Salesforce Snaps up Radian6

Posted: March 30, 2011 in CRM, Technology
Tags: ,

Salesforce.com announced a short time ago that it acquired Radian6 for $326 million.  The deal has terms and you can find them here.  The big questions about the acquisition are why and what is the future likely to be.

First the why.  The easy answer is that it can.  Salesforce is generating cash and it is smartly spending its cash on valuable assets in a down market when asset prices are relatively low.  The IPO market has been in the doldrums for several years and emerging companies have fewer options for liquidity events.

Ten years ago companies used their stock as if it was cash and bought each other up.  That’s not so much the case today though the Radian6 deal included cash and a bolus of stock.  But the major point is this deal looks a lot like an IPO-sized payday for Radian6 without the lawyers and the Wall Street leeches attached.

So it was a good move for Radian6 which now joins a stable of hot divisions in what is arguably the hottest company in SaaS or any other form of corporate computing.  Now, what’s the future going to be like?

Here it’s always good to go back to root causes or first principals and for me that’s economics.  Don’t confuse economics with finance, they are very different.  The economic drivers I see running the market include a lot of things that will continue to make reaching out to customers difficult in the years ahead.  High transportation costs will limit business travel, declining first world demographics result in slackening demand.  Rising demographics in the emerging world markets will increase demand there but, really, what does a first world vendor know about emerging markets?  Not enough.

The picture I am presented with is a market where it’s harder to know much about the customer from the usual sources.  Increasingly the marketplace is a blackbox that we must use sophisticated analytic tools to ponder.  But before you can use analytics, you need to capture a lot of data for analysis.

A study released by Harvard Business Review last summer, “The New Conversation: Taking Social Media from Talk to Action,” said among many things that “Three-quarters (75%) of the companies in the survey said they did not know where their most valuable customers were talking about them.”  Ouch!

Another study, “Stop Trying to Delight Your Customers,” said that unhappy customers were twice as likely to trash a vendor than happy customers were likely to praise it.  From the study:

  • 25% of customers are likely to say something positive about their customer service experience
  • 65% are likely to speak negatively
  • 23% of customers who had a positive service interaction told 10 or more people about it
  • 48% of customers who had negative experiences told 10 or more others

In that environment, it makes sense to play good defense.  Salesforce already has some nice products like the Service Cloud that can track and help companies respond to customers but that’s more or less in the moment.  Some capacity to perform longitudinal analysis of customer sentiment also makes sense and I think that’s part of what Radian6 brings to Salesforce.

So Salesforce continues to consolidate by bringing good ideas into the fold.  I think they are building a company and a set of offerings for the long term, at least as I see it.  Investors and fans should be happy.

So, what did you think?

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