Salesforce.com Snaps Up Assistly in Race to Dominate Customer Service Technology

9/21/11Follow @wroush

Salesforce.com, the San Francisco-based cloud business services giant, announced today that it has acquired Assistly, a two-year-old startup focusing on technology that helps companies track complaints and other customer feedback on social media channels such as Facebook, Twitter, Web chat, and e-mail. Salesforce.com (NYSE: CRM) said it paid $50 million for Assistly, net of cash; that translates into a handsome and swift exit for Assistly investors Bullpen Capital, Index Ventures, Social Leverage, True Ventures, and individual investor Kenny Van Zant, who had collectively put just over $5 million into the company. Salesforce.com itself was also an investor in Assistly.

Xconomy profiled Assistly this July and later took a close look at its switch to a freemium business model. It’s one of a growing number of companies competing in the area of social customer relationship management or social CRM, where Salesforce is a come-from behind player. The SaaS giant is known best for its salesforce automation software, but has snapped up a number of social software companies recently, including social sales contact manager Jigsaw and social media monitoring startup Radian6.

Assistly—which has roughly 1,000 customers, including many Web and mobile startups such as Instagram, Klout, One Kings Lane, Spotify and Square—designed its freemium cloud-based software so that any company can sign up to start monitoring social-media conversations about its brand in a matter of minutes. Salesforce.com emphasized this ease of use in its announcement about the acquisition. Marc Benioff, Salesforce.com’s chairman and CEO, said that the purchase of Assistly “doubles down” on the company’s efforts to democratize enterprise cloud applications by “putting us at the heart of the new trend of customer service help desk applications that have instant sign-up and zero-touch onboarding.”

Alex Bard, Assistly’s co-founder and CEO, was predictably upbeat about the acquisition, saying it will help put the startup’s technology in front of more business customers. “We started Assistly with the goal of bringing awesomely responsive customer support tools to the millions of small businesses struggling to serve customers in today’s social world,” Bard said in the press release about the acquisition. “As part of Salesforce.com and the Service Cloud family, Assistly can continue to deliver and improve one of the world’s most-innovative customer-service applications. For our customers, this will be an unbeatable combination.” (We’ve reached out to Bard for fresh comment and will let you know as soon as he responds.)

Phil Black, a partner at True Ventures who oversaw the firm’s investment in Assistly, also seemed happy about the news. “It was a great outcome for all involved,” Black told Xconomy. “It is a natural acquisition for Salesforce and they love the product. It allows for Salesforce to go after the small and medium size businesses with a product and pricing offering that is tailor-made for that segment. I have enjoyed my time working with Alex and the other founders. It has been a privilege for True Ventures to be an Assistly investor from the earliest days of company formation.”

Salesforce.com said Assistly will be added to its “Service Cloud” family of products, which includes a Facebook- and Yammer-like enterprise social networking tool called Chatter, customer portal and live agent software, and other components. But it remains to be seen exactly how Assistly’s tools for monitoring conversations on Facebook, Twitter, and other social media channels will be integrated, if at all, with these existing CRM tools. Research firm Gartner has called Salesforce.com one of the leaders in social CRM, but has also criticized the firm for failing to combine all of the technologies it has acquired into a coherent offering. “The exuberance in buying companies isn’t being matched by a road map and vision for Social CRM as a suite of functionality,” Gartner analysts wrote in their 2011 “Magic Quadrant for Social CRM” report.

Salesforce said during an investor conference call this afternoon that it plans to retain “essentially all” of Assistly’s employees.

Assistly CEO Bard and co-founders Gary Benitt (who is chief operating officer), Brad Birnbaum (chief technology officer), and Jeremy Suriel (chief architect) have made something of a specialty of building software startups—including two customer-support startups—and flipping them to larger acquirers. The foursome founded eShare Technology in 1996 and sold it to Melita in 1999. They started eAssist Global Solutions in 1999 and sold it to Talisma in 2004. They founded Flash-widgets startup Goowy Media in 2004 and sold it to AOL in 2008. But Assistly marks their quickest exit yet—just 24 months from founding to acquisition.

It’s clear that Bard and his colleagues have been looking at Salesforce as a partner and potential buyer for some time. “I think there are a handful of potential acquirers and Salesforce.com is certainly one of that handful,” Bard told me in a May 2011 interview. “They are arguably the leading SaaS B2B platform on the planet, and they are hugely progressive in how they think about providing services to businesses. Our technology is very complementary to what Salesforce does. They have gone a bit more up-market, and they have this pretty significant area where we can come in and drive lots of value.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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