Salesforce's acquisition of Radian6: 'Like getting married in 2nd grade'

An analyst argues that Salesforce.com bet too early on Radian6's platform and it would have made more sense to partner rather than spend $326 million in the early innings of social media.
Written by Larry Dignan, Contributor on

Is the run by enterprise software companies to buy up social media listening companies a wee bit premature? It's quite possible considering that you could partner instead of acquire.

That's the gist of a research note by Cowen & Co. analyst Peter Goldmacher. He handicapped Salesforce.com's $326 million acquisition of Radian6 as a deal that can become a distraction.

Most observers gave Salesforce.com's Radian6 purchase a thumbs up, but others such as Dennis Howlett have questioned the rationale and price tag. Meanwhile, Kana bought Overtone on Tuesday to foreshadow what's likely to come: A run on so-called social listening companies.

Goldmacher's biggest beef with Salesforce.com's Radian6 purchase is that it's a big bet in the early innings of social media. Goldmacher said in a research note:

We were surprised to see CRM make such a large bet so early in the evolution of social media. We view the acquisition of Radian6 as equivalent to getting married in 2nd grade; industry groups estimate that there are 120 vendors chasing what is sized today as a $600M market opportunity. While we are used to CRM making smallish bets on interesting but as of yet unproven opportunities (Chatter, Heroku, DimDim), buying R6 is a significant commitment to technology, deployment and distribution in a nascent market that has potential, but is still vaguely defined and unproven. Why buy when partnering was still a viable strategy?

Goldmacher has a point. For what Salesforce.com paid for Radian6 it could have acquired a bevy of social listening companies. To wit: Kana's purchase of Overtone wasn't material enough to disclose a price tag.

In the end, Salesforce.com's biggest cost for Radian6 may be opportunity costs. By betting big on Radian6, Salesforce.com could miss the big data analytics picture and potentially more impactful acquisitions. Goldmacher argues that social media monitoring is just a small piece of an overall big data analytics issue.

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