What’s Salesforce, and how could it be worth $49B?

Dan Weissmann May 6, 2015
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What’s Salesforce, and how could it be worth $49B?

Dan Weissmann May 6, 2015
HTML EMBED:
COPY

Wall Street has been buzzing about the possibility of Microsoft offering to buy Salesforce.com Inc. Or maybe Oracle will bid. Or Google. Only very big outfits need apply, since the market considers Salesforce a $49 billion company.

Which raises a couple of questions: First, why would anyone pay that kind of money for a company that doesn’t make a profit? And second: What does Salesforce do, anyway? 

Salesforce offers what it calls “customer relationship management” tools. Basically, a master database with all of a worker’s contacts. Or a whole team’s contacts. Or all the contacts across an entire business  and the progress of every sale and contract.

The people who like Salesforce, really like it.

“I tell people it’s like a cult or a religion,” says Gabe Arnold, founder of marketing-tech consultancy tEkk3. He also runs a LinkedIn group called SalesForce Power Users, with more than 30,000 members. “Salesforce users are extremely loyal,” he says.

A combination of a high price tag and a big learning curve are part of what makes people loyal, Arnold says. Once a user invests the money to license it and the time to implement it, they’re hooked.

The company has grown quickly, largely by buying smaller companies and integrating itself into more functions. Revenues have more than doubled since 2012, even though the company hasn’t seen a profit.

In the company’s dream scenario, software like Salesforce ties together sales and marketing. 

Brian Wieser, an analyst at Pivotal Research, describes the “big data” world that Salesforce hopes to serve.

“At some point in the near future,” he says, “the Chief Marketing Officer will control more of the technology budget than the Chief Technology Officer or the Chief Information Officer.”

Wieser says that’s a potential trillion-dollar market for a company like Salesforce. He mentions IBM, Adobe and Oracle as likely competitors.

That’s the dream. Andrew Bartels from Forrester Research, thinks expanding into marketing puts Salesforce up against established competitors. He lays out another possible scenario.

“At a certain point in time,” he says, “Salesforce’s revenues will grow more slowly. It simply can’t sustain 38 percent revenue growth as it gets bigger and bigger.”

At that point, he says, shareholders will start to want profits.

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