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Originally published June 25, 2012 at 6:49 PM | Page modified June 25, 2012 at 9:38 PM

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Microsoft paying $1.2B for Yammer business social network

Microsoft says it's committed to continuing Yammer as a stand-alone service while also integrating it into some of Microsoft's own collaboration and communications offerings, such as SharePoint, Office 365, Dynamics and Skype.

Seattle Times technology reporter

Billion-dollar club

TYPICAL MICROSOFT acquisitions are relatively small, but over the years the company has shelled out more than $1 billion for a handful of acquisitions.

May 1999: Telewest Communications, $2.9 billion

September 1999: Visio, $1.3 billion

December 2000: Great Plains Software, $1.1 billion

May 2002: Navision, $1.3 billion

May 2007: aQuantive, $6 billion

January 2008: Fast Search & Transfer, $1.2 billion

May 2011: Skype, $8.5 billion

June 2012: Yammer, $1.2 billion

Source: Seattle Times files

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For all its successes, here's one thing Microsoft has never managed to do: Create a consumer product that people like so much they clamor for it in their workplace.

Sure, Microsoft's presence in the corporate world is almost ubiquitous, from the Windows software running on company desktop and laptop PCs to the servers hosting corporate network operations.

But consumer success leading to corporate adoption? Not so much.

Microsoft hopes that will change with its acquisition of Yammer, a San Francisco-based company specializing in social networking for businesses.

The two companies confirmed long-running rumors Monday when they announced the software giant was buying the social-networking company for $1.2 billion in cash.

Yammer will become an organization within Microsoft's Office division, with Yammer's 350 employees still reporting to CEO David Sacks. It will continue to be based in San Francisco.

Microsoft says it's committed to continuing Yammer as a stand-alone service while also integrating it into some of Microsoft's own collaboration and communications offerings, such as SharePoint, Office 365, Dynamics and Skype.

The purchase gives Microsoft an instant leg up in the world of business social networking — a relatively new but fast-growing area where Microsoft had been lagging.

In a conference call with reporters and analysts after the announcement, though, Microsoft CEO Steve Ballmer enthused not just about Yammer's capabilities, but also about its business model — specifically, what Ballmer called the "viral adoption method."

Essentially, it's another take on what's been called the "consumerization of IT," in which individuals basically demand to use their own devices or services — say, an iPad or Android phone — in the workplace, and have the workplace's information technology (IT) department accommodate that use.

Because Yammer has a Facebook-like user interface now familiar to millions of people, and offers its basic services free, many individuals have signed on — about 5 million corporate users currently, with 250,000 more being added each month, according to the company.

Many businesses, including Fortune 500 ones, have then opted to upgrade to Yammer's paid services.

"Consumerization of IT is a trend which I think, perhaps more than almost any other company out there, Yammer has gotten right with its viral adoption model," Ballmer said.

"Yammer now has a sales model that we like: viral adoption by the end user, the consumer inside some kind of professional organization, with the option for IT to buy enterprise-level capability and management."

An example of how Microsoft could benefit from that model already exists:

Yammer offers an enterprise networking package for $15 per user per month that includes integration with SharePoint and Dynamics, said Wes Miller, an analyst with independent research firm Directions on Microsoft.

That "provides a nice little bump for Microsoft," he said.

Miller predicts Yammer will start to appear in SharePoint, and Office Web Apps in Yammer, by the end of this year or the beginning of 2013.

So far, adoption of business social networking and social networking-enabled collaboration tools is still low, said Bernardo de Albergaria, vice president and general manager of the collaboration line of business for Citrix Online. Citrix competes with Yammer in some areas, particularly with its recently acquired Podio online work platform.

But that's changing as more people begin to think of email and emailing attachments as an inefficient way of collaborating on projects.

And social networking within the workplace — complete with tools that allow IT departments to manage security and other issues — "is the fastest growing subset of the overall collaboration segment," de Albergaria said.

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com. On Twitter @janettu.

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