Social networking’s impact on the consumer internet is well-established and one need look no further than Facebook’s current valuation to see that, despite healthy skepticism, social networking will continue to play a large role on the web.
But what about enterprise social networking?
While not talked about nearly as much, social has become a key focus for big tech companies like IBM, which are seeking ways to capitalize on bringing employees together.
Yesterday, after more than a week of rumors, Microsoft made its biggest move to date in the enterprise social networking space by purchasing Yammer for $1.2bn in cash.
Yammer, which launched as a Twitter-like service for company employees, is a full-fledged social networking platform that is used by 5m corporate users. A basic service is offered free of charge; companies pay to add additional features, such as more sophisticated administrative tools.
In shelling out more than a billion dollars for Yammer, Microsoft CEO Steve Ballmer clearly believes that the company, which is just four years old, can help Microsoft stay relevant in the social age. “The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love. Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services,” he stated.
While Microsoft says it intends to keep operating Yammer as a standalone entity with current Yammer CEO David Sacks at the helm, the Redmond software giant not surprisingly hinted at integrations with other Microsoft products, including SharePoint, Office 365, Dynamics and Skype.
Those make sense given that many of Yammer’s existing users are employees of firms likely to be using Microsoft products. Indeed, according to Microsoft, employees at 85% of Fortune 500 companies are on Yammer.
What’s not clear, however, is just how many companies are paying for Yammer and services like it as part of broader strategic initiatives. That, of course, poses some risk for such a large acquisition. Whereas certain products, like SharePoint and Office, are often part of large, enterprise-wide deployments with million-dollar price tags, one has to assume that many services like Yammer are frequently adopted by smaller teams within organizations without the need for backing from the IT department.
Can Microsoft and its competitors change that, turning enterprise social networking into a new cash cow? The $1.2bn the company is investing in Yammer suggests Ballmer and company believe they can. But at the end of the day, just as consumer social networks like Facebook need to prove to advertisers that they can deliver ROI, services like Yammer will need to prove that they can boost employee communication, productivity and satisfaction if they want to bring home the bacon.