When the rumors about Salesforce potentially making a bid for Twitter first began to circulate, there were two main rationales to lend it credence.
The first was that Salesforce had made an abortive attempt to buy LinkedIn, losing out to Microsoft which bid $26 billion for the pleasure. The second leads on from the first in the form of an assumption that the value of LinkedIn for Salesforce would have lain in its data and by implication, the same would be true of Twitter.
Wrong, says Salesforce CEO Marc Benioff, that’s not how he looked at LinkedIn at all:
For other companies who are trying to buy assets just for data, that isn’t why we are looking for assets.
The attraction of LinkedIn lay in its financial position, he says, most particularly its deferred revenues, as well as the sudden collapse of its value in January, which created an opportunistic moment that was there to be taken.
Emphasizing that Salesforce hadn’t entered this year intending to do any acquisitions, Benioff argues that it’s essential to seize the day when opportunity knocks. He who hesitates, loses out - and loses out for good:
These are once-in-a-lifetime trades. Once they trade, they’re not going to trade again, so you better be damn sure that it’s not right for you. These are marquee, monopolistic brands that are one-time trades and then they’re gone.
Benioff cites the example of Demandware, acquired by Salesforce for $2.8 billion as the basis of its Commerce Cloud, as a prime case in point:
There are some people who are pissed that they did not get that. We got lucky. I still don’t know how we ended up with it. We were just damn lucky. That is a mission-critical asset, we had to have it.
It was a one-time trade. If you didn’t get that asset, what are you going to buy now? There’s no more assets. And you know how long it’s going to take you to build that? A long time! That’s how I look at these things. Is it a great asset and is it a great price? I viewed LinkedIn that way - I thought it was a great asset at a great price. I was surprised when I read about people who said it was expensive. Bill Gates said it was a great price.
On that occasion though, Salesforce lost out with Benioff publicly voicing his annoyance at the process surrounding Microsoft’s victory:
We wanted [LinkedIn] but we didn’t get it. I don’t know why we didn’t get it. We weren’t included in the process. They were kind of talking to us and they weren’t really talking to us. We don’t know what really happened.
What we do know happened is that the deal further soured the once beautiful friendship between Salesforce and Microsoft, with the two now in a war of words over the latter’s alleged intent to block third party access to LinkedIn data sources in order to boost the prospects of its own CRM and productivity offerings.
Benioff argues that this was not how Salesforce would have behaved:
Microsoft now wants to take that data stream in an inappropriate way and use it as a theoretical proprietary advantage for their customers and for their office productivity applications specifically. That wasn’t our plan. We liked that asset for their deferred revenue. I wasn’t valuing that asset based on the data. I really liked the financial characteristics of the company and that’s why I was willing to go to a higher price. I felt that the asset was undervalued.
Salesforce has now called out to international regulators to look into the alleged anti-competitive aspects of the deal and Microsoft’s supposed intent (which it denies incidentally). Benioff says:
I didn’t expect Microsoft to go, ‘Now look at this, it’s got this jewel. Now we can take this jewel and alter our office productivity suite in a way that no competitor can come in. You can’t combine assets to create barriers to entry - that’s illegal. That’s why we want to flag that to the Federal Trade Commission and European regulators.
He adds that he’s not the only one who thinks that there’s a case to be answered here:
It’s not just us - Oracle’s on board with us, Infor’s on board with us and other companies, who are not ready to come forward, are also on board with us. They completely agree with this, that what [Microsoft] is doing is not cool - or what they say they’re going to do. It’s not done.
As for the supposed appeal of data in the LinkedIn bid and in any putative Twitter offer, Benioff insists that Salesforce is already in charge of its most important data sources and that the rise of AI and machine learning has bolstered its position:
The most valuable data asset that we own is our platform because that holds all our customer data. Our biggest anxiety over the past five years as we saw artificial intelligence and machine intelligence and machine learning emerge, we would ask ourselves, ‘If we can’t see our customers data, then how are we going to apply these algorithms?’. That was quite a big question mark for us.
As we hired new data scientists, they would say, ‘If you can’t show us the data and we can’t normalise it, we can’t do this magic for the customers’. Then we bought some of these [AI] companies, people who had an outsiders mind or a beginners mind came in and said, ‘No, that’s not correct, we can actually take our customers data and through artificial intelligence we can provide intelligence on it without seeing the customer’s information.
This was a huge breakthrough for Salesforce. Up to that point, people felt that if you couldn’t see the data or normalise the data and understand the data, then you couldn’t get the insights or apply the algorithms. We have the data already that we need. We can now operate on that data without interfering with our trust relationship with our customers.
As for those Twitter rumors, Benioff dealt with those - as far as he can - elsewhere, but he does leave a cryptic comment hanging in the air about one day wanting to be able to sit down and explain what the possible appeal of Twitter might be. It’s not the data, he emphasizes, adding that he does look at things differently to other people.
A convincing explanation of the appeal of LinkedIn as a prospect, although I find it hard to believe that, alongside the financials, that the value of that lovely business data didn’t have some allure. The ‘carpe diem’ mantra when it comes to acquisition strategy though is entirely credible and characteristic of Benioff’s personality.