Salesforce's Buddy Media Buy Could Produce a Power Couple
Salesforce is rumored to be readying the purchase of Buddy Media for $800 million. The reported price would be a hefty sum for the social media marketing company, but Buddy's assets could also give Salesforce a range of new abilities. If the deal goes through, it "will be very bad for Buddy's competitors," Haleglobal.com's Chris Selland said.
Buddy Media's main business is helping corporations manage their brand presence on Facebook. It has branched out to other social media platforms, including Google+, Twitter and LinkedIn.
The reported purchase is possibly a move by Salesforce.com to fill out its core customer relationship management (CRM) capabilities.
"Salesforce has been the leading company in CRM since 1999, and Buddy Media is all about managing and promoting your social presence," social media expert Lon Safko told CRM Buyer. "It makes perfect sense that [they] join forces to create one integrated product that uses social to propel sales."
Salesforce.com doesn't comment on rumors, company spokesperson Katy Dormer told CRM Buyer.
What's a Buddy Media?
Buddy Media was among the initial 14 members of Facebook's Preferred Developer Consultant Program. Some of Facebook's investors, such as Peter Theil, Ron Conway, Zynga's Mark Pincus, also put money into Buddy Media.
Buddy's offerings include ConversationBuddy, a publishing platform and dashboard that clients use to manage discussions on social networks; ReachBuddy, which helps customers integrate social content from Facebook and Twitter into their websites; and Conversion Buddy, a set of sharing buttons designed for e-commerce. Earlier this month, the company announced several new products.
To date, Buddy Media has raised $90 million in venture backing. Investors valued it at $500 million at its last funding round, in August 2011, when it raised $54 million. Investors include GGV Capital, Institutional Venture Partners, Bay Partners and Insight Venture Partners.
Buddy Media also took a $5 million investment from ad agency holding company WPP in October 2010. The two entered a global partnership.
Earlier this month, Buddy Media acquired social commerce and analytics firm Spinback.
Playing on Buddy's Team
Earlier this month, Group M, WPP's media-buying unit, selected Buddy Media as a preferred platform for all its Facebook purchases across media agencies. Group M spent $200 million on Facebook ads in 2011 for clients that included Dell, Macy's and AT&T. The deal isn't exclusive.
Further, Buddy Media teamed up with digital consumer analytics firm comScore in December.
Why Salesforce's Purchase May Make Sense
If the deal does go through, it will "show Salesforce's commitment to social networks and its desire to maintain the leadership position," Chris Selland, senior vice president of corporate development at Haleglobal.com, told CRM Buyer.
"Buddy's a similar acquisition to Radian6," Selland said. "Buddy's strength is Facebook marketing, Radian's strength is analytics, and Heroku's a platform. They fit together."
Salesforce.com purchased Heroku, a cloud platform for writing apps in the Ruby programming language, for $212 million in December of 2010. Radian6 had more than 2,400 customers, including Dell, Kodak and UPS. Customers used it to monitor, analyze and engage in conversations on social media networks. Salesforce.com entered an agreement to buy Radian6 in March 2011.
Fitting in With Salesforce
Buddy Media offers its technology in software as a service (SaaS) mode, which dovetails right into Salesforce.com's business model.
However, Salesforce might be overpaying for Buddy Media, Selland speculated. "Nobody knows what Buddy's revenues are, but the rumor is about $50 million. If Salesforce pays $800 million, they'll be paying well over revenue. That's very expensive, but that's what you get when you buy the market leader."
Buddy Media did not respond to our request to comment for this story.
Fallout From the Possible Purchase
Salesforce.com's purchase of Buddy Media "will create the most powerful sales and social tools available," Safko said. "Companies like GlobalCrossing and other competitors will be [driven] out of the market [because of the plethora of features resulting from the purchase]."
Competition in the social service software market is fierce. One of Buddy Media's larger rivals is Wildfire Interactive. Facebook reportedly uses Wildfire to manage its fan pages.
Salesforce.com's purchase of Buddy Media "will be very bad for Buddy's competitors" because "Salesforce has B2B marketing and Buddy's an endorsed leader in Facebook marketing," Haleglobal.com's Selland remarked. "For anybody in B2B marketing, there'll be a pretty clear choice."