Salesforce buys Radian6 for $326M: So What?

Salesforce-Radian6Two months ago I wrote a post lamenting over how the emerging enterprise social media/social CRM vendors are making the same mistakes we have made over the past 40 years in the enterprise software industry and alluding to the fact that I expected the major enterprise technology vendors to enter the market in earnest this year.  I just never thought we would see so much before the end of Q1. During the past 5 days, IBM launched a social media analytics solution based on their Coremetrics acquisition last summer,  and today Salesforce announced their plans to acquire Radian6, one of the leading social listening / analytics platforms (disclosure: SAP is a Radian6 customer).

While the jury is still out on whether Salesforce overpaid (I heard from a VC friend today that the $326M amounts to 5x of Radian6’s 2012 revenues), whether there will be a culture clash, as the much smarter than me, Paul Greenberg said today, or whether we are in a bubble (Warren Buffet appears to think so and I concur), there is no doubt this IS the market to be in if you are in the enterprise technology space today.

In my opinion, there are three things enterprise social media/social CRM vendors need to do in this emerging market to rise above the noise:

  1. Simplify, simplify, simplify:  This was the main thesis of my January post, and I cannot emphasize this enough.  Most solutions today boil the ocean and have no focus on what the user is trying to do (and most of us as I said then don’t know what we don’t know yet).  Please understand what your users are trying to do and don’t be afraid to say no to the next feature request.
  2. Remove the noise (pun intended):  I thought it was fitting to see this Huffington post article appear today where, based on research conducted by Cornell University and Yahoo! Research, the level of noise in Twitter is raising to levels that questions its efficacy-apparently 50% of all tweets are generated by less than .05% of all users.  I guess this is why Jack Dorsey decided to return to Twitter as its Chief Product Officer.  As he was quoted in the Wall Street Journal today: “We have a lot of mainstream awareness, but mainstream relevancy is still a challenge”. Regardless of what Twitter does (and of course Twitter is not the only channel), enterprise social vendors need to at least get to where Google is today vis-à-vis removing the noise.
  3. Integrate with back-end CRM systems:  This is the holy grail today and with very few exceptions, no vendor has cracked this.  While I would argue most companies that I know of are not ready, we are all thinking about this and the vendor that helps us get there, will create immense differentiation.  Even for simple use cases, such as social programs around events, the value of knowing who your net new vs. existing customers and influencers are, will drive tremendous value to companies as they try to engage in social.

What do you think?  Is this a bubble because there is no ‘social’ value or because the market is so over-hyped?  Will it be 10 years before we see sanity sink in?  As always, I would love your thoughts.

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4 Responses to Salesforce buys Radian6 for $326M: So What?

  1. Natascha Thomson March 31, 2011 at 09:12 #

    Ted:

    astute observations put into good context.

    All you say rings true but I am not surprised this is happening. There is nothing I have seen in the last 20 years in Silicon Valley that would lead me to believe that the software technology cycle has changed (history repeating itself and I don’t see “agile” fixing this aspect).

    If you look at the Gartner Hype Cycle of Emerging Technologies (http://www.gartner.com/it/page.jsp?id=1447613), I see social media software on the usual path. The point to argue about is where we are stuck right now.

    Are we still in the “Peak of Inflated Expectations” (me, Buffet, you) or already in the “Trough of Disillusionment” (me, you)?

    The good news: Enlightenment should be ahead of us and then it’s only a few more years until these tools will be truly productive :-).

    Until then, sincerly yours,

    Natascha

  2. Vish Agashe May 19, 2011 at 16:15 #

    Ted,

    For this discussion if we keep the valuation of Radian6 out, I believe that there is significant value in ‘social’ data. Very fact that SAP is a customer of Radian6 (and several thousands of companies are using Radian6 and other SMM) is a testament to the perceived value SAP and companies like SAP see in social data.

    It is true that there is significantly more discussion around social media/data now than it was five years back. In that sense, you can say that ‘social’ is riding the hype cycle.

    Time in and time again, many companies and countries have seen the power (both in positive and negative ways) of social media and social data. Paradigm around how engagement is done with the audience (target market) has been totally changed by social media.

    I think that ‘social’ is here to stay. Its form factor and how it is consumed might change over a period of time, but it is here to stay and is going to be critical part of every organizations (not only) CRM and back office strategy.

    Vish Agashe
    http://vishagashe.wordpress.com

    PS: as far as Salesforce.com’s valuation of Radian6 is concerned, I think that Salesforce.com must have felt confident that they will be able to leverage their current install base to up sell value created by Radian6 and recoup all of their investment many times over(just like they did with Chatter).

    • Ted Sapountzis May 20, 2011 at 16:29 #

      Vish,

      Thank you for your comments. I have no doubt that social is here to stay as you point out. My big concern however is what I see with all these vendors (and no, I am picking on Radian6). We are at such an early stage that we (as in the practitioners) don’t know what we don’t know yet. While I appreciate the ‘first mover’ advantage that all the vendors are focused on today, my premise is that this is not going to be the winning strategy in a social world….

      Of course, only time will tell and I may be way off…..

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  1. My takeaway from Dreamforce 2011: Convergence | Lead, Don't Manage - September 7, 2011

    [...] but also the integration of Radian6, the social listening and monitoring platform Salesforce acquired last spring.  Most notable was the announcement of the capability to allow companies to build true social [...]

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