"Sledgehammer spending" really bugs me. It says "we didn't exercise any brain cells to figure out what our purchase is actually worth, we're just throwing money at the wall because we think we can".
Investors should scream at stuff like this. How many things could millions of extra dollars buy? For one thing, maybe they could have acquired 4 or 5 additional companies, patents or other IP. If there was any chance that they could have done this for $500 million or $400 million or $50 million, that matters and should have been investigated thoroughly. Those saved millions of dollars can also be used to employ a bunch of people on projects for years (heck, sometimes entire applications are written by one or two people inside a company, and they might build something really cool that can be sold).
Microsoft has lots of money, sure. But this kind of spending isn't thinking long-term. Are they guaranteed to have this kind of money in a few years, even? There may be a time when they're completely incapable of making a key future acquisition because they overspent on crap like this.
Especially when you consider that MS lost a lot of good talent by putting some hiring on hold and especially by forgoing nearly all raises, bonuses, and promotions for about 2 years during the recent economic downturn. Even while they had tens of billions of dollars in the bank. They should have used that war chest to project their strength while everyone else was showing their weakness. Instead they made a cowardly choice and drove a lot of good developers elsewhere.
The question is more, "Can Microsoft extract more than 1 billion (or whatever the exact purchase price is) + return on investment from this purchase?"
If they have ~1 million paying users, and have anywhere close to 3/user (considering some are on group licenses, some are in the 15/mo range), that's 36 million in revenue a year, with a potential total of much more.
Microsoft must believe they can grow the user base, be able to integrate it with existing products (sharepoint) that will drive upgrades, and extract more than a billion dollars of value.
You can bet that they'll integrate this with SharePoint. I don't necessarily think direct revenues from Yammer had anything to do with the decision. This isn't the first aquisition they've done this with - see Fast Search And Transfer a couple of years ago. The SharePoint product line generates huge revenues for Microsoft, so they could easily justify spending a lot of money on something like this.
So now we'll have another huge addition to this already humongous monstrosity. But I guess it's a good thing for Microsoft if they want to grow SharePoint into a SAP-like product that is everywhere and impossible to get rid of. Seems like a sensible purchase to me, although at a somewhat high cost. I think they paid 200MM for FAST a couple of years ago, for advanced search features.
Yammer released a number of key enhancements to its platform, enabling integration with a wide range of business applications:
[...] Yammer released a new version of its SharePoint integration, adding a highly secure, real-time social layer to the native SharePoint platform, making it social, mobile and engaging for enterprise employees.
$1b is a steal for Yammer. I'm surprised Yammer would take that right now considering it's current valuation and how bright its prospects are. It has one of the most efficient B2B customer acquisition schemes. Even with the culture mis-match, I suspect this will be a good acquisition for MSFT.
The Facebook IPO punched a temporary hole in their valuation. I think Microsoft got a modest steal due to that.
Yammer has already won their segment. Imagine owning a private corporate social network, spanning the globe, with paying clients. It's an extremely valuable segment.
Depends on how narrowly they define their segment. I've done a ton of customer development interviews with people over the past 8 or 9 months, exploring this whole "enterprise 2.0" space, and I've found that - by and large - most people haven't even heard of Yammer (or Jive, or Broadvision, or Lotus Connections, etc). My perception is that anyone playing in this space isn't even really competing with Yammer (or Jive or whoever) they're competing to convert current non-users of this kind of technology.
Investors should scream at stuff like this. There may be a time when they're completely incapable of making a key future acquisition because they overspent on crap like this.
This feels a bit presumptuous to me. Beyond playing into sticker shock, you haven't provided any evidence that they overspent or neglected to investigate other options.
A "nice round figure" is suspicious. Shouldn't a well-researched investment cost an amount that sounds well-researched (i.e. a more precise figure and not something that seems rounded up to the nearest billion)?
How about some brief brainstorming on what else they might have done...
If I look at the rest of the company: shouldn't Microsoft be more interested in, say, shipping Windows 8 sooner and with more features? They could pay engineers $200,000 a year (a very nice salary) and contract FIVE THOUSAND of them for a single year with that billion dollars. I'm not saying that would be any more sane of an investment, but I can imagine quite a bit that 5,000 engineers could do: more work on robustness, more bundled applications, more hardware supported, more optimizations...tons and tons of good stuff. Heck, they could do all of that if they hired just 500 engineers and kept them for 10 years, instead of 5,000 contractors for a year. The scale of any billion-dollar investment is insane in those terms.
(This is an example breakdown only. Pick whatever breakdown you like if you don't think this is realistic. The point is, money goes a long way. Companies should take extra time to see if there isn't a better place to spend a few million.)
A "nice round figure" is suspicious. In an article no not really, in real life sure. If the purchase price had been 1,192,456,786.36 it would have been reported as 1.2 billion because the 36 cents are an unimportant detail.
I think the more important thing is how long would it have taken for them to start from scratch and build Yammer. Integrating the Yammer team and Yammer's products is going to take time as well so there are several variables there that need to be compared not just a simple back of the envelope pay a few guys a few years sort of thing.
shouldn't Microsoft be more interested in, say, shipping Windows 8 sooner and with more features? They could pay engineers $200,000 a year (a very nice salary) and contract FIVE THOUSAND of them for a single year with that billion dollars
Something something Mythical Man Month something something
> Something something Mythical Man Month something something
if you remember (or read the actual article), the mythical man month says nothing about the problem you quoted. It is often mistakenly taken out of context to mean that more people on a project doesn't make it faster.
Mythical man month actually says that a project already running late, won't be completed faster by adding more people at a later date, due to communication, and coordination problems.
If you planned out the work for 5000 people (a hellova plan!), then this problem won't occur...in theory.
>A "nice round figure" is suspicious. Shouldn't a well-researched investment cost an amount that sounds well-researched (i.e. a more precise figure and not something that seems rounded up to the nearest billion)?
This sounds more or a fallacy and less of an argument to me.
Microsoft is buying a highly successful business that actually produces real revenue and profit. What makes you think they didn't do an due diligence and instead just threw a number like 1.2 billion out? You have no evidence of this, and it makes absolutely no sense.
As a MSFT shareholder I have no problem with them doing this given that Yammer had between 50-100 million in revenue last year and dominates their market.
>> As a MSFT shareholder I have no problem with them doing this given that Yammer had between 50-100 million in revenue last year and dominates their market.
As a MSFT shareholder, I am interested in how they came to the 1.2B price. Between 50-100 million in revenue? Actualized revenue does grow and shrink. It is a fixed number. That is quite a spread. They might very well dominate their market, but how much is the market worth? What is its upside?
I imagine Microsoft took the intrinsic value of Yammer and added a stab at the value of the impact on Microsoft if a competitor, say, Google bought Yammer.
There's just too much we don't know, meaning that any comment we make here amounts to little more than meaningless speculation. Unless someone has a credible source?
I would like to see "SpaceX" as a measure. As in, "Microsoft has just acquired Yammer for 1.5 from-scratch space programmes". Just to put the real value of money into perspective.
Business-software company Yammer Inc. has agreed to sell itself to Microsoft Corp. for more than $1 billion, according to a person familiar [with] the matter.
It is unclear when the acquisition will be completed and announced, this person said.
A Microsoft spokesman declined to comment. Representatives for San Francisco-based Yammer didn't immediately respond to requests for comment.
Yammer is often called Facebook for the workplace because it creates a private social network inside a company. The purchase of Yammer could add social-networking functions to Microsoft's popular Office suite of software. Microsoft has an existing product, called SharePoint, with some functions that overlap with Yammer.
Bloomberg News earlier reported Microsoft was in discussions to acquire Yammer.
I remember laughing at them when they launched at and won TC50. "Twitter for the enterprise! What a dumb idea." I'm laughing all the way to their bank now.
The tech is funny and most failed at this - we all know small batches or private twitters isn't that hard to do - they won with hustle and sales (and good tech probably).
The company where I work tried to use Yammer in 2009, and it seemed like a good idea implemented very poorly back then. It was just the engineering division with about 40 people. Tech issues quickly went to email threads where you could deal with code, screenshots etc. It mostly got used as an IRC channel to post WFH messages. But what caused their downfall for us was the constant updates (using AIR--argh) that broke the client, moved buttons around, etc. One by one, people just didn't update, then just removed it (AIR too). Since I hadn't heard much buzz about them until now, I thought that happened to everyone and they died a slow death.
I was at a company a few years ago where the designers and execs were all about using Yammer internally, and I thought it was a joke. A billion dollar joke, turns out.
Heh, I suppose so. Thing is, I still feel like my initial assessment was right. It was a very poor fit the company I was at, not to mention it was a rather immature service at the time -- it felt like a half-baked Twitter clone and it made for a poor replacement for chat/email, especially in a small company. Today it seems like an almost completely different toolset with a lot more features. Looking at it now I think it could be useful, but until this story came out I hadn't thought about the service since that time more than 3 years ago.
The important takeaway I get from this is that they kept trying and managed to improve and deliver a service that actually works for their target market. If it had stayed like it was I don't think it would have gone anywhere. Hats off to them for pushing through and executing well!
It came flying out of the gates, was always more like Facebook than Twitter and is targeted at pretty much all companies (I've worked at a 6 person company that loves it, a company that went from 10 to 100 employees that loves it and a company with 10s of 1000s of employees that loves it).
You've been at a lot of companies in a short amount of time. My experience has been that Yammer is not useful, for when the company was small and even less useful for a larger company. What exactly do you find useful that isn't covered by existing products?
I am one who thinks "Yay! Another accelerator to the Microsoft death-spiral" when reading this.
I am not sure what data it is you want me to put in my data bank, as I do not buy your premise that getting bought by Microsoft is any kind of validation. Quite the contrary.
You can get rich by playing the lottery, just as you can get rich by making a crappy product that you manage to get enough hype around to get sold to Microsoft. It does not mean you should bet on the lottery as a viable business strategy.
Getting the world to think your crappy product is the newest silver bullet might be a viable way of making money (see Zynga, Madoff, et al), but it does not lend itself very well to reproduction.
If you have some specific details on what makes Yammer objectively superior to alternatives (and not just a fad) I am all ears though.
Just so I'm clear, you're comparing spending 4 years building an extremely successful business communications company to winning the lottery? Bernie Madoff? Casual gaming? Downvote.
You can compare things on many aspects. The Zynga/Madoff comparison was on trajectory - meteoric rise followed by sharp fall. Such a trajectory characterizes the scam or fad. My point is that Yammer is a fad, Madoff was a scam and Zynga is probably a bit of both.
When a colleague of mine heard that Yammer was bought for 1 billion he exclaimed : "Oh, so THAT is what we should be doing - create a crappy product and get bought by Microsoft!". My point is that other factors than creating the crappy product is what gets you bought by Microsoft. There is no causal relationship between the quality of the product and the money received. Another similarity to Zynga/Madoff btw.
So the conclusion is that you are better off creating a quality product, despite such evidence to the contrary. Likewise you are better off providing real value to the world, despite some people getting rich by winning the lottery.
I saw what they were doing when they launched and thought "you know, twitter of business sucks but Facebook for business would be brilliant." Too bad I let myself stay stuck in a service business. Going to end that July 1.
I laughed when I read an article about a company ditching email to embrace Yammer. After taking a couple more looks at how it worked, I convinced my company to try it out - it's been fantastic about removing a littering of articles from our emails and putting them into Yammer where people can quickly ignore the noise and discuss the important stuff.
We've also found it a great way to let everyone know that you'll be out of the office, working from home, etc.
We probably aren't perfect in our execution, but it's been a fantastic tool so far.
Well, this is interesting. Our company (Fogbeam Labs) are working on products in this same "Enterprise 2.0" space: social-networks for the enterprise, knowledge management with a social twist, social-search for the enterprise, etc.
So, what - if anything - does this mean for us? Well, it confirms that the area we are working
in has value, and illustrates the potential we're chasing. And this could actually be good if/when
we start trying to raise outside money, as it shows that there are viable exit scenarios in this field.
OTOH, it also means we're competing with Microsoft, and it probably makes us look a little behind
the curve. That's OK though... the adage about the tortoise and the hare still stands.
On a personal level, I'm excited by this. I like the idea of competing with Microsoft. It's easier to see
them as the "evil empire" given their history, and I've never liked Steve Ballmer anyway. These guys I could get fired up about competing with. It's even better that we are a "pure play" Open Source company, where MS has a long history of antipathy for F/OSS.
I'm not very familiar with how raising funds works so this is a genuine naive question and I'd appreciate if someone could explain this to me.
On their "About Us" page, they say that they've raised $142M in venture funding. How much equity VCs typically get for such an investment? 20%? In that case, the exit of the VC would be around $240M which in not even a 2x profit. Is it possible that the equity owned by the VCs is much larger than that? It seems to me that VCs would have to own a very large percentage of their equity to make this acquisition worthwhile for them, in which case the original founders wouldn't get anything nearly close to the $1.2B purchase price.
From actual usage of Yammer, have heard of many companies where it is in use but the user engagement is really low. Can anyone using it comment on any success stories or failures of using Yammer internally? What has worked and what not?
In my current company it's pretty successful; it pretty much fills the role that IRC had at my previous two jobs. I guess it's less intimidating for less-technical folks than installing an IRC client (and one less server for ops to maintain).
Congrats to Yammer team. On a side note, we are seeing lot of acquisitions that are > $500M. Buddy Media, Instagram and now Yammer (during last couple of months itself).
Actually that describes the original startup that Yammer was spun out of: a spam-heavy social network called Geni, that tries to turn a family tree int a social network, and brings not only your grandmother, but every other crazy distant relative out of the woodwork.
Kudos to them for recognizing the value of an internal tool and spinning it off. Their original idea, Geni, seems to be languishing(unsurprisingly-how many mentally ill second cousins once-removed does it take to ruin a social network?).
Seems a pretty naive statement. Especially for someone who has been around HN long enough...
Just this week Microsoft has updated their Azure tools with additional NodeJS support, Python and PHP support.
I know many Java developers that actually thing C# is a better language. Personally, it depends on the platform and tools you want to use. I've written anything from JS to Java to C++ to C# to Erlang to PHP to Python in the last year. I don't care about such things...best tool for the particular job.
I'm not sure Diaspora has any enterprise specific leanings, although - to be fair - I haven't spent as much time studying Diaspora as I probably should have.
OTOH, there is another Open Source (ALv2) "enterprise social networking" project out there, and we're always happy to have other folks get involved.
A "facebook wall" like event stream for various event types, including status updates, calendar events (via iCal), business events (via our business event subscription engine), and external activities (via the activitystrea.ms protocol)
Friending / Following users
User Lists
User Groups (well, this is still being worked on)
"User Streams" (sort of like Circles in G+, but more flexible)
User profiles (this still needs a fair amount of love)
Status Updates (like "post to your wall")
ICal Subscriptions
Business Event Subscriptions (for SOA integration)
And we have a pile of other features planned or in progress. See:
Disclaimer: I freely admit that we intend to make money from this initiative eventually, but the code is (and always will be) under a true OSS license (it's ALv2 now and probably always will be) and we don't ask for copyright assignment or anything. Hack on the project with us and hopefully we can hire you full-time when we (land a couple of paying customers | raise a round of funding | win the lottery).
I guess it is not distributed (meaning I can run my own Quoddy server, and talk to users at friend's Quoddy server)?
Well... there's not exactly a notion of "distributedness" built in. That's on the wishlist (and, in fact, this project sprung out of a much older project that had that as it's core idea) but there is support for receiving and display messages from any other arbitrary system that supports the activitystrea.ms protocol. So modifying Quoddy to emit, as well as consume, activitystrea.ms messages would give you a way to achieve a degree of "distributedness." And that wouldn't be a hard change to make in and of itself.
The trickier part would be how to say "I want to receive updates from remote user $FOO when they come in" since $FOO is probably not a user on your local Quoddy instance. Once we have FOAF support implemented, it would be easier to talk about navigating the remote social graph and connect to non-local users... but a short-term way to achieve that could probably be hacked up.
Investors should scream at stuff like this. How many things could millions of extra dollars buy? For one thing, maybe they could have acquired 4 or 5 additional companies, patents or other IP. If there was any chance that they could have done this for $500 million or $400 million or $50 million, that matters and should have been investigated thoroughly. Those saved millions of dollars can also be used to employ a bunch of people on projects for years (heck, sometimes entire applications are written by one or two people inside a company, and they might build something really cool that can be sold).
Microsoft has lots of money, sure. But this kind of spending isn't thinking long-term. Are they guaranteed to have this kind of money in a few years, even? There may be a time when they're completely incapable of making a key future acquisition because they overspent on crap like this.