The purchase of Yammer is part of the software giant's push to
expand its products for businesses.
Microsoft has announced that it will buy Yammer, a social
networking service for businesses, for $1.2 billion in cash as it
seeks to strengthen its business software offerings and compete more
directly with Salesforce.com.
Under the terms of the deal, Yammer will be added to Microsoft's
Office division and will continue to be led by David Sacks, its
chief executive.
Yammer, which calls itself "the enterprise social network," is a
sort of Facebook for business. Its Web-based service allows
companies to create private social networks, on which employees can
chat privately, share files and collaborate on projects.
"The acquisition of Yammer underscores our commitment to deliver
technology that businesses need and people love," Steven A. Ballmer,
Microsoft's chief executive, said in a statement Monday. "Yammer
adds a best-in-class enterprise social networking service to
Microsoft's growing portfolio of complementary cloud services."
Though the Microsoft Office suite of software has become
ubiquitous in homes and offices, the company has fallen behind on
social networking applications for businesses. The company offers
SharePoint, a collaboration platform, but the service is primarily
used to share and manage documents. With Yammer, Microsoft will be
able to pin its applications to a social graph flush with
communication tools.
"Microsoft has been a bit slow to the social game," said Rob
Koplowitz, an analyst at Forrester Research. "Social enterprise is
taking off, and Microsoft needs a strong position."
Yammer was co-founded in 2008 by Mr. Sacks, a former PayPal
executive who spun the business out of Geni, a genealogy and social
networking site.
Over the past four years, the service has grown rapidly as more
companies have turned to the Web for secure methods of interoffice
communication and collaboration. Yammer, which offers both free and
subscription services, has more than five million users and is used
by more than 85 percent of Fortune 500 companies.
It has raised a total of $142 million in venture capital,
recently adding $85 million in late February, in a financing round
led by Draper Fisher Jurvetson. The company's roster of investors
and board members is stacked with former Facebook executives and
members of the so-called PayPal mafia. Founders Fund, the venture
firm led by a PayPal co-founder, Peter Thiel, and the Social Capital
Partnership, a firm partially backed by Facebook, are both major
backers. Sean Parker, the former president of Facebook and an
executive general partner at Founders Fund, is a board member.
In recent months, Yammer has aligned itself more closely with the
software giant. In April, Yammer acquired OneDrum, a British start-
up focused on file sharing and collaboration software for
businesses, for an undisclosed sum. At the time of the acquisition,
Mr. Sacks highlighted the value of the start-up's applications for
Microsoft products, citing the popularity of Microsoft Office
documents.
"When we started Yammer four years ago, we set out to do
something big," Mr. Sacks said in a statement. "We had a vision for
how social networking could change the way we work. Joining
Microsoft will accelerate that vision and give us access to the
technologies, expertise and resources we'll need to scale and
innovate."
Microsoft's pursuit of Yammer comes as the business software
market converges with the consumer Web. Traditionally, a company's
technology purchasing decisions were made top-down, controlled by a
handful of information technology experts. That model is rapidly
eroding with the rise of Web-based services that are created to be
lightweight and user-friendly. Start-ups like Yammer reel in
consumers with free versions. Those consumers then become
evangelists at their companies, encouraging their employers to adopt
the application and pay for a premium subscription.
The Yammer acquisition will allow Microsoft to compete more
directly with Salesforce, which offers a similar messaging product
called Chatter. Salesforce has also been aggressive in adding social-
related applications to its portfolio, recently spending $689
million for Buddy Media, a social marketing business that works with
companies like Ford Motor and L'Oreal. The service helps companies
build and manage their advertising campaigns across social
networking sites, like Twitter and Facebook.
Facebook's chief operating officer, Sheryl K. Sandberg, has
joined the social network's board, becoming the first woman to serve
as a director for the company, Michael J. de la Merced reported from
New York.
"Her understanding of our mission and long-term opportunity, and
her experience both at Facebook and on public company boards, makes
her a natural fit for our board," Mark Zuckerberg, Facebook's chief
executive, said Monday in a statement. Ms. Sandberg already serves
on the board of the Walt Disney Co.
