Microsoft’s Ballmer: Yammer’s ‘viral adoption model’ is key to $1.2 billion deal

Why in the heck would Microsoft pay $1.2 billion to buy a Facebook knockoff for businesses? No one put it in precisely those terms, but that was the subtext of a conference call that concluded a short time ago, as Microsoft CEO Steve Ballmer and other executives answered questions about the Redmond company’s deal to acquire Yammer.

Explaining the deal, Ballmer said repeatedly that he sees value not just in Yammer’s products, technology, employees and customers, but in its “viral adoption model” — in which individuals and groups can start using the product initially on their own, in many cases leading their corporate IT departments to sign up for premium management and administration tools.

Yammer CEO David Sacks (left) and Microsoft Office Division president Kurt DelBene. (Microsoft photo)

It’s a trend that’s commonly known as “the consumerization of IT,” as individual users drive broader corporate tech decisions.

The Microsoft CEO made it clear that his company plans to learn from those marketing techniques as it sells its existing products for businesses, including Microsoft Office and Dynamics. In addition, the company plans to integrate elements of Yammer into Microsoft products, and Yammer customers will see more ties to Microsoft products.

“We think there’s tremendous, tremendous opportunity in doing both of those things,” Ballmer told analysts and reporters during the call.

The deal, first rumored two weeks ago, has been getting attention across the industry and the startup world.

“Most of the customers we talk to consider SharePoint (to some extent even Outlook) legacy software … so this is a smart and essential move by MSFT to stay relevant,” said Anup Kejriwal, CEO of Bellevue-based MangoSpring, a startup that focuses on secure social networks for startups. “As social software truly transforms the way everyday work gets done, this deal by Microsoft gives the category instant credibility and will accelerate adoption.”

Kurt DelBene, president of the Microsoft Office Division, writes in a blog post

Over time, I see opportunity for exciting new scenarios by adding Yammer’s stand-alone service alongside and integrated into our collaboration offerings with SharePoint, Office 365, Dynamics and Skype. I picture people being able to use Yammer to manage and expand their professional relationships, share and collaborate on Office documents, stay informed about content updates, and to seamlessly move from status updates and feeds into voice and video conversations.

Microsoft and Yammer declined to give more detail on product plans, saying they’re still being worked out. Ballmer credited Yammer founders David Sacks and Adam Pisoni for recognizing early on that social networking would extend beyond personal lives into businesses.

“Really getting the integration right is clearly one of the most motivating opportunities for both teams,” Ballmer said.

In addition, Ballmer noted on the conference call that Microsoft’s sales force would be able to help Yammer with the conversion of more free usage into paid corporate accounts.

Yammer is expected to remain in San Francisco following the completion of the deal. Microsoft paid $8.5 billion for Skype, which has so far stayed relatively independent even as Microsoft works to integrate Skype offerings into its products.

More details on the acquisition in this previous GeekWire post.

Thanks to the GeekWire reader who contributed the illustration at top.

  • guest

    If this was MS realizing there’s huge potential payoff from reinventing enterprise applications, it would probably make good financial sense. Instead it’s likely just another in a series of defensive moves from MS, which will end with some poorly done integration and a product that in a few years has lost its focus and leadership in the market.

  • JohnDoey

    The “consumerization of I-T” is just what happens when consumer electronics companies make better computers than I-T companies. If there is anybody in the world who should not need a lesson in that, it is Microsoft, because Apple just schooled them over the last decade.

    If I-T companies start making better computers than consumer electronics companies, then we will talk about the trend of “the re- I-T -ization of I-T.”

  • guest

    I promise that Yammer will prove to be as financially successful for MS shareholders as aQuantive and Skype have
    - Steve Ballmer