Customer relationship management firm Salesforce.com Inc. (NYSE: CRM) has signed a definitive agreement to acquire privately held Buddy Media for approximately $689 million in cash and stock. The transaction is expected to close by the end of Salesforce’s third quarter in October.
The announcement contains some interesting tidbits. For example, the CEO of Salesforce noted:
With CMOs [chief marketing officers] surpassing CIOs in spend on technology within the next five years, our Marketing Cloud leadership will allow us to capitalize on this massive opportunity.
Can it be true that more money will be spent on marketing technology than on IT? And if it is true, will the companies get their money’s worth? Reasonable questions given that the world’s premier social network, Facebook Inc. (NASDAQ: FB), lost the advertising dollars (admittedly not many dollars) of General Motors Co. (NYSE: GM) shortly before Facebook’s IPO.
Buddy Media provides tools to create and manage Facebook’s “likes”, Twitter’s Tweets, and more customer interaction with brands on other social networks like LinkedIn Corp.’s (NYSE: LNKD) and YouTube from Google Inc. (NASDAQ: GOOG). But one thing that GM’s dumping of Facebook advertising indicates is that social network users are not particularly susceptible to advertising.
Salesforce is not the only company making big bets on monetizing social networks. Oracle Corp. (NASDAQ: ORCL) spent $300 million several days ago to acquire Vitrue, another social media marketing outfit, after also considering a purchase of Buddy Media.
Google’s search advertising model is a natural winner. A user is searching for something tangible, and many times it’s something to purchase. Facebook users are looking for a good time — they’re not looking at the advertising with the intent of taking action. This is not to say that Facebook and the others won’t eventually figure out how to make ads work. But monetizing “likes” and tweets is a lot harder than turning searches into cash.
Another Salesforce executive had this comment on the Buddy Media acquisition:
[W]e are doubling down on the Salesforce Marketing Cloud to provide CMOs with the ability to manage the entire social marketing lifecycle.
Managing the “social marketing lifecycle” is one thing; making money from it is quite another.
Salesforce’s shares are down about -2% at $128.19 in pre-market activity this morning, in a 52-week range of $94.09-$164.75.