WebEx Acquires Intranets.com for $45 million
With Microsoft's acquisition of Groove a few months ago, it was clear that the 800 lbs. gorilla moving into the collaboration market was now also going after the the SMB (Small, Medium Business) market, of which there are 10 million SMBs in the U.S. alone.
About the same time as the Groove acquisition by Microsoft, Webex announced MyWebex PC, which was targeted at individuals and SMBs to get them more familiar with Webex technology and the media tone network. Webex has about 100,000 users signed up for My WebEx PC, but it is not generating much (if any) revenue. It's clear with over 250,000 subscribers that Intranets.com has cracked the code for selling collaboration to SMBs.
It is no surprise that Webex has acquired an asynchronous collaboration vendor like Intranets.com. Intranets has the same business/distribution model as Webex (i.e. ASP)and they will be moved (hosted) on Webex's media tone network. But what is more important is that Intranets.com's seasoned management team (read Rick Faulk and Karen Levitt) have figured out a way to sell to SMB's at the right price point and get good traction in this area. Intranets.com has about 300,000 customers including about 10,000 businesses. Their revenues last year were in the $6-8M range and with 50% growth over the last few years (and expected this year) they were in line to do about $13M this year (making the $45 million acquistion price about 3X+ estimated yearly revenues for 2005). One of the reasons that Intranets.com has been profitable for so many quarters, is that they have figured out how to keep the cost of sale down (the critical factor in selling to SMBs).
In a recent press release the CEO at Intranets said "that I believe this (the merger) will allow Intranets to compete against business models such as: www.ignitetech.com and www.kontiki.com - to allow companies to create and send rich media to employees and partners through the firewall." Does this mean that Webex and Intranets have their sights set on a video or VoIP vendor?
While Microsoft and Webex are focused and fighting it out in the enterprise market. What Intranets brings besides an asynchronous platform (which we use internally here at Collaborative Strategies (we have also used Groove and GroveSite)) is a management team that knows how to successfully sell to the SMB market, and already has embraced the philosophy that Subrah Iyar, the Chairman of Webex talked about "going wide and going deep."
What this means is that Webex realizes that they will have a battle with Microsoft as a horizontal application, and currently MeetingCenter is only providing 60% of Webex revenues, the other 40% is through spin off products like: SalesCenter, TrainingCenter, SupportCenter, etc. We also have seen them recently release an application for the financial services market (which is one of the biggest adopters of collaboration technologies) so they are going after verticals also.
We like the combination of Webex and Intranets, and think it is a good fit functionally as well as businesswise. It gives Intranets the network and marketing clout (money) to look at scaling up their efforts and going after more of the SMB market. They already compete with LiveOffice (www.liveoffice.com) in the SMB for financial services space, and we believe they will move into other verticals (like Webex) over the next year.
In an interesting side note. Intranets.com used to resell Netspoke conferencing services(Netspoke is located right down the street from them), and that generated about 6% of revenues for Intranets.com, but more importantly it allowed them to have a more well rounded collaboration offering.
Because of the Webex acquistion, for the next 60 days current users will be in a transition period where they can use either Netspoke or Webex conferencing services for the same price, however after the 60 day transition period, just Webex conferencing services will be available.
In wondering how Netspoke felt about this, we were surprised to find out that Netspoke had also been acquired (July 27) by Premiere Global Services for $23.2 Million.
One thing for sure, the Collaborative Consolidation that we have been predicting over the last two years is well underway, and should continue unabated until this overcrowd market begins to thin out!
