YAMMER TIME! Microsoft To Buy Social-Enterprise Startup For $1.2B


Photo: Boonsri Dickinson, Business Insider

The Wall Street Journal is reporting what employees at Yammer have been talking about all week—Microsoft is buying the maker of a social-networking service for businesses for $1.2 billion.Yammer has raised $142 million over five rounds of funding. As of April, it had 5 million corporate users—only 20 per cent of whom actually pay for the product—and 300 employees.

The company began as a spinoff of Geni, a genealogical website that is Yammer CEO David Sacks’s other company.

From the get-go, Yammer was an acquisition target: Salesforce.com CEO Marc Benioff said in 2008 that he wanted to buy the product. Instead, he created a knockoff, Chatter.

The core feature of Yammer is an internal discussion board. Employees post updates about what they’re doing, ask questions or conduct polls, share files, and update wikis. Increasingly, Yammer has integrated its features with Microsoft products like Sharepoint and Dynamics CRM.

The key thing: Employees can sign up for Yammer with an email address, without having to get approval from their IT department—though a key way Yammer gets paying clients is by letting IT managers know they can take over administration of their company’s Yammer network for a fee.

It’s a clever, bottom-up way of selling software that’s completely different from the way Microsoft has sold Windows and Office.

That may be more important than the holes Yammer fills in Microsoft’s product lineup. Yes, Microsoft needs to add better, more modern social and sharing features to Office to stay competitive with Google and Salesforce.com. But it has engineers who can do that.

We don’t think Microsoft is going to pay a rich price for Yammer to ruin it—say, by forcing all users to upgrade to a paid version of the product.

What Microsoft needs to learn from Yammer are the arts of customer service and marketing for Web-native software products.

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