Customer relationship management (CRM) integrated with social networks (aka "social CRM") is moving to the clouds. But the jury seems to be out regarding the future of this niche.
In a move that has focused attention on the trend, Salesforce.com Inc.today announced the purchase of online marketing startup Buddy Media for $689 million in cash and stock.
The deal follows Saleforce.com's purchase of Radian6, which monitors and measures social media, last April. It also follows the recent purchase by Oracle Corp. (Nasdaq: ORCL) of cloud-based social marketing firm Vitrue, which was founded in 2006 and claims McDonald's and American Express among its customers.
Buddy Media, founded in 2007, offers a suite of applications that allows companies to create customized, interactive content on social media sites and then track the activity that results. That's the key to making cloud-based CRM one of Saleforce.com's biggest businesses.
"Facebook has become the new corporate homepage," said Salesforce.com CEO Marc Benioff on a call with analysts today. And in a prepared statement, he noted: "With CMOs surpassing CIOs in spend on technology within the next five years, our Marketing Cloud leadership will allow us to capitalize on this massive opportunity."
Buddy Media boasts over 1,000 clients, including Ford, Hewlett Packard, L'Oreal, Mattel, and several big marketing agencies. Co-founder and CEO Mike Lazerow is quite the marketer in his own right, having hit the social media nerve with a video describing his very personal -- and very moving -- reaction to the deal with Salesforce.com:
Both Salesforce.com's and Oracle's stocks were trading lower today. And while that reflects the trend for the computer software market overall, there are skeptics who view all this "socializing" of cloud services suspiciously.
Here's how Jim Edwards of Business Insider Advertising put it:
The most interesting thing about the recent acquisitions of Buddy Media (by Salesforce.com) and Vitrue (by Oracle) is who didn't do the buying: The big Madison Avenue ad agency holding companies like WPP, Omnicom, Interpublic Group and Publicis.
...So this could go two ways: WPP et al. could come to regret not moving fast enough to snap up these companies. Or, if history is a guide, five years from now we'll be talking about the naivety of non-advertising companies thinking they can get into the marketing business via a few simple (and expensive) acquisitions.
Another source, author, consultant, and VC, Robert Rose, says he likes the deal "from an agility perspective," but he stated the following in an email to me today:
[I]t’s certainly a huge bet. Not just from a financial standpoint -- although by my quick back of the envelope calculation it's about a 15x multiple on Buddy Media’s revenue -- but rather a huge bet on the idea of Social -- and especially Facebook -- as a direct marketing channel for the enterprise.
I think the most interesting thing to watch will be to see if [Salesforce.com] can pivot into being a truly social company. It's one thing to center on managing a normalized database of names, titles and addresses through a pipeline -- and quite another to enable non-linear, conversational chaos for a global enterprise.
And there you have it. Social CRM may be headed for the clouds -- but whether it makes it there is a future hidden from our gaze.
I wonder if we are just starting to see a difference between the dot.com boom of the late 1990s and this new era of "Eh."
I think consumers and the financial markets in general didn't understand much of what was coming at them in the late 1990s, but much of it sounded cool and the Internet was definitely the future. Something had to come of it.
With things like Social CRM, some get it and most don't. And those who get it aren't universally sold it's the future.
In the end, I think consumers and investors are more jaundiced than they were 13 years ago and these neuvo companies have to work much harder to be captivating. They actually have to be able to demonstrate value, and that, in my view, is pretty hard in the social CRM space.
Me too, Nicole. That video changed a run-of-the-mill deal story to something quite different, and showed me once again that social media CAN be used to generate goodwill.
Thanks for embedding that video Mary. I knew about Buddy Media, didn't know about its founder. Very moving story. Whatever the future of social CRM in the cloud, I say good for Mike.
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