Microsoft Buys Yammer Enterprise Social Network for $1.2 Billion

After more than a week of rumors, Microsoft and Yammer confirmed June 25 that the software giant will acquire the enterprise social networking site Yammer for $1.2 billion.

Yammer will remain a standalone business led by its current CEO David Sacks and operate within Microsoft€™s Office division headed by its president, Kurt DelBene.

Microsoft CEO Steve Ballmer remarked that the way Yammer built its customer base of 5 million users€”virally at first as individual employees started using it before it was embraced by corporate IT departments€”reflects its strength.

He also said that while Yammer will remain a standalone product, it will also be integrated with Microsoft products such as Office 365, Microsoft Dynamics for ERP and CRM software, as well as its recently acquired Skype voice over IP service.

€œThis an important part of the communication, collaboration, productivity and social networking offering from Microsoft, both as adopted by IT and now, with the Yammer acquisition, as adopted virally,€ said Ballmer, during a conference call to discuss the acquisition.

Yammer’s service is used by employees at 85 percent of the Fortune 500 firms. It allows employees to join a secure, private social network for free and then makes it easy for companies to expand the service, with premium services, as strategic initiative for their enterprise.

Sacks, who co-founded Yammer in 2008, said the acquisition by Microsoft will be a great step forward for the growth of Yammer.

€œWe had a vision for how social networking could change the way we work. Joining Microsoft will accelerate that vision and give us access to the technologies, expertise and resources we€™ll need to scale and innovate,€ said Sacks, who was also on the call.

The Microsoft acquisition of Yammer is just the latest in a series of acquisitions of enterprise social networking companies by major IT companies just in the last month.

Salesforce.com acquired Buddy Media for close to $700 million to complement its existing Chatter social media platform. Oracle added Collective Intellect and Vitrue to its portfolio of social media-related acquisitions. SAP acquired Ariba for $4.3 billion, although that€™s more of a collaboration company than enterprise social media. However, many of these platforms combine collaboration (a la Microsoft Lync/SharePoint) with social media (a la Facebook). VMware announced a new pricing strategy for its Socialcast enterprise social service, offering a full-featured suite of services free for up to 50 users.

Sacks said that Yammer, as a part of Microsoft, will be competing in a very dynamic market as companies realize the business benefits of social media to collaboration and communication. Besides the companies mentioned above, other standalone providers include Jive, Moxie Software and BroadVision.

Sacks said Yammer€™s office will remain in San Francisco.