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Why Did Microsoft Acquire Yammer?

Posted by on June 26, 2012

If you haven’t heard the news yet, Microsoft has officially announced that they acquired Yammer for 1.2 billion dollars.  I’ve had several discussions around this over the past week or so, ever since the rumors first started circulating.  It’s an interesting move and I think it makes sense.

Yammer has just under a million paid users which represents around 20% of it’s total user base.  Sharepoint on the other hand has around 40 million paid users.  So if you’re Microsoft why would you spend 1.2 billion on Yammer?  Out of all of the companies in the collaboration space I think it’s safe to say that Yammer is perhaps one of the most well known and dare I say “coolest”.  Sharepoint on the other hand is well known yet has a bad reputation as being a non-usable and ineffective collaboration product yet it has an enormous paid user base.  Companies like Yammer and Jive offer integration’s into Sharepoint but really they make up for a lot of the features and capabilities that Sharepoint lacks.  Right now many Sharepoint customers are looking for ways to improve their collaboration capabilities by either migrating completely off of Sharepoint or by deploying something like Yammer which integrates with Sharepoint.  Now that Microsoft has acquired Yammer that conversation for virtually all existing Microsoft customers dies.  Microsoft customers now have no reason to look elsewhere once Yammer becomes fully integrated.  Microsoft also stated that they are fans of the “viral” nature of Yammer’s business model which is not something that Microsoft really does (meaning offering a freemium product).

When you take a look at the Microsoft suite of products around collaboration and communication (under Office 365) the clear weakness is Sharepoint which is what they rectified.  I think we will see Yammer integrated quite heavily into the suite of Microsoft products but it will probably take around  year to make that happen.  And when I say “heavily” I mean being able to access and see Yammer activity from within an Outlook sidebar kind of heavy.  Microsoft’s office products are used by virtually every company and nobody is going to be able integrate that social and collaborative layer and add additional features and capabilities like they will now be able to.  I think Yammer will be the social layer that connects all of their products.  Microsoft has actually created a very powerful collaboration toolset which can completely dominate. Yammer has had trouble converting their free users into paid subscribers which is definitely an area that Microsoft is going to be improving as well.

I’m sure a few Yammer customers are probably freaking out because we still don’t know if Yammer will get killed off (unlikely), if it will be migrated and combined into Sharepoint (which I’m sure many customers are a bit scared of but is what I think is most likely), or if they will just leave Yammer alone and have it as another product (what they did with Skype but seems unlikely with Yammer).  Tony Zingale, Jive’s CEO said that they have been getting some defecting customers from Yammer and don’t be surprised if Jive starts an aggressive marketing campaign aimed at this acquisition.  Chances are though, that many if not most of Yammer’s enterprise customers are already using Sharepoint as well.

This also poses an interesting situation for vendors in the collaboration space who seem to have collectively been targeting Sharepoint, either to get people to move away from it or to heavily integrate into it.  But now that Microsoft will have all the same capabilities as every other collaboration vendor out there it becomes a tough sell to go against them.  However, this also points the spotlight on collaboration vendors in the space and really helps highlight the importance and value of what this means to the enterprise.  I originally thought that Microsoft would acquire Newsgator which has built a whole business around making Sharepoint a more social and collaborative product but now that Microsoft is going to have these capabilities I’m thinking Newsgator is going to have to start thinking about what their future with Microsoft is going to look like.

So to sum up I think the acquisition makes sense for Microsoft because it:

  • gives them a cool popular brand with a new set of features and capabilities that they don’t have
  • allows them to further retain Sharepoint customers
  • gives them a new business model
  • kills some of their competition
  • ads a social layer to connect many of their other office and collaboration products
  • fits in line with their new “social mission”
  • makes them a front runner in any collaboration discussion with prospects
  • can leverage existing Microsoft products to now sell a new one, another revenue stream for them

What do you think of this acquisition, does it makes sense or do you think it’s a waste of time and money?

  • If you must spend 1.2 billion to make your 10 year old –Sharepoint–social, you did a poor job raising it. The talk now is about social intranets and the like. You should not have to teach your intranet to be social. In the same way that your child should be taught social skills from infancy. It is time to move away from the intranet model and create something new, something social from birth. What we are all looking for is something that connects the people in our organizations in a seamless and organic way. That is why I use {s}hareCLOUD the ‘peoplenet’ exclusively.

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