Number of Salesforce.com Chatter Users on the Rise

Salesforce.com (NYSE:CRM) introduced Chatter, a cloud-based social networking application for enterprises, in February 2010 in its beta form and has since then garnered a positive response from companies. Salesforce’s Chatter mainly competes with Microsoft (NASDAQ:MSFT) Sharepoint and web office, Google (NASDAQ:GOOG) Apps, and Adobe (NASDAQ:ADBE) Acrobat.com.

The total number of companies deploying Chatter has crossed 20,000 within three months of general availability. ^[1] With attractive pricing and more features offered compared to social networking sites and collaboration tools, we expect the number of paid subscribers for Chatter will continue to grow.

Although Chatter’s paid subscriber growth is a positive, the Chatter Collaboration Network constitutes only 3.5% of Salesforce’s stock value, based on our estimates. Hence even a significant increase in paid Chatter subscribers will have a limited impact on CRM stock. While we expect paid Chatter subscribers to rise to 2.5 million by the end of our forecast period, Trefis community members predict a slightly higher level of 3.3 million, implying some upside to our price estimate.

We maintain a $128 price estimate for Salesforce.com’s stock, in line with market price.

Attractive Pricing and Employee Productivity Tools

Salesforce is keeping the basic features of its Chatter app free while Chatter Plus, which has premium features, is available to users at an affordable price of $15 per month. Through the Chatter application, enterprise users can make business profiles with professional information like personal contact data, area of expertise, and work history. Users can share business documents or customer support case with each other. They can also post status updates on documents and applications to share communications with other users and form both public and private groups. In the beta release of Chatter, customers reported that the application brought about 22% improvement in productivity.

More Security, Privacy and Features Over Competitors

The advantage that Chatter has over social networking sites like Facebook and Google Buzz is that it provides more security and privacy features. Facebook has been criticized for security and privacy issues, while Chatter plugs that gap. Chatter also integrates Facebook and Twitter status updates, making it different from other enterprise collaboration offerings from Cisco and Microsoft, which revolve more around traditional IM screens, video conferencing and emails.

Trefis Community Forecast

Trefis members expect the number of paying Chatter subscribers to increase from 0.1 million at year-end 2010 to 3.3 million by the end of our forecast period, compared to the baseline Trefis estimate of an increase to 2.5 million during the same period.

Our complete analysis for Salesforce.com’s stock is here.

1. Salesforce Press Release, Sept 22, 2010 [↩]