Radian6 Sells for 10X Revenues to Salesforce

There's over 100 tools available to measure or monitor social media traffic, but ask the average marketing pro for a product by name and they're most likely to mention “Radian6.” Whatever you think of their products – and there are detractors – the Canadian company has done an undeniably phenomenal job at marketing itself.

This week, we learned that Salesforce has acquired them for $326M in cash, plus $50M is stock. In interviews, Salesforce CEO Marc Benioff claimed Radian6 has annual revenues of about $35M, so he paid a handsome 10X multiple. Why so much, and why now?

Despite the cruddy economy, there's a nascent bubble emerging in social media-focused companies. Evaluations are skyrocketing even for start-ups unencumbered by income of any kind. Radian6 is on the peripherary of this market, but no doubt the evaluation reflected some of this hype.

Second, Radian6 has attracted a large pool of the kind of customers attracted to Salesforce's core CRM technology. At between $400 and $600 per month, Radian6 was priced such that SMBs could buy-in. The company also did a great job at selling through influential intermediaries – advertising and PR agencies.

Finally, the company ate its own dog food. The social media outfit worked the social media world tirelessly. Anyone remotely connected to their world, even lowly Uninfluentials like me, have been contacted by them.

Did Salesforce pay too much? Maybe. Certainly the hopes of many competitors will have been raised, and rightly so: expect more consolidation over coming months. Arguably there's also a new opportunity for these other companies to take up the position Radian6 held, and become the “leading independent” in the category. For sure, this is an early-stage market. Radian6 is a good company, but there's plenty of room to improve on their technology, and I speak from experience.