With all the excitement around Enterprise 2.0 and the use of social software in the enterprise, vendors from several corners are converging. There are providers with consumer services going after the enterprise market, best-of-breed enterprise software providers with a focus on blogs or wikis, and large enterprise vendors adding blog and wiki features to larger suites. Given this breadth, we can't cover all possible contenders here, but will look at some likely targets and acquirers.
The enterprise market for blogging and wiki software is still immature, with most enterprises still in the very early stages of exploration and adoption. But it's still difficult to envision a market for stand-alone enterprise blog and wiki tools two years from now. Blog and wiki features are turning up everywhere, particularly in larger collaboration suites and content management systems. Most notably, IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT) have entered the market. This complicates things for the smaller vendors that have built businesses over the last three to five years with blogging and wiki software and services for the enterprise.
Generally, the 1.0 features being included in suite products from larger vendors do not match what can be found in best-of-breed products. But that tends not to matter much long term. Large enterprise customers are most comfortable with existing vendor relationships and vendors they know and trust.
Microsoft Office SharePoint Server 2007 is the real game-changer here. In this version, Microsoft has added some blog and wiki capabilities. The capabilities are basic but enough to have many organizations stuck in their tracks as they decide whether to work with what they already have in SharePoint, work with another provider or wait for Microsoft to beef it up. This indecision is already affecting buying conditions for smaller blog and wiki providers.
Some smaller vendors are looking to expand beyond the area they started in (i.e., blogs or wikis) to broader collaboration, and we may see some minor M&A along these lines within this group. Others are taking the best-of-breed approach and working on integrations with SharePoint. This can work for a while and can alleviate some customer concerns when customers want to use both products, at least until Microsoft builds out its own capabilities. But there's little doubt that some of the current batch of best-of-breed providers will be looking for an exit and will be picked up to round out the emerging social software portfolios of other large vendors.
Past M&A activity
Google's (Nasdaq: GOOG) October 2006 acquisition of JotSpot for $65m is probably the most relevant to date in the enterprise market. JotSpot had hosted and appliance-based enterprise wiki products. Google announced at the time of the acquisition that it would run JotSpot as a free service, much like Blogger, but it has yet to resume or relaunch the JotSpot service.
Google also bought Pyra Labs, parent company of Blogger, in February 2003, but this lies more accurately in the consumer market than in the enterprise. Google could easily turn some of this into a hosted blogging service for the enterprise as part of Google Apps, but hasn't done so yet.
Six Apart has made a few acquisitions in the blogging realm. It bought Rojo Networks for $450,000 in September 2006. Prior to that, Six Apart acquired SplashBlog in March 2006 and LiveJournal in January 2005, both for undisclosed sums. These were all more immediately relevant to Six Apart's consumer services, but SplashBlog's mobile technology has some use in the enterprise.
The fact that blogging and wiki features are turning up in many products and there hasn't been much M&A activity in these areas to date highlights the fact that blogs and wikis just aren't all that difficult to build. Open source tools abound and they both leverage basic principles in content management. So it's difficult to say what exactly the future holds for the current best-of-breed vendors and what sort of valuations they might be able to capture. We believe acquisitions will be about installed base, market presence/'2.0' credibility and expertise more than technology.
In most cases, the lines between wiki and blogging software are blurring and a number of vendors are doing both. But there are a few that remain focused on one area or the other.
Six Apart has a high profile in blogging on both the consumer and enterprise fronts, where its revenue is fairly evenly split. Movable Type, its blogging product for the enterprise, runs some of the largest corporate blogs (internally and externally) on the Web. Six Apart has received a total of $23m in three venture rounds. It may have a revenue stream that is diversified enough with both enterprise and consumer products and services to continue to build a business independently for a while or even try for an IPO. It is already moving into managing other types of website content beyond blogs.
On the wiki side, Atlassian Software Systems has about 2,000 wiki customers and has no venture backing, direct sales force or marketing organization. It hasn't done this all on the back of its wiki product though, as its bug-tracking tool Jira accounts for approximately 60% of the company's revenue, which is about $17m for the fiscal year ending June 2007.
Atlassian should be particularly attractive to IBM, BEA Systems (Nasdaq: BEAS) or Oracle (Nasdaq: ORCL) (IBM and BEA are also Atlassian customers), which have hands in both Java development and collaboration, although all three of these are currently trying to build out their own wikis. Because of Jira, Atlassian isn't as dependent on its wiki business (as compared to Socialtext), which gives it more of a runway.
It also wouldn't be surprising to see Atlassian make small acquisitions to expand its own portfolio. It's not new to acquisitions, as it bought Authentisoft for single sign-on in September 2006.
Socialtext, the other pure wiki vendor of any size, has taken approximately $7.6m in funding so far, with another $3.5m expected as part of its series C round. It's difficult to estimate the company's revenue as it is tight with its customer numbers. We estimate about 600 paying customers, but some unknown percentage of that group probably pays as little as $100 per month, while others run to $20,000 per year. The Socialtext wiki is definitely an improvement over an open source tool like MediaWiki or the wiki features in SharePoint, but probably not enough of an improvement to build a long-term business.
There are other wiki vendors like MindTouch and eTouch Systems, but these don't have the number of customers that Socialtext and Atlassian do, making their futures even less clear.
There is an increasing number of vendors that meld blogs, wikis and other types of social or collaborative software. Traction Software, founded in 1996, was probably an even earlier innovator than Six Apart in the area of blogs, but with a much lower profile and with a primary focus on internal collaboration. iUpload is similar but with more of a focus on hosted external blogs. Either could be good technology buys; neither has a huge customer base, but they're not green startups either. Blogtronix is also in this market, although it comes from the consumer world with a more recent entry (August 2006) into the enterprise market.
Jive Software is an example of a vendor pushing into the area of collaboration suites, with its new Clearspace product. Jive comes from a background in high-end forum software where it has about 1,600 customers, including large tech companies like SAP (NYSE: SAP) and Oracle. This should be an attractive business to an acquirer. It is harder to envision Jive making a go of it with a suite given the competitive situation, but the technology Jive has built out in Clearspace should make the company more attractive.
Source: Vendors and The 451 Group estimates (*Note: 2006 calendar year revenues are based on The 451 Group estimates; actual fiscal year-ends may vary.)
With the hubbub surrounding Enterprise 2.0, the number of vendors clamoring for a piece of the action is large. Acquirers could come from surprising corners – Cisco Systems' (Nasdaq: CSCO) recent acquisitions of Five Across Inc and the assets of Utah Street Networks in the social networking space are case in point. For vendors like Six Apart that have a strong consumer play, potential acquirers could come from well beyond the world of enterprise software.
Blogging and wiki software is generally more mature than other tools in the social software bucket, like social networking, shared bookmarking or RSS aggregation servers. With the large platform providers surprisingly active already in social software, particularly with blogs and wikis, they seem more likely to look to other areas for acquisition, like RSS aggregation.
Microsoft is a good example. It has basic blog and wiki capabilities in SharePoint 2007, and while they don't compare to best-of-breed products, they are enough to mark the boxes on a checklist. It seems unlikely that Microsoft will add more blog or wiki features via acquisition. RSS management seems a more likely area for Microsoft to invest in by acquisition, with NewsGator Technologies as a primary target. For blogs and wikis, IBM and Google also fall into the category of 'not likely' given existing products and past acquisitions.
We believe Oracle seems the most likely acquirer. Oracle has an OEM of Jive Forums in its new portal/wiki product WebCenter and Oracle seems a logical home for Jive as Oracle looks to build out its own collaboration capabilities. Atlassian could be a good fit as well, with its focus on both collaboration and development tools.
Similarly, SAP is likely to be shopping. SAP is also a Jive customer and a big user of Atlassian Confluence. And it is behind where IBM and Microsoft are in terms of the collaboration market generally and social software specifically. It has perhaps the most to gain by picking up a solid best-of-breed player.
Cisco has also made it clear that it will invest further in collaborative applications, following its $3.2bn acquisition of WebEx in March. For Cisco, acquiring vendors with a strong presence on the user desktop will be imperative if it is to transition from a pure infrastructure provider. Atlassian could fit here, and Cisco is a large Atlassian Confluence customer, although it's not clear that Cisco would want the Jira business. Other possibilities include Socialtext or Six Apart.
There are other potential acquirers, beyond the usual suspects. One of several content management vendors, including Vignette (Nasdaq: VIGN), Interwoven (Nasdaq: IWOV), and Day Software, could try to make a bigger play in social software via acquisition. It also seems likely that Salesforce.com (NYSE: CRM) will make another move similar to its acquisition of content management vendor Koral in April. Salesforce.com could well go for a collaboration service targeted at the SMB market, like 37signals or Central Desktop, which were not covered as part of this report.