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Microsoft formally announced the acquisition of enterprise social networks provider Yammer for $1.2 billion yesterday.
VentureBeat talked to George Zachary of Charles River Ventures about how the deal happened and what the future might hold for Yammer. Charles Rivers is the venture capital firm that led Yammer’s original $5 million funding in January 2009 and participated in three of the following four investment rounds.
“Microsoft approached Yammer in the first quarter of this year,” Zachary told VentureBeat while taking a brief break from his vacation in the Caribbean. “They saw the growth rate of the user base and that Yammer had gotten a lot of love from users.”
After initial contact earlier in the year, nothing significant happened for several months, until May. Then negotiations got serious very quickly, said Zachary, who is also on Yammer’s board of directors.
“We didn’t talk to anyone else,” Zachary said. “They put down an offer and we accepted it.”
The founders of Yammer, chief executive David Sacks and chief technical officer Adam Pisoni, were both in favor of selling.
“We asked the founders what they wanted to do, and they wanted to do the deal. So we did it.”
Zachary was both cautious and bold when speculating where Yammer might end up within Microsoft’s offerings. “I’m not privy to Microsoft’s plans, and I’m sure they’d prefer I didn’t talk about it, but if I had to speculate, I would guess that Yammer will supersede SharePoint.”
That fits with the company’s original vision, Zachary said, since Yammer’s goal was always to build the world’s best intranet. And it fits with the corporate oversight that Microsoft is at least initially instituting: Yammer will report to the SharePoint group.
Zachary said the acquisition will help Microsoft solidify and grow its $18 billion annual revenue stream from the enterprise market:
“Microsoft learned from both Facebook and Twitter that they need to be more social. Outlook and SharePoint are both a little dated. The future of messaging is not going to be Outlook.”
Having Yammer sets Microsoft up well to compete in the enterprise social market with the likes of Jive and Chatter, said Zachary. When asked about IBM Connections, which IDC recently highlighted in the enterprise social market as having over $100 million in revenue, he was blunt.
“When IBM says they’re the biggest enterprise social network provider, I think they’re lying, and I’m happy to be quoted on that. It’s like Nokia saying they’re leading the smartphone market. Really, they’re so far behind in product and architecture.”
(See IBM’s response below.)
The reason that Microsoft was a great fit? “The end destination for Yammer is integration with email. The world’s biggest enterprise email company is Microsoft.”
Zachary wanted to publicly thank the founders of Yammer, Sacks, and Pisoni, for their key role in growing the company.
“There’s a world of investors out there trying to differentiate themselves and the value they bring, but it always comes down to the founders.”
VentureBeat reached out to IBM for a response on Zachary’s comment about the enterprise social market. Here’s the answer we received from Karen Lilla, manager external relations:
Look at what the leading analysts are saying. Last week, leading analyst firm IDC unveiled its analysis of the top enterprise social software vendors in the market: IBM was #1, Yammer was #8. IBM grew faster than its competitors and nearly two times faster than the overall market. For three consecutive years (2009, 2010, 2011), IDC ranked IBM number one in worldwide market share for enterprise social software.
IBM is the only vendor that can deliver the breadth of social business solutions that include social analytics and content management; across private and public clouds, and on a wide range of mobile devices, giving customers the maximum flexibility based on their preference.
Image credit: ShutterStock
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