Microsoft says Yammer sales are booming

The enterprise social networking's product revenue grew 259 percent year on year in the quarter ended in March

By , IDG News Service |  Unified Communications

With the backing of its new parent company, Yammer more than tripled its revenue year on year in the quarter that ended in March.

Sales of Yammer's cloud-based enterprise social networking (ESN) software shot up 259 percent in Microsoft's third fiscal quarter, compared with the same quarter in 2012, when Yammer was still an independent company, Microsoft said on Thursday.

Microsoft isn't disclosing Yammer's revenue in dollar figures, but the growth and momentum -- Yammer added 312 new customers in the quarter -- is a validation of the US$1.2 billion it paid for Yammer last July, a Microsoft executive said in an interview.

"We're really pleased with the acquisition, with the process of the teams coming together and with the continued customer acceptance and demand," said Jared Spataro, senior director of the Microsoft Office Division.

"There are always questions after an acquisition, like, 'How is it going?' There's a worry about cultures clashing, and about products and strategies coming together," Spataro said. "When we did the acquisition, we talked a lot about how it would accelerate Yammer's momentum. So this is a great data point to demonstrate how well things are going in general."

Spataro specified that to calculate the revenue spike, Microsoft considered only sales of standalone Yammer licenses, and left out revenue coming in from Enterprise Agreement volume licensing deals involving the ESN product.

It should also be noted that after the acquisition, Microsoft eliminated Yammer's Business edition and slashed the price of the more sophisticated Enterprise edition from $15 to $3 per user per month, so in this year's quarter Microsoft generated significantly less revenue per license than Yammer did in the prior year's quarter.

Microsoft expects Yammer sales to get another boost this summer when the Yammer sales team is merged with Microsoft's global salesforce, boosting the number of reps pushing Yammer from about 100 today to thousands worldwide.

As a frame of comparison, worldwide revenue for enterprise social collaboration software grew about 25 percent in 2012 compared with 2011, according to Michael Fauscette, an IDC analyst.

Another market benchmark is Jive Software, a publicly traded ESN vendor, whose revenue grew 34 percent to almost $34 million in the quarter that closed at the end of March.

"Clearly with this announcement Microsoft is trying to put a certain amount of validation out there that says they made a good acquisition, because some people thought they had overpaid for Yammer," Fauscette said.

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