Salesforce Buys Buddy Media To Ride Social Media Wave

Salesforce.com (NYSE:CRM) has agreed to buy Buddy Media, a leading social media marketing platform for $689 million in cash and equity. Buddy Media enables its clients to listen, engage, gain insight, publish, advertise and measure social marketing programs. This addition to the Salesforce Marketing Cloud is likely to be backed by Radian6 which is a leading social media monitoring and analytics platform provided by Salesforce. This is the second social media campaign company to be acquired recently with Salesforce competitor Oracle (NASDAQ:ORCL) announcing its acquisition of Virtue in May.

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Marketing On Social Media To Drive Sales

Buddy Medias’ top clients are Ford, Hewlett Packard, L’Oreal and Mattel. Its social media solutions help Chief Marketing Officers (CMO) manage social media campaigns, which is becoming an increasingly important aspect in brand building and awareness. Marketing on social media such as Facebook, Twitter and YouTube is driving technology sales as companies look for tools to deliver and monitor social media campaigns. Salesforce believes the next big driver in technology sales is from marketing expenditure and this move positions it to capitalize on that growth opportunity. Chairman and CEO Marc Benioff had this to say, “With CMOs surpassing CIOs in spend on technology within the next five years, our Marketing Cloud leadership will allow us to capitalize on this massive opportunity.”

Key Advantages of Buddy Media

Eight of the top ten advertisers are clients of Buddy Media, making it a clear leader in the social media marketing. The company currently has nearly 1,000 customers, including major global brands and the world’s largest marketing agency groups such as IPG (Interpublic Group), Omnicom, Publicis and WPP. Buddy Media is also the only company to be named a charter Facebook Preferred Marketing Developer, Google Engagement Solutions partner and LinkedIn Certified Developer. These are key partnerships which along with the Salesforce Marketing Cloud, will be empower CMO’s to manage the entire social marketing lifecycle.

Financial Impact of The Proposed Buddy Media Acquisition

Salesforce will acquire Buddy Media for approximately $467 million in cash and $184 million in common stock, and $38 million in vested options and restricted stock units. This transaction is not expected to have any material impact to the fiscal second quarter FY13 revenue or EPS results. The acquisition is expected to increase revenues by approximately $20 million to $25 million in the second half of the year ending January 31, 2013 depending on the final acquisition date. ^[1]

We currently have a $130 Trefis Price Estimate for Salesforce.com, which is in-line with the current market price.

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1. Salesforce.com Signs Definitive Agreement to Acquire Buddy Media, www.salesforce.com, June 4, 2012 [↩]