Cross-posted with Jeremiah Owyang, (Customer Strategy) a fellow founding partner at Altimeter Group
Community Platforms Evolve Into Social Business Category
Having tracked the social business category for some years now, and having watched the category grow, many players have expanded into other niches. At first, the community platform space (e.g. InGage, Jive, KickApps, Lithium, Mzinga, etc.) was insular, focused only on enterprise communities. However, the space has evolved into Social CRM, Application Platforms, Social Media Management Systems, Brand Monitoring, corporate email systems and will eventually morph to focus on VRM and customer experience that’s native to the customer. This evolution may manifest into social, it may play out into mobile, and it may take even radical forms including in store displays advertising.
The Situation – C Round Funding
Jive, who recently raised a $15mm in 2007 has capped off their war chest with a hefty $30mm ‘C round’ for a total of $57.5 million in total. Why this large amount? ‘D rounds’ are virtually non-existent out of Sand Hill road, and if they need investment they’ll have to get from a partner corporation.
- Strengths: Jive has been hailed as a leader in the social software category, (i.e. Forrester Wave and three Gartner Quadrants), and continues to show growth with large clients, claiming sales in the range of “$75,000-$150,000 per customer. Some of those deals include ten – with average selling prices (ASP’s) of $1 million, four of which closed in the last two quarters. While Jive is not yet cash-flow positive, the company has 3,000 customers, 15 million users, and will end the year on a $100 million run-rate” (source). Jive’s recent acquisition of brand monitoring company FiltrBox demonstrates the pre-cursor of SCRM systems. In addition, Jive has formed a variety of strategic partnerships including social business consultants Dachis Group. The team recently hired a new CEO, Tony Zingale, a seasoned leader of Mercury Interactive, where he clinched $1B revenues and led a $5B sale to HP. Last but not least, the company shifted their headquarters from trendy Portland, Oregon to tech (and VC) centric Palo Alto, CA.
- Weaknesses: They’re undergoing a cultural shift from a hip Portland startup, to becoming a tried and true enterprise player. With a new CEO and with a new CMO (Kiker has moved on) to take the helm soon, Jive will have to undergo both an internal mindset change as they shift to battle enterprise players. Also, as Jive takes on larger clients, they risk alienating their small and medium size clients who can’t afford, or can’t scale with Jive’s new value proposition.
- Opportunities: Expect this war chest to be used to bolster the sales and marketing team. C-rounds often focus on getting the company ready for a “material” event. Jive will most likely use this time to build out significant partner channels and business development with enterprise clients. Platform investments should support new partner models that support value added service growth. Expect Jive to focus on bookings and immediate recurring revenue in order to maximize value for a ‘material’ event. Significant acquisitions may come after a material event but not likely at this point in time.
- Threats: Key threats come from larger vendors who may suddenly gain a “social” religion. Jive must transform from dominating the small pond of community platforms to winning the large enterprise. Corporate strategies must prepare the company for a new type of battle in the enterprise application market. Should an Oracle or SAP decide to enter the market, it may make overtures for an acquisition. Salesforce.com and RightNow are the biggest CRM threats as they have integrated with key social business constituents. Chatter for Salesforce.com offers competitive features on an existing footprint of innovative customers. Mainstay social business platform Microsoft Sharepoint can continue to win favor through having a large direct and channel sales force. New threats may come from reemerging vendors such as Broadvision, who bring a pedigree of traditional eBusiness. While Jive is often compared with Lithium, the likely outcome – continued verticalization and increased friction with the larger enterprise software players. CEO Tony Zingale often publicly denounces incumbents for having Social media “bolt on” features and Jive bloggers often throw bombs at the CRM vendors. Expect incumbents to use their existing enterprise footprints, CIO relationships, and direct and channel sales teams to their advantage.