Salesforce Buys Buddy Media for $689 Million

Second major social software deal in as many weeks

Salesforce announced this morning that it is buying social media management platform Buddy Media for $689 million. The deal, which All Things D reported was on the horizon last week, will close during Salesforce’s fiscal third quarter and is the company’s “largest acquisition to date,” Marc Benioff, the company’s chairman and CEO, said during a call with analysts.

“Today we’re doubling down on the Salesforce Marketing Cloud,” said Benioff. The deal pairs Buddy Media with last year’s $326 million acquisition of social analytics firm Radian6 to create a unified social media marketing platform, he said, and positions Salesforce to service CMOs in addition to its traditional CIO base. “Our goal is to build a large direct sales organization for these CMOs and provide them with a complete suite of offerings," he said.

Salesforce has been looking at the social media management space for “a number of months,” and in that time heard from “a lot” of customers that also use Buddy Media, said Marcel LeBrun, svp and general manager of Salesforce Radian6. In opting to buy Buddy Media—the deal is expected to close in August, LeBrun said—Salesforce applied similar logic that it used in acquiring Radian6. “What it came down to with Salesforce is the formula of ‘buy the market leader’ has worked,” he said.

Buddy Media cofounder and CEO Michael Lazerow said he signed the deal yesterday and brought together employees Monday morning for an all-hands meeting to discuss the news, answer questions and let them know that they’re “all moving forward together. Their job yesterday is their job today,” he said. The companies are still determining the post-acquisition organizational structure, but all Buddy Media employees are being retained.

The Buddy Media acquisition highlights aggressive interest by enterprise software companies in the social marketing space. Less than two weeks ago, Salesforce competitor Oracle snagged Buddy Media competitor Vitrue for $300 million, and Benioff said he met with the CEOs of 10 “major” social media marketing software companies before deciding to acquire Buddy Media.

Forrester senior analyst Melissa Parrish said in an interview last week that the No. 1 thing marketers ask social media management platforms for is integration with other enterprise systems, such as analytics and CRM providers. Social, and in particular the customer data surfaced through social networks, has played a role in fundamentally changing the CRM business, said Mark Miller, CRM practice lead at Digitas, in an email. “People are using social networks to volunteer crucial insights about themselves, and it’s the job of any smart CRM provider to tap into that,” he said.

Benioff acknowledged as much in referring to Salesforce’s 100,000 cloud CRM customers who want to connect those products with social media efforts.

Salesforce expects the Marketing Cloud to become the company’s “fourth billion-dollar business,” said Salesforce CFO Graham Smith. Salesforce expects Buddy Media to contribute roughly $20 million-$25 million in revenue for the second half of the 2013 fiscal year. “The high end of this range is just slightly less than the amount of revenue Buddy Media generated for all of calendar 2011,” he said.

Buddy Media and Vitrue were largely seen as two of the most high-profile social media software firms, so their sales open up the space to jockeying by competitors, such as Wildfire and Hearsay Social.