VentureBeat

Salesforce.com, considered the standard bearer for the software-as-a-service business model, announced unexpectedly strong third-quarter earnings today.

Total revenue was $276.5 million — a 43 percent increase from the same period last year — and total income was 8 cents per share. Revenue and income beat out analysts’ estimates of $273.6 million and 7 cents per share, respectively. That’s good news for Salesforce, of course, particularly at a time when the economy is tanking and traditional business software companies like SAP are underperforming.

That’s also a good sign for the many startups that have built their businesses around SaaS or cloud computing. After all, analysts and entrepreneurs in this space like to predict that SaaS and cloud computing may actually benefit from the downturn, or at least avoid getting hit as hard, because they provide a low-cost alternative to traditional hardware and software for businesses. It’s nice to see some numbers to back that up.

Finally, it’s a rebuke to executives, such as Oracle chief executive Larry Ellison, who say SaaS isn’t a real business model. A single quarter doesn’t really prove or disprove anything, but it’s pretty hard to find tech companies surprising analysts nowadays. Salesforce shares have increased $1.17 (more than 5 percent) in after-hours trading.

[Photo:flickr/jenn_jenn]

Salesforce.com’s strategy can be boiled down to one word, according to chief executive Marc Benioff — love. Of course, Benioff was being a little tongue-in-cheek as he answered questions from analysts and reporters at today’s Dreamforce conference in San Francisco. But he was illustrating a real argument about how Salesforce.com might beat software giant Microsoft in the cloud computing market.

As with its other offerings, Microsoft’s new cloud-computing application platform, Windows Azure, is all about tying people into Microsoft products and services, Benioff said. Salesforce, on the other hand, is much more about being open and cooperative, both in its customer relationship management (CRM) services, and in Force.com, its platform for business applications. Salesforce is interested in connecting multiple clouds, platforms and devices — witness today’s announcement that Force.com will integrate with the Facebook platform and Amazon Web Services, or Salesforce’s integration of Google Apps earlier this year.

Comparing Microsoft and Salesforce, Benioff said: “They hate everybody and we love everybody, and that’s pretty much the difference. We even love Microsoft. … This is our core strategy, love.”

When an audience member pressed Benioff on his touted openness, Benioff emphasized that he’s talking about cooperation with other companies, not open source, per se. He also acknowledged that Force.com has its closed aspects, namely the fact that if you build an application on Force.com, you can connect it to other platforms, but you can’t fully move it to another cloud.

“Portability of code is just not something we have gotten to in our industry,” Benioff said. He cited Apple’s App Store as a platform that’s closed to a certain extent (now that’s an understatement) but is thriving anyway.

Benioff also talked about why Salesforce is integrating with Facebook first, rather than another networking site, particularly business-oriented network LinkedIn. Force.com plans to add LinkedIn and MySpace integration eventually, but Facebook’s users and platform infrastructure made it an obvious first choice.

Lastly, Benioff took some questions about how Salesforce will be responding to the declining economy. The common theme: We’re going to stick to our game plan. For example, Oracle chief executive Larry Ellison has said the downturn presents an opportunity to acquire companies at bargain rates, but Benioff said he has no plans to change Salesforce’s acquisition strategy. Another questioner pointed out that some of the vendors who sell apps to extend Salesforce’s capabilities will go out of business in the downturn, which could be bad for Salesforce’s customers. Benioff responded that Salesforce has always tried to provide “bridges” for its customers, so they aren’t hurt when a vendor goes out of business.

“The way I think about this is very very simple,” he said. “We don’t want to make a lot of material changes to our business right now.”

As tech giants eye the cloud computing market, Salesforce.com chief executive Marc Benioff made it clear that he intends to stay competitive. During his keynote speech today at the Dreamforce conference in San Francisco, he first discussed Force.com Sites, the service for hosting public-facing websites and apps that I covered last night. Then he announced that Salesforce.com is connecting its business application platform with Facebook and Amazon.

The Facebook announcement is probably the most significant, because it allows developers for Force.com (Salesforce’s platform for business applications) to tap into the huge number of users on Facebook. (Facebook’s chief operating officer, Sheryl Sandberg, announced on-stage that Facebook now has more than 120 million active users per month, up 30 million from just three months ago.) It’s also a way for Facebook to introduce more business-oriented apps into its own platform, which is largely dominated by fun and gimmicky consumer-oriented apps.

There are two basic components to Force.com for Facebook. First, as I mentioned, Force.com developers can now introduce their applications into the Facebook platform. Second, Force.com applications can integrate Facebook social data through Facebook Connect.

Salesforce presented two sample applications on-stage. The first was a job recruiting tool built by Appirio, which lets you recommend your Facebook friends for jobs, similar to the way you can refer connections on business networking site LinkedIn. The second involved integrating My Starbucks Idea, where customers submit suggestions to Starbucks, into Facebook. If a user submits a Starbucks idea through Facebook, their friends will see it in their news feeds and can comment on the idea or submit their own.

The Amazon announcement is also significant, particularly because it shows that Salesforce and Amazon’s cloud hosting services can be complementary. Now you can build an app on Force.com, make it available to the public through Force.com Sites, then tap into the computing and storage offered by Amazon. For example, there’s a new app called Lasso, which lets you photograph business cards and view them in your Salesforce.com account. Lasso was built on Force.com, but it uses Amazon’s Elastic Compute Cloud for image processing, and Amazon’s Simple Storage Service to store the images.

Finally, after bringing tech stars like Sandberg onto the stage, Benioff introduced some real starpower — famed musician Neil Young. Young (pictured, above) is spearheading an initiative called Linc Volt, which retrofits existing automobiles with clean technology, namely electric batteries and a natural gas engine. The Linc Volt site is hosted on Force.com Sites, and it includes some cool Salesforce integration, including a chart that’s constantly updated with information from Young’s Linc Volt car.

Overall, the keynote pffered a promising vision: Salesforce will continue expanding its business application platform and connecting it to other Internet clouds. Benioff is a natural salesman, but I don’t think it was just PR-speak when he said he isn’t concerned about Microsoft’s recent announcement that it’s launching its own cloud application platform called Windows Azure; Benioff playfully described Azure as “future vaporware.”

“I can’t even pronounce it,” he said. “I don’t even know. I don’t care. The important thing is, they said [they're entering the cloud].”

Ribbit, the web phone company recently acquired by BT, continues to tie together many of your communication tools with the release of Ribbit for Salesforce 2.0, which adds compatibility with landline phones, Google Talk and Skype.

Calling itself “Silicon Valley’s first phone company,” Mountain View, Calif.-based Ribbit has built a platform for easily integrating phone capabilities into web applications. Ribbit for Salesforce, which launched in May, was the first big demonstration of the platform’s potential — it linked your mobile phone to Salesforce’s customer relationship management (CRM) software, allowing users to make, log and transcribe their calls and messages in Salesforce. The new features are probably less essential, but they bring Ribbit even closer to making your Salesforce account the center of all your business communication. For example, you can now answer calls on Google Talk, or receive voice mails as an instant message.

That sounds cool, but I wonder if Ribbit can find much traction at a time when companies are taking a hard look at their budgets. Ribbit acknowledges that it’s a challenge to convince companies to consider a new service when the economic outlook is bleak. But Ribbit also makes a convincing case that its product is a smart investment. By making calls easier to track and manage, and by allowing customers to read voice mail transcriptions rather than listening to message after message, Ribbit for Salesforce can actually save employees a huge amount of time, freeing them up to be more productive.

Ribbit also plans to boost adoption with its just-announced channel partner program, where companies like Bluewolf and SimpleSignal sell Ribbit for Salesforce as part of their own offerings.

Salesforce.com wants to become an even big player in the cloud computing market with a new service called Force.com Sites, which allows companies to host public-facing web applications in the Force.com platform. That means Salesforce — nominally a maker of customer relationship management (CRM) software, but also an increasingly important platform for business-related applications — is moving closer to direct competition with cloud giants like Amazon Web Services and the Google App Engine.

Previously, companies could host web applications on Force.com, but they had to be inward-facing — in other words, for use within your company or team. If you wanted to make those features available to the rest of the world, you had to plug it into another service, like Microsoft .Net, using Force.com’s application programming interfaces (APIs).

“It was possible, but it wasn’t as easy as it could be,” says Eric Stahl, director of product marketing.

With Force.com Sites, you can now move your Force.com apps and data to the public-facing Internet quickly and easily. For example, if you’ve created a tool for tracking the job application process within your company, you can now add a recruiting feature, so people can submit applications via your website. Or, to use my favorite example, New Jersey Transit already had an application for alerting workers within the agency about accidents, delays and other problems. With the new Sites service it can make those alerts available to riders, too.

A preview version of Force.com Sites is available today, with general availability scheduled for next year. This should also be good news for companies trying to make money by developing for Salesforce’s platform, because their apps can now be more broadly accessible. For example, a company called Astadia says it can integrate its recruiting app into your website in less than a day.

The announcement comes as more and more players are moving into the cloud computing space — most recently, Microsoft announced a new platform for web apps called Azure. Stahl says he found the announcement encouraging, because you know a new technology has truly arrived “when the legacy giants of the previous technology kind of throw in the towel.”

Zuora, a startup that offers software to manage customer subscriptions, just announced its second product, dubbed “Z-Payments.” While Zuora’s first product, Z-Billing, automates the billing process (duh), Z-Payments handles the other side of the equation — actually allowing customers to pay those bills, including integration with online payment service PayPal.

The product addresses a common complaint among Zuora customers, says chief executive Tien Tzuo — billing customers isn’t always enough. There are always people who don’t pay, or payments that don’t go through, and companies often lack the staff to deal with every one of those problems.

“The net effect is they end up not collecting all the money they can collect,” Tzuo says.

That’s where Z-Payments comes in. It manages not just the act of getting paid, but also all the issues that can pop up surrounding payments. So a company can use Z-Payments to notify their customers when their credit cards are are about to expire, or send out suspension warnings when customers fail to pay. It’s all customizable, Tzuo says, allowing each company to offer its own payment terms, and to set its own penalties for non-payment. The product has already been tested out by helping storage startup Box.net and Facebook application Teach the People handle their subscriptions and payments.

Before founding Redwood City, Calif.-based Zuora, Tzuo spent nine years at Salesforce.com, and he left with Salesforce chief executive’s Marc Benioff’s blessing — in fact, Benioff invested in Zuora. Like Salesforce, Zuora delivers its service through an online subscription, i.e. through the software-as-a-service business model, making it cheaper and easier to set up than the established solution from Portal Software.

The new product sounds like a smart step towards Tzuo’s goal of turning his company into the primary “online subscription platform,” in the same way that PayPal is the platform for online payments, and Google is the platform for online ads. It also gives Zuora an advantage over Aria, another company that offers to automate subscriptions and billing through a SaaS model. Z-Payments will be available for free to Z-Billing customers, and as a standalone product with a base price of $500 per month.

Zuora launched earlier this year and has since signed up more than 40 customers. It raised $6.5 million from Benchmark Capital and from Benioff. Tzuo says the company has plans for other products and features to make handling subscriptions easier, and is also developing a module for Salesforce’s Force.com platform.

Here’s the latest action:

Obama Bay Area event sets fund-raising record — Democratic Presidential candidate Barack Obama visited the Bay Area and racked up $7.8 million in fund-raising, a record for a single event, according to Draper Fisher Jurvestson’s Steve Jurvetson, who, with his wife Karla Jurvetson, donated in $9,200.

Xbox 360 sells out in Japan — The Microsoft gaming console has never been able to gain a strong foothold in the country which prefers its own Nintendo Wii and Sony Playstation 3. Perhaps the tides are turning — or perhaps this shortage was staged, as many commenters are speculating in the comments on Kotaku. Either way, there will be more in the country next month.

Hulu closer to going international? — The popular NBC and Fox-based video streaming site is apparently trying to hire people to expand to other countries, according to GigaOm. That will remove perhaps the biggest knock people have against it — if you’re outside the U.S., you can’t watch it!

Tsavo gets funding — The new southern California start-up that is buying up content and advertising start-ups, akin to Demand Media, raised $20 million from American Capital. The start-up is the latest project of Michael Jones, who has just left AOL, where he worked for two years after AOL bought his previous text-voice-video chat software company, Userplane, for about $40M. TechCrunch has more.

American Airlines takes Wi-Fi to the skies — The airline has started rolling out its in-flight Internet service powered by Gogo, according to CNET. For now it’s only on non-stop flights between New York and San Francisco, New York and Los Angeles and New York and Miami.

iPhone update 2.0.2 is meant to address 3G issues — Suspicions that the new software update was meant to address iPhone 3G connection issues have been confirmed by an Apple representative talking to USA Today’s Ed Baig.

Salesforce.com posts solid numbers — It’s the first software as a service company to exceed a $1 billion annual revenue run rate, according to the release. It saw record revenue of $263 million, up 49% year-over-year.

VC in the middle of online escort scandal — William Ferretti, the co-founder of Medstar Television and a self-described venture capitalist, faces felony charges. Vallywag has more.

Don’t tweet for money when raising funding — Jason Goldberg, the founder of SocialMedian, sent a tweet (Twitter message) out this morning letting people know he was raising more funding and to contact him if you were interested in participating. One problem, Mike Arrington of TechCrunch, who is also a lawyer called him out on that being illegal because it was technically an unregistered public offering. The tweet was deleted.

BioImagene gets a new round — The digital pathology company has landed a $26 million fourth round. Burrill & Co. led the round with Ascension Health Ventures, National Healthcare Services, Artiman Ventures and ICCP Ventures also participating.

Personalized talk radio company Stitcher launches an iPhone app — Watch the video below for more.

Updated

Appirio, an online software startup whose most popular offerings sync data between Salesforce.com and Google products, has raised a $5.6 million second round of funding led by Sequoia Capital.

The startup has close ties to Salesforce.com — the customer relationship management (CRM) company led Appirio’s $1.1 million first round, Appirio’s most popular products are sold on the Salesforce.com AppExchange and its offices are located at the AppExchange incubator in San Mateo. The partnership has already paid off for Appirio — the company’s app for synchronizing calendars between Salesforce.com and Google Apps is currently the most popular AppExchange download, and two of Appirio’s other Google-Salesforce integrations are also in the top 10.

Of course, it’s a good time to be offering these products, given the Google-Salesforce partnerships announced this year — first the integration of Google Apps into Salesforce.com, then the release of applied programming interfaces (APIs) that allow Force.com developers to access data in Google Apps.

But chief executive Chris Barbin says Appirio isn’t just an AppExchange company. His long-term goal is to make business software that connects a range of internet “clouds.” Appirio will be increasing its presence in the Google Solutions Marketplace, and it will also explore partnerships with companies like Adobe and Workday.

Only a few months have passed since Appirio announced its first round, so it seems a bit early to raise more funding. Barbin says the Sequoia deal fell into place very quickly, taking only three weeks to finalize. In fact, Barbin says Appirio hadn’t even used any of its first round money yet, but the deal with Sequoia was too good to resist. The venture firm was the first to really understand Appirio’s business model — other VCs had wanted the startup to focus exclusively on product development or services, but as a software-as-a-service company, Appirio does both. (It probably didn’t hurt that Sequoia is one of the biggest names in the venture world.)

Stanford University and angel investors also participated in the round.

Update: Barbin has just posted his thoughts on what the funding means for Appirio.

Search engine Google and hosted software provider Salesforce.com announced a joint product that combines Google’s search result advertising program, AdWords, with Salesforce’s customer relations management software.

The goal of the product, called Salesforce Group Edition featuring Google AdWords, is to allow the companies to work together to target small to mid-sized businesses.

The deal is less than many market observers had anticipated, but is significant because it aligns Google and Salesforce on the application side, at a time when Google is upgrading its applications effort. Google faces efforts by Microsoft to leverage its software business to enter the advertising business more aggressively.

Here’s how the Google/Salesforce product works: A company using the product can connect directly to Google’s advertising platform, called AdWords. The company can decide to place an ad for itself beside a desired search result. People clicking on that ad are then taken to the company’s Web site, where they are presented with a form to fill out. This becomes a new lead in Salesforce’s CRM software.

Here’s more from InfoWorld:

The new product will immediately replace Salesforce.com’s Team Edition offering, said [senior vice president of marketing Kendall] Collins. It will be available in 14 languages and in the 43 countries where Salesforce.com operates. Under a promotional deal, the new offering will initially cost $600 for a five-user edition per year, as compared with $995 for the five-user Team Edition. The list price will end up as $1,200 per year. For users in Canada, Mexico and the U.S. who are new to AdWords, Salesforce Group Edition featuring Google AdWords also comes with a $50 AdWords credit.

Under the terms of the nonexclusive agreement, Salesforce.com will take 100 percent of the $600 annual subscription fee, while Google will garner the lion’s share of the advertising revenue generated, with the CRM vendor receiving a small undisclosed portion of those ad sales. Google’s hope is that teaming up with Salesforce.com will enable the company to reach new SMB customers.

It’s likely that this is the start of an intensification of the Google, Salesforce.com relationship, with perhaps the tight integration of Google Apps and Salesforce CRM to come.