Enterprise

How Salesforce Tames Twitter for Big Business


(Updates fifth paragraph to add additional context before a quote.)

In May, Angela Ahrendts, the chief executive officer of Burberry, met with Salesforce.com (CRM) CEO Marc Benioff in Northern California’s Half Moon Bay. During their meeting, Benioff grabbed a hotel notepad and sketched out ideas for how Salesforce could help Burberry harness the excitement around social media sites to boost sales and customer loyalty. Then he took out his iPad, snapped a photo of his handiwork, and, using Salesforce’s own social networking technology, called Chatter, sent it to a group of his executives. Within 10 minutes they were responding with their own ideas. Ahrendts was impressed. “We want to get [Burberry] globally connected after 155 years,” she says.

Many big businesses have been slow to experiment with social media, a freewheeling realm where they can’t easily control the conversation. At Salesforce’s annual Dreamforce conference in San Francisco on Aug. 31, Benioff will explain why his customers should go social—and let Salesforce help them. The pitch, in short, is that while consumers are online shopping, trading product tips, and discussing their vacations on Facebook, Twitter, or elsewhere, Salesforce software can help companies understand and profit from those desires and complaints. Bank of America (BAC), for instance, is already using Salesforce software to respond to customers on Twitter. “Businesses need to become social enterprises,” says Benioff. “This is more than just websites. Here’s how to make your customers your friends.”

Salesforce’s main business—selling Web-based programs to track sales leads, project revenue, and help call-center reps deal with problems—is still growing at 35 percent annually, and the company is on track for at least $2.2 billion in sales this year. But Benioff says customers have been asking for better ways to respond to the explosive growth of social media. Benioff plans to use the conference to introduce a newer, higher-priced option for its “Winter ’12” software, which will let sales managers monitor what’s being said about their company and its products on Facebook, Twitter, and LinkedIn. A new version of Chatter, Salesforce’s technology for creating secure social networks, will loop customers into Facebook-style discussions and let them share documents and slides. Toyota Motor (TM) is using it to create a social network that connects dealers with drivers, helping them to track maintenance and repairs, among other things. Companies including PepsiCo’s (PEP) Gatorade, Walt Disney (DIS), KLM Royal Dutch Airlines (AFLYY), and L’Oréal (LRLCF) have also signed up for some of Salesforce’s new social media offerings.

Benioff says the social media push will help Salesforce nearly quintuple annual sales, to $10 billion, though he sets no date for that goal. Wall Street is optimistic. Today the stock is trading at 821 times last year’s earnings, 6.6 times the tech industry average, according to Bloomberg data. This despite the fact that Salesforce earned just $43.1 million in the second quarter—and actually suffered a small loss if options and other expenses are included. Next quarter, analysts expect the company to lose $6.5 million, in part because of hiring and acquisition expenses. In May, Salesforce paid $340 million for Radian6, which makes software to monitor social media conversations (and is now a part of the Winter ’12 offering). Meanwhile, early social media initiatives aren’t exactly raking in big bucks. Salesforce had to cut the price of the first iteration of Chatter from $50 to $15 per user per month, says Benioff. “The bear story is they’re spending money somewhat like drunken sailors,” says Brent Thill, an analyst at UBS (UBS) who nonetheless rates Salesforce a “buy,” in part because of the social media efforts.

As Salesforce’s customers experiment with social media tools, they’ll need to hire programmers to customize the company’s offerings. Salesforce’s first attempt at creating developer-friendly tools, a programming language called Apex, didn’t find many fans, especially among professional Web developers. “None of those developers wanted anything to do with the platform,” says Scott Raney, a partner at Redpoint Ventures. His firm invested in Heroku, a maker of software tools, which Salesforce bought last year for $212 million.

The Heroku acquisition is part of a broader strategy to do more to attract outside developers. At Dreamforce, Benioff will announce a broad array of new tools geared to the modern programmer. Salesforce has also rewritten its mobile technology using a new Web standard, HTML5, so developers for any platform—whether it’s Apple’s (AAPL) iOS or Google’s (GOOG) Android—can easily design applications that work with it. Medical device maker Zimmer Holdings (ZMH) used Salesforce tools to build an iPad app for its 1,200 salespeople. “Everything you’re doing in that app is Salesforce except the look and feel,” says Don Lamping, associate surgeon communications director.

Benioff’s bet is that companies that embrace social media and mobile computing will get closer to their customers—and those that don’t will get left behind. “It’s a true bifurcation,” he says. “For consumers it’s a whirlwind. For enterprises it’s a challenge and an opportunity.”

The bottom line: CEO Benioff hopes to quintuple revenue, to $10 billion, in part by embracing social media. Early efforts have had mixed results.

Aaron_ricadela_75x75
Ricadela is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.

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