Why is Yammer Worth $1.2B to Microsoft?

Posted on June 15th 2012

Why is Yammer Worth $1.2B to Microsoft?

You cannot underestimate the power of "working out loud" with social tools.story graphic

Over the last 48 hours there have been many words written about the rumored Microsoft acquisition of Yammer, but very little about just what Yammer is and why Microsoft would care.  In fact many have never heard of Yammer and wonder just where did this come from and why would Microsoft pay an Instagram price for this company with a potato like name.

 
The social revolution happening in the consumer space has also been happening within corporation.  It goes by the name of Enterprise 2.0Social Business, or Social Enterprise.  Yammer is one of the early products who picked up on the twitter model of short messages posted to followers, but they keep it within the firewall of large corporations, creating a "walled garden" for private discussions within local and far flung offices of a company.  I was introduced to the product about 3 years ago when I was working for a global company with tens of thousands of employees.  About 1000 had already picked up on the idea and found great value in the self forming communities and open communications that Yammer enabled. 
 
Yammer claims to be used in 200,000 organizations and makes their entrance most often through a "freemium" approach.  The cloud based product can be enabled by any employee with a company email address.  Once enabled, the employee invites colleagues to join, tying the network together by the common email domain that is required to confirm your membership.  Often the network grows quickly outside of the watchful eye of the Information Technology department and before you know it, there is full scale, crowd driven collaboration taking place.  IT can't seem to understand why a product like this is needed, since they already offer email, IM andSharePoint collaboration sites.  But Yammer is special, it is a rebel product that can be installed, promoted, and maintained by Marketers or Sales people.  Yammer builds in viral hooks that encourage users to bring on more within the company using the email system.  Once they see a network picking up, Yammer's sales people begin to contact the heavy users and start the up-sell process to try to convert the service into a subscription at $5 to $15 per user per month. 
 
The irony is that relatively few ever convert.  A network of 10,000 users would cost $600k to $1.8mm per year at those prices.  The main advantage to a subscription is the ability to have better control, mainly in deleting employees that have left the company. It is not until IT and Legal get involved that anyone wants to even consider a pay model.  So, for the most part, the process continues and corporations in mass adopt this free service as a entry point into enterprise collaboration.
 
So, just what does Yammer do for a corporation?  Why would it be worth $1.2B as an acquisition?  Yammer provides an excellent selection of desktop and mobile clients that bring the network to the employee 24x7 on any device.  Just like Twitter, they offer a simple web interface, but also offer a desktop client and apps for every major mobile platform.  The security is simple and on a smartphone, the application is always on and always accessible, enabling quick and easy collaboration riding on top of the popular BYOD (Bring Your Own Device) wave.  
 
I used Yammer to monitor the flow of conversation within my company.  People would post ideas, suggestions, questions, or links to corporate intranet content.  Others would build upon those ideas, begin a conversation, or simply listen in to the conversation.  The conversations are mostly public within the company, but the tool gives the ability to create private groups where sensitive conversations can stay within a department or a team without being viewable by the entire corporation.  Once I asked the crowd where I could find the latest corporate PowerPoint template.  Within minutes someone I had never met responded with an intranet link to the answer.
 
You cannot underestimate the power of "working out loud" with social tools.  So many conversations get trapped in the one on one world of email and instant messaging.  With open sharing, new ideas emerge, experts are found, and teams are formed from the groundswell.  Serendipity happens when conversations become public and others are encouraged to listen and contribute their ideas, all within the safety of the company walls. 
 
Yammer is onto something big.  Microsoft recognizes that they need to make an acquisition to become relevant in this space and the deal is done.  All we need now is to get confirmation that this is indeed happening. [update 6/25: It's official.  See the press release]

You can follow more emerging coverage on this handy Google Doc being composed by the crowd.
JimWorth

Jim Worth

Enterprise Change Agent; Part Time Futurist; Social CIO. My thoughts, Not those of my employer.

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Comments

It's Official.  See the press release today from Microsoft: http://www.microsoft.com/en-us/news/Press/2012/Jun12/06-25MSYammerPR.aspx