Microsoft officially announces Yammer acquisition for $1.2 billion

yammer microsoft deal

The coffee house rumors weren’t unfounded after all. Microsoft announced today that the company has agreed to the acquisition of Yammer for $1.2 billion in cash.

Yammer is a Facebook-like application for the business demographic, and has netted more than 5 million users since its inception in 2008. The acquisition shouldn’t come as a surprise — there has been an increasing pressure for social applications to exit in the wake of an underperforming social platforms including Yelp, Facebook, and even Zynga and Pandora.

There’s a mutual benefit in this acquisition. Yammer is now flush with cash and has unparalleled access to Microsoft’s resources to grow Yammer, including integrating it with Microsoft SharePoint, Office 365, Microsoft Dynamics, and Skype.

“When we started Yammer four years ago, we set out to do something big,” David Sacks, Yammer founder and CEO said. “We had a vision for how social networking could change the way we work. Joining Microsoft will accelerate that vision and give us access to the technologies, expertise and resources we’ll need to scale and innovate.”

From Microsoft’s perspective, Yammer can replace the ailing Microsoft SharePoint, which has been neglected and left to collect dush, and can integrate the professional social network into existing Microsoft products to bolster its inter-office social communication capabilities. More importantly, as Microsoft’s blog post states, it will get access to 85 percent of Fortune 500 employees, who are Yammer users.

“The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love,” Steve Ballmer, CEO of Microsoft, said in a statement. “Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services.”

As we presumed, Microsoft’s relationship with Yammer will resemble Facebook’s relationship with Instagram post-acquisition, meaning Yammer will remain as a standalone service. While its team will join the Microsoft Office Division, they will continue to report to David Sacks.

“Yammer will continue to develop its standalone service and maintain its commitment to simplicity, innovation and cross-platform experiences,” Microsoft said.

For those of you worried about the implications of this acquisition, including changes to its existing freemium model, there is little to fret about. Yammer will continue to remain free for basic users, and offer upgrades for enterprise features.

The only entity that has to worry about the acquisition is Salesforce. The company has been recently strengthening its social media suite with acquisition of social enterprise software, BuddyMedia, for $689 million. But Microsoft now has a more grounded footing in its competition with Salesforce, which offers Chatter, a Yammer-like messaging service.