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Yammer: Microsoft's billion-dollar social bid

Microsoft paid $1.2 billion to acquire Yammer, an enterprise social network company. Yammer's got a lot of users -- and Microsoft plans to use that base to make the Office suite more useful.

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Lou Dematteis/Reuters
Microsoft CEO Steve Ballmer (L) shakes hands with Yammer CEO David Sacks after announcing that Microsoft will buy Yammer for $1.2 billion. Microsoft hopes to add more social tools to its Office suite.

If you've never heard of Yammer, Microsoft's new billion-dollar darling, you're not out of the loop; it just means you don't keep up with corporate social networks.

Think of a network like Facebook, complete with sharing and news posting capabilities, but limited to employees of a single organization. That's Yammer. It's designed to let users within organizations communicate and collaborate on projects -- and on Monday Microsoft paid $1.2 billion to acquire the company.

To be fair, Yammer brings quite a bit to the table. Founded in 2008 by former Paypal COO David Sacks, it boasts a customer base of more than 200,000 companies, which translates into about 5 million users. It's matured since its early days as a microblogging service, and now boasts file and photo sharing, mobile clients, public and private groups within a network, and solid security. Back in 2010 Sacks said that 70 percent of Fortune 500 companies were using Yammer for collaboration.

Sacks will stay on as Yammer's CEO, and Microsoft will make the company part of its Office unit (although Yammer's 400 employees will remain headquartered in San Francisco). That puts Yammer side-by-side with Sharepoint, the sorta-social network bundled into business versions of the Office suite, support for which Microsoft has been trying to drum up for years. Sharepoint lets users create private websites for working on projects within a company, but it never really caught on. Now, with Sharepoint and Yammer bundled together, employees will be able to look up co-workers, post news, and chat within their organization.

Is it worth almost a billion and a quarter, though? Microsoft's banking on it -- which shows, more than anything, that social networking is considered a necessary competitive business tool. The Office suite is Microsoft's most profitable asset -- it brought in 60 percent of the company's profit so far -- so it behooves Redmond to make the software more interactive and useful to its core base of corporate users.

Microsoft isn't the first software giant to move into the social-networking space -- in fact, it might be a little late to the party. Salesforce.com has a built-in network called Chatter, and Oracle, Cisco, and others all have business social networks already. But Microsoft CEO Steve Ballmer thinks Yammer is special: InformationWeek quotes him as saying, "You can throw the words 'enterprise' and 'social' on a bunch of different stuff, but you can't find anybody [else] that has really built a customer base of enterprise IT customers, virally."

This isn't Redmond's first big social acquisition: last year the company bought Skype, the ubiquitous phone-over-Internet app, for $8.5 billion. It's likely that we'll see Skype, too, integrated into future versions of the Office suite.

Readers, what's your take? Have you used Yammer, and do you think its inclusion will make Office a better product? Let us know in the comments section below.

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