What's Behind Microsoft's Yammer Buy

| About: Microsoft Corporation (MSFT)

Social networking is a feature, like word processing. It's not a place, like Seeking Alpha.com.

That's the take-away from Microsoft's (NASDAQ:MSFT) $1.2 billion purchase of Yammer, which closed today.

The market battle in social networking between Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) and anyone else who comes in should be seen as the equivalent of a "public cloud" market fight, like the one now taking place among Amazon.com (NASDAQ:AMZN), Google, Rackspace (NYSE:RAX) and others.

These sites serve the consumer market. Yammer is not into this space. Yammer is into the business market, which you might compare with private clouds and (since it does interface with other systems) hybrid clouds.

Yammer's technology platform enables real-time engagement like Facebook and Twitter offer, but it really complements Microsoft SharePoint, since that real-time component can now be integrated with other Microsoft software.

In this way companies can experiment with social networking and real-time collaboration in a safe, closed environment. Lots of firms fear their employees' use of social networking, just as they feared their bringing iPads to work, and even cell phones. (I am just old enough to remember when companies had a problem with PCs.) With Microsoft and Yammer, these companies can now channel those social networking energies in a work-safe way.

The hope would be that employees become accustomed to and conversant in social networking norms, with the boss always looking over their shoulder. They can be trained in how they might go elsewhere on the public Web, just as corporate Internet policies allow them limited use of shopping and news services from their desks, but don't let them near porn or cat videos.

Given Microsoft's large Windows Server customer base, this deal becomes dirt cheap. It dramatically increases Yammer's footprint. It's truly a win-win. It's bullish for Microsoft stock, because understand that the profits in the business model mainly come from the business market, not the consumer market.

Getting back to our cloud analogy, businesses are building private and hybrid clouds so they can understand the technology at their own pace, and then moving workloads to the public cloud once they understand the economics, all the costs and all the benefits. This lets them do the same with social.

And I think that over time it will benefit social networking companies of all types, by training the mass market of parents the ways of the social network, making them more comfortable with this and more knowledgeable about what their teenagers are up to.

Until those darned kids come up with something else.

Disclosure: I am long MSFT, GOOG, AMZN.