Microsoft snaps up enterprise social network Yammer for $US1.2 billion

Professional services social network Yammer will now become part of Microsoft’s huge Office division after the technology giant paid $US1.2 billion for the four-year-old social network.

The acquisition is the biggest since Microsoft’s $US8 billion purchase of Skype last year, and comes two weeks after rumours started flying about a potential buyout for Yammer founders David Sacks and Adam Pisoni.

“When we started Yammer four years ago, we set out to do something big,” Sacks said in a statement.

“We had a vision for how social networking could change the way we work. Joining Microsoft will accelerate that vision and give us access to the technologies, expertise and resources we’ll need to scale and innovate.”

In its four years of existence, Yammer has managed to score some big-name users – nearly 80% of the Fortune 500 companies use it. Workers at accounting giant PwC are counted as users, along with eBay, 7-Eleven and Deloitte Australia. Plenty of smaller companies use Yammer as well, including New Zealand accounting group Xero, and crowdsourcing design site 99designs.

Over 80,000 companies use it across the world. Although Sacks has never disclosed revenue, he has confirmed the total is up to seven figures – analysts suggest it could be as low as $US15-20 million.

Funding, however, has been ample. The company has received as much as $US142 million from Charles River Ventures, led by George Zachary, the Founders Fund and prominent investor Ron Conway, who has put money into dozens of companies including Digg, Facebook, Google and PayPal.

The latest funding round was worth $US85 million and was completed in February.

Revenue comes from subscription services, with a premium version of the site selling for $5 per user a month.

Yammer is a type of micro-blogging service, similar to Twitter, but built for the enterprise – it markets itself as a type of “private social network” – or in other words, a Facebook for business. Colleagues can post messages about the projects they’re working on, and other types of updates.

Over time, the service has grown to become more than a simple messaging tool, incorporating advanced social networking features.

Microsoft chief Steve Ballmer said the purchase “underscores our commitment to deliver technology that businesses need and people love”.

Sacks originally launched the company at a TechCrunch conference in 2008. It was part of a separate company, but Sacks spun it off as a standalone product. Over time, the company has continued to add new features, including the ability to share URLs with co-workers that display image and video, while employees can monitor who is online and then chat to them.

The move confirms Microsoft is staying far away from the social networking game where Facebook and Google continue to duel. Instead, it’ll stick to where it works best – in the enterprise.

Yammer will now become part of the company’s Office division, where it will fight against similar services from other companies, including Salesforce’s Chatter service. But integrating into Office will give Yammer even more traction – and will hopefully lead to squeezing more money out of the majority of users who don’t pay.

In a blog post, Sacks said the company will remain as a standalone service.

“With the backing of Microsoft, our aim is to massively accelerate our vision to change the way work gets done with software that is built for the enterprise and loved by users,” he said.