Another giant acquisition of a social networking service has emerged. This time it is the software giant Microsoft in one side, the enterprise social networking service Yammer on the other side and $1.2 billion in cash between. Happy times for the social media (and for venture capitalists)!
The “secret” acquisition was one of the most public deals this year as the tech blogosphere already stirred with its rumors over the last few weeks but now, Microsoft officially announced about it while also releasing a nice infogrphic (you can find it at the bottom) about Microsoft and Yammer collaboration.
What will happen with Yammer now? Well, it appears that Microsoft intends to keep Yammer a standalone service and to integrate it within Microsoft’s different products. Yammer would be appended to Microsoft’s Office Division as all current Yammer employees will continue to work under Yammer CEO and founder David Sacks.
Okay, enough being nice… I have to admit that I see this acquisition as tremendously overvalued. I’m not an accountant or a lawyer (just a humble financial advising graduate) and I’m sure that the Microsoft folks knows many things that I don’t, but I simply don’t understand the economic logic behind the acquisition.
From financial perspective, I found it really hard to see how a company which earns $20-$30 million a year in revenue and was valued by $500-$600 million just a few months ago suddenly worth $1.2 billion. Even if Yammer’s revenue would miraculously double, it will still take Microsoft 25 years to return the investment (which is a lot of time).
Also from total number of users point of view it doesn’t add up- Yammer has only about 5 million users compared to Instagram’s 30 million users at the time Facebook acquired it for $1 billion and to Foursquare’s 20 million users which is valued by about $750 million worth.
But I guess Microsoft is socially desperate. Its own experimental social network So.cl is pretty shitty while the company seeing other technology giants rides on the social networking train. The problem is that Microsoft is so late for the train that it decides to pay an expensive airline ticket.
And it just might turn out to be a ticket to Oceanic Airlines Flight 815.