Why Salesforce Overpaid For Radian6

As you may have heard, yesterday Salesforce announced the $326 million purchase of social media monitoring company Radian6, the CRM company's largest acquisition to date. While we know that Salesforce has been actively pushing its social strategy with the debut of a Twitter and Facebook-like Chatter and the Service Cloud 3 , $300-million plus is a lot of money for the CRM giant to shell out for a single company. In a press call with Salesforce executives and analysts yesterday, the company's CEO and founder Marc Benioff said that Radian6 currently has a revenue run rate of $35 million and is expected to add $40 to $50 million in revenue to Salesforce's top line this year. At $326 million, Salesforce paid nearly ten times Radian6's revenues, which is rare. So why did Salesforce want Radian6 so badly? First, Salesforce is aggressively pushing a social strategy and it's a dog eat dog world in the social enterprise space with a massive number of companies trying to capture marketshare for social applications. Salesforce is actively marketing Chatter but the Yammer and Jive competitor isn't a clear cut leader in the space. Radian6 boosts the company's footprint in social, and provides an established set of well-known clients, such as Dell, GE, Kodak and UPS.