Why I love Yammer’s business model… and why it needs to change
The enterprise Twitter clone, Yammer, has a great business model that exploits the desire for grassroots social computing from employees and preys on the security fears of their employers.
The way it works is simple: any employee can sign up to Yammer for free. If they are the first to use their corporate email domain (e.g. acme.com) then they automatically create a private micro-blogging community for their organization. Any subsequent employee who signs up with the same email domain becomes a member of that private community. In fact, they disguise an “invite a colleague” recruitment feature by asking new users to provide the email addresses of people they work with (including their manager).
Even if 10,000 employees sign up, it doesn’t cost a cent. The desire for low-cost social computing from normal employees has been met. It’s a smart move on Yammer’s part, as these employees are unlikely to have the budgets required to pay for the service.
Obviously Yammer isn’t going to get rich doing this. So they’ve come up with a cunning ruse to open the corporate coffers. They’ve worked out the one thing that companies discovering these “unauthorised” communities will pay for: control and ownership. So all the security features (like IP restrictions, password complexity and session management) are “paid for” features that cost the company $1 per user per month. At this point the employer also owns all the updates posted by employees to Yammer. Effectively Yammer is holding employers to ransom: “Your employees are using our system, and we want $1 a month per user to give you control and ownership of the space.”
And that’s why their business model has to change.
Firstly, I doubt that a company with 1,000 employees on Yammer - let alone 10,000 - is going to pay $1 per user a month for this service. Sooner or later Yammer is going to have to introduce volume-based pricing and/or a behind-the-firewall version of Yammer for a one-off fee.
Secondly, the majority of those employees who sign up for Yammer do so out of curiosity or because they’ve received one of the cunningly disguised invitations. Yet the employer still has to pay $1 a month for every member, not just the active ones. I’d like to see Yammer charging based on “active” usage, not total membership.
Thirdly, once they do start paying, the Yammer business model actually discourages companies from encouraging adoption. Let’s say there are 30 members of a Yammer community when the company takes control - that’s $30 a month. It’s in the company’s financial interests to limit the rate of further adoption. If numbers rose to 1,000 say, a hike of $30 to $1,000 would take a lot of explaining to most bean-counters. It will inevitably lead to internal cross-charging for most companies, which will further limit adoption and value. Yammer needs to let companies to put a limit on the number of users in order to limit their monthly budgets.
Don’t get me wrong. I love Yammer and I congratulate them on a very clever business model. But they need to be very careful not to bite the only hand that feeds them.
Niall, great points, I’m banking on the fact that people want an on-premise solution. http://www.broadcastr.net, is an enterprise micro-blogging platform that you can check out in the cloud then purchase as a VM, the vm includes all the cloud test data. Additionally, once in house it will integrate with your existing directory authentication systems for easy of use Single Sign On.