Microsoft Confirms $1.2 Billion Yammer Buy

Microsoft will add Yammer to the Microsoft Office Division, placing the cloud social service side-by-side with SharePoint.
Enterprise Social Networks: A Guided Tour
Enterprise Social Networks: A Guided Tour
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Rumored for more than a week, Microsoft's plan to acquire Yammer became official Monday.

Early business news reports turned out to have just about everything right, down to the $1.2 billion price. Microsoft did confirm that Yammer will be integrated into the Microsoft Office division, making it part of the same product family as SharePoint, which was one detail that hadn't been clear previously. Some analysts thought it would be more likely to be positioned as an adjunct to Microsoft Dynamics CRM, as a counter to's Chatter service, which is similar to Yammer. Instead, Yammer is to be integrated with SharePoint, Dynamics, and other products but will also have a life of its own.

Kurt DelBene, president of the Microsoft Office Division, praised Yammer as "best in class enterprise social networking" and the company behind it as providing "rapid innovation in the cloud" that will benefit Microsoft customers. "Yammer has a unique model that appeals directly to end users, allowing them to get started in social networking immediately," he said.

Yammer operates on a freemium business model where individuals can sign up to start collaborating with others in the same business domain. Organizations that find the collaboration useful can convert to paid account with administrative features and other upgrades.

Microsoft CEO Steve Ballmer said Yammer's sales model was one of the things he found most attractive. Yammer is "really unique, maybe very unique in the viral adoption model. You can throw the words 'enterprise' and 'social' on a bunch of different stuff, but you can't find anybody [else] that has really built a customer base of enterprise IT customers, virally--with great respect from the IT department and with great love from the customers. I think Yammer is very unique in that."

Microsoft stressed that Yammer would continue to operate as a standalone service, even as the company looks for ways to deepen its integration with SharePoint and other Microsoft products.

Yammer CEO David Sacks said joining force with Microsoft and its product family is the best way for his service to achieve its potential for widespread use by businesses. "Kurt and I share the belief that enterprise social networks are more powerful when they're integrated with business applications," he said.

DelBene did not provide details about how Yammer would mesh with Microsoft's efforts to boost the social software capabilities built into SharePoint, saying it was too early. At last week's Enterprise 2.0 conference, The Real Story Group's Tony Byrne wondered if the Yammer acquisition meant Microsoft was recognizing that SharePoint can't keep pace with the advance of social software as well as a cloud service like Yammer--even though the cloud version of SharePoint in Office365 was supposed to close that gap.

"We're very excited about the social feeds and capabilities of Yammer and very committed to continuing it as a standalone business," DelBene said. At the same time, Microsoft will obviously be looking for synergies, particularly with Office365, he said. Yammer will be less relevant to the strictly on premises environment of SharePoint, he said.

"SharePoint is a tremendous success and has a bright future, and Yammer is a tremendous success and has a bright future," Ballmer said. "One of the keys, of course, is really getting the integration right."

When I asked whether the model for integration might follow that of Skype, which has been allowed a degree of autonomy after its acquisition, Ballmer said, "sure" but did not elaborate.

Until recently, many analysts saw NewsGator, the creator of a Social Sites product that's implemented as a SharePoint application as the most likely acquisition Microsoft might make to round out SharePoint as a social platform.

However, Constellation Research analyst Alan Lepofsky points out that every NewsGator customer is by definition also a SharePoint customer. "If they had bought NewsGator, that would have been a technology purchase only, whereas this is a seat grab," he said.

Microsoft wants access to that base of enterprise customers Yammer has won through viral adoption, as well as the broader pool of individuals who use it as a free productivity tool. In the past, competitors have made much of Yammer's policy of only providing administration tools to paying customers, which some IT administrators see as a trap. That may be why Ballmer tossing in references to "respect for IT" as one of the elements of success.

"Holding users hostage for features is very new to the Microsoft model," Lepofsky said. While Microsoft likes Yammer's pattern of viral adoption, it will likely try harder to appeal to enterprise IT, he said. "Microsoft doesn't need the influx of cash the way Yammer did, so they will not have to do it on that same model."

Follow David F. Carr on Twitter @davidfcarr. The BrainYard is @thebyard

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