Microsoft to Yammer on?
Apparently, the software giant thinks so. The company recently paid more than a billion dollars to acquire Yammer, the “freemium” enterprise social network. Launched in 2008, it’s designed to allow communication between employees and/or departments within an organization – kind of a workplace version of Facebook, where individuals or groups can share ideas and relevant sites, update their progress and just stay in touch, professionally.
The app is easy to use. It requires only a company URL. Anyone within the organization can start his or her own network and invite employees to join the conversation.
Yammer CEO David Sacks, formerly of PayPal, reported revenue was “doubling every year”, with 80% of Fortune 500 companies using the service. Still, Yammer was no money-making machine. It earned just $20 million last year. So why the big bucks?
Microsoft has experienced consistent success selling such productivity and collaboration programs as Office and Sharepoint. But products like Word and Excel are used in isolation, while Yammer is designed to encourage collaboration and conversation. Microsoft may believe that the next round of serious revenue will come not from regular consumers, but from this higher-spending “enterprise” segment of businesses and public sector buyers.
Financial Times suspects that Microsoft is gambling that users will initially adopt Yammer’s free services in their work environment. Yammer will then step forward to IT departments who need the tools in order to manage the growing networks within the company. At some point, “freemium” will evolve to “premium”.
Certainly, David Sacks is enthusiastic. From viewing a number of interviews with David and other Yammer executives, one senses we’re at the beginning of something new and different – yet familiar – certainly worth Yammering about.
Cam Levack, Raven5 Ltd, Toronto, July 2012