Salesforce to buy Buddy Media for $689 million

Salesforce.com Inc. on Monday said it has agreed to buy social-marketing company Buddy Media for $689 million.

Shares of Salesforce fell more than 2% in early trade, but the deal got positive reviews from analysts who pointed to the growing importance of marketing and branding in the social-networking arena.

Buddy Media helps companies manage their branding and marketing efforts on social media sites such as Facebook and LinkedIn.

Salesforce.com said it will buy Buddy Media for roughly $467 million in cash, $184 million in Salesforce.com common stock, and $38 million in vested company options and restricted stock units. The deal is expected to close in Salesforce.com’s fiscal third quarter ending on Oct. 31.

In a statement, Salesforce.com Chief Executive Marc Benioff noted the growing importance of social media marketing and chief marketing officers in corporations.

“With CMOs surpassing CIOs [chief information officers] in spend on technology within the next five years, our marketing cloud leadership will allow us to capitalize on this massive opportunity,” he said.

Senior Vice President Marcel LeBrun also said social media “has caused the biggest transformation in marketing since the Mad Men era,” referring to the popular TV series.

Salesforce.com has been one of the key players in the trend toward cloud computing in which businesses access computing power through a network, instead of in-house data centers.

The rise of such sites as Facebook , LinkedIn and Twitter have also fuelled the growth of social marketing and branding companies.

Forrester Research analyst Melissa Parrish said it’s become common for companies to set up multiple accounts on social media sites as part of their marketing efforts. Social media marketing companies offer ways to maximize and manage these efforts, by allowing them to analyze their effectiveness and fine tune the way they use social media.

“They need to get their arms around this growing footprint across the social web,” she said.

In a note, Wells Fargo analyst Jason Maynard described the deal as positive for Salesforce.com, saying: “Buddy Media is a fast growing, social engagement platform that we believe is poised to benefit from the ongoing usage of social media and networks.”

“Our view is that chief marketing officers are increasingly gaining control over digital strategy and the digital purse,” Wells Fargo analyst Jason Maynard said in a note.

“As technology becomes an integral part of customer acquisition and retention, it will fuel demand for tools that identify, monitor, engage, analyze and interact with customers via the mobile/social web,” he added.

Salesforce.com is also known as a pioneer of the software-as-a-service model which allows businesses to access software applications for such tasks as managing inventory and keeping track of payroll through the Web.

Customers typically pay a fee based on the number of users, allowing companies to save the costs of running their own in-house networks. On the other hand, traditional software companies, such as Oracle Corp., make money by licensing their products to businesses.

Last week, at the D10 Conference in Southern Calif., Oracle CEO Larry Ellison specifically cited Salesforce as an emerging “formidable competitor in the cloud.”

Source: MarketWatch