Yammer announced an impressive $85 million financing recently. You can get the details here.
You might already know that Yammer provides enterprise social networks, the kind of collaborative spaces that enable employees to “swarm” on issues to achieve resolution or deal with a customer issue, for instance. Yammer claims that more than 85 percent of the Fortune 500 use their products. The swarm idea comes from business writer Stephen Denning in The Leaders’ Guide to Radical Management.
If enterprise social networks sound familiar, it may be because Salesforce.com has put so much into it with its own product, Chatter, which has penetrated enterprises such as Dell, NBC, Comcast and Burberry. Though offhand I don’t know what percent of the F500 use it, the company talks about tens of thousands of customers, since Chatter is included the basic monthly service.
Suffice it to say that Salesforce has been carrying the water to educate the market so far — Yammer’s PR said they would launch their first ad campaign March 1, for instance. But ads or not, these companies and some others are carrying an important new message to enterprises: Get on the social express or you’ll be dog meat in a little while. Or words like that.
The Freemium Model
Permit me to change course here. So far, the rollout of social media in the enterprise follows a normal hype cycle curve. It’s the same idea that Geoffrey Moore documented in the 1990s in the Crossing the Chasm series — everybody needs to buy the new gizmo to secure competitive advantage. This is great because the companies that offer the new, new thing sell it like crazy for a few years. Some of them burn out, sometimes in spectacular fashion, and a few limp across the first finish line (an IPO) and become real companies.
But this hype cycle is a bit different. In fact, many companies are finding the cycle has changed due to the pervasive nature of the freemium idea. That’s where the vendor offers a subset of the functionality free in the hope of snagging a big sale down the road. This is also called the “puppy dog close” because once your kid takes the puppy home it’s yours, regardless of what they told you at the pet store — “Just bring it back tomorrow!”
But freemium has a different set of issues. Some companies are just fine with the free version, some don’t use it, and vendors discover that only a small portion of the initial users turn into paying customers. That’s life. With a freemium approach you don’t need an expensive sales team, and marketing can be minimal because customers show themselves the value of the product, which might explain why most don’t turn into buyers.
Rather than the freemium approach, I offer a different way to appeal to companies to buy social wares. I just finished the Steve Jobs bio and one of the things that struck me was how much Jobs wanted to leave a legacy, a company that would be great for a long time after him, like HP had been in his youth.There may be many C-level officers who really only care about making money because cash is how they keep score. But under the power suits, I think you are more likely to also find a person who puts in many hours and for whom the enterprise is the achievement of a lifetime — dare I say a monument to the executive’s cunning and ability to lead?
If money was the only important thing, I have to believe executives would not work as hard as they do. Flying to China or Japan might sound exotic, but it gets old. Once you’re certain that the next generation or two of your kids will have a good life, your attention turns to the legacy, what you’ll leave behind for the next guy and the shareholders.
So here’s my proposition. The vast majority of the new products coming onto the scene in any decade are things that make money, contain costs or occasionally improve customer satisfaction. But social is different. It is no stretch of the imagination to say that social can do all three, and even more important, it is giving companies the ability to change who and what they are.
When you get down to it, social’s core offer and benefit is that it enables you to make a great business by leapfrogging over old ideas, processes and procedures to make customers more satisfied, which in turn leads to everything else, like money. By making information ubiquitous, social (i.e. employee collaboration) ensures decisions can get made for the right reasons and in the right time frame and helps build a great business. Building a great business, a great company — the legacy — is where it’s at.
So the big mystery to me is why the vendors in this fantastic market are selling their wares as technologies or services. Sure, social technologies in all their forms are new, and the market requires a certain amount of massaging to get early buyers. But rather than selling social as an end in itself to mid-level managers, I think I’d be selling the legacy idea to the C-suite. You don’t get to make a pitch like this every day, and it would be a shame not to take advantage of the opportunity.