Salesforce.com has confirmed the Buddy Media speculation, revealing it will pay $689m in cash and shares for the cloud-based social media marketing company (founded in 2007). That will make it Salesforce.com’s most expensive acquisition so far (topping Radian6 which came in at $326m). The deal is expected to close in Q3 (ending October 2012).
As we noted in Social Media marketing vendor-grab gathering pace, it makes perfect sense on a product and strategic level and puts Salesforce.com in a good position to explore the uncharted social media marketing market. Buddy Media will join Radian6 and Salesforce.com’s native applications to extend its marketing footprint and embrace the important social channel.
What makes less sense is the price being paid. During the second half of FY13 the acquisition is expected to add just $20m to $25 in additional revenue but will reduce non-GAAP EPS by $0.14 to $0.15, which indicates Buddy Media is making big losses for every dollar of revenue it pulls in.
Salesforce.com is paying for potential and that is a risky play – but that is what the company is all about. Buddy Media does have a cadre of global brands and advertisers among its 1000 clients - including Ford, Hewlett Packard, L’Oreal and Mattel. It also has leading marketing agency groups such as IPG (Interpublic Group), Omnicom, Publicis and WPP. Salesforce.com has the makings of a social marketing business if it can integrate, execute and most importantly provide metrics to prove to businesses that social media marketing can pay.