M&A Alert—June 12, 2012
Salesforce Acquires Buddy Media
Transaction Size: $745mm
On June 4th, 2012, Salesforce.com acquired Buddy Media for a total consideration of $745mm.
Buddy Media offers a social media marketing platform which enables brands and marketing agencies to connect and engage with their customers and measure their social marketing campaigns on Facebook, Google, LinkedIn, Twitter and YouTube. Brands and marketers use Buddy Media to develop customized targeted content (by geography, languages, preference-based, etc) and landing pages featuring social applets that allow customers to engage in moderated conversations and share products on social networks. Buddy Media also monitors and measures user conversion and social advertising campaigns. Buddy Media has 1,000 clients including eight of the top 10 advertisers and also top brands such as Ford, Hewlett Packard, L’Oreal, Mattel, IPG (Interpublic Group), Omnicom, Publicis and WPP. Key competitors include Vitrue (acquired by Oracle a few weeks ago), Wildfire, and HootSuite.
Founded in 2007, Buddy Media has 300 employees and has raised $92mm in funding from Bay Partners (Salil Deshpande), GGV Capital (Glenn Solomon, Jeff Richards), Counsel RB Capital, European Founders Fund Management, Greycroft Partners (Ian Sigalow), Insight Venture Partners (Bryan Gartner, Deven Parekh, Richard Wells), IVP (Daniel Barney, Jules Maltz and Stephen Harick), KB Partners (Keith Bank), Knight’s Bridge Capital Partners, SoftBank Capital (Eric Hippeau) and WPP Digital.
Upon close the acquisition, Buddy Media will be integrated to Salesforce Marketing Cloud Offerings.
Salesforce provides a leading cloud-based sales and customer relationship management (CRM) application to businesses. Recently, Salesforce has been aggressively expanding its social and mobile product offerings. Salesforce has made 16 acquisitions since 2011 (with Buddy Media being the largest acquisition) including Radian6 (social media engagement monitoring), 2Catalyze (social performance management platform), Assistly (multichannel customer service), Stypi (real-time collaboration), Model Metrics (cloud computing platform), Heroku (app development platform), Jigsaw (crowdsourced, business contact service) and DimDim (web conferencing).
In addition, Salesforce launched new products such as Social Marketing Cloud (social media listening and monitoring ), Service Cloud (which automates customer service support), Chatter (social network service for enterprises), Desk.com (social customer service support), Rypple (social performance management) and Sales Cloud (a sales force automation / contact management platform).
Marc Benioff, CEO and Chairman, and Marcel LeBrun, SVP of Salesforce Radian6, were the key executives mentioned in the press release.
Salesforce will pay $467 million in cash and $184 million in salesforce.com common stock, $38 million in vested salesforce.com options and restricted stock units and $56mm in employee retention. Salesforce.com expects the transaction will close in the fourth quarter of 2012. Salesforce also announced that Buddy Media generated approximately $25mm in revenues in 2011.
Purchase Price: $745mm
Purchase Price/Revenue: 29.8x
Oracle’s $300mm acquisition of Vitrue is the most comparable M&A transaction. Other comparable M&A transactions within the social media space include Walmart’s $400mm acquisition of Kosmix, Adobe’s $400mm acquisition of Efficient Frontier (which bought Context Optional) and Saleforce’s $340mm acquisition of Radian6, BazaarVoice’s $151mm acquisition of Power Reviews and Exact Target’s acquisition of CoTweet.
Salesforce is positioning itself to capitalize on the next wave of IT spend where CMOs will drive the corporate application agenda and spend more on IT than CIOs by 2017. Buddy Media bolsters Salesforce’s social marketing initiatives. Buddy Media brings a platform that allows brands and marketers to develop, customize, manage, engage in and monitor multiple social marketing campaigns, expanding Salesforce’s existing cloud social marketing initiative which is primarily focused on enabling brands to track and monitor customers’ social conversations. Social advertising is the largest growth area in online advertising and is expected to be a $10b market worldwide next year (eMarketer Forecast Sept 2011).
Architect Partners’ Observations
Marketing efforts within social media platforms such as Facebook, Twitter, Google+ and LinkedIn have attracted a tremendous amount of attention as well as controversy. Clearly, these platforms represent ripe locations for brands and other marketers to attract and engage consumers and marketing spend on these platforms has exploded. Today, social media marketing spend is estimated to be $3b in the U.S. in 2011 (37% growth from 2010). This compares to a $15b search advertising market (27% growth from 2010) and $11b display advertising market (15% growth from 2010). However, we are still in the early days of perfecting effectiveness as evidenced by GM’s recentdecision to pull marketing budget from Facebook due to uncertainty around ROI.