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UPDATE: Salesforce acquires Buddy Media for $689m

Cloud computing and CRM specialist Salesforce has acquired social media marketing platform Buddy Media for the sum of $689m.

It was revealed last week that Salesforce was readying an $800m bid for Buddy Media, after both companies agreed to terms.

Salesforce will acquire Buddy Media for approximately $467m in cash and $184m in Salesforce.com common stock.

The transaction is expected to be completed during Salesforce.com's fiscal third quarter ending 31 October 2012 and is subject to closing conditions.

Five-year-old Buddy Media chose the offer from Salesforce over a competitive bid from Google, according to people familiar with the matter.

"Buddy Media's mission is to eliminate the current state of anarchy in social marketing," says Buddy Media co-founder and chief executive Michael Lazerow. "With the Salesforce Marketing Cloud, marketers will be able to unify their efforts to better organize their teams, optimise their social programs and deliver real business results." 

Rumours previously suggested that WPP and Facebook were interested in acquiring the company. WPP invested $5m into the company back in 2010 and earlier this month its media buying arm GroupM chose Buddy Media as its preferred global social ad partner.

Buddy Media was thought to be considering an initial public offering (IPO) after it hired former Yahoo executive Dennis Morgan as its chief financial officer, a move that was designed to help the company grow aggressively according to founder Mike Lazerow. Analysts suggest that as Buddy Media’s business model relies heavily on Facebook, the social network’s disappointing debut on the stock market makes this deal with Salesforce a safer move for the social enterprise company.

Buddy Media’s client base includes L’Oréal, HP, Virgin Mobile and Mattel. The company specialises in building stronger social media connections between brands and their followers. It is still evolving its service and added several extra features to its suite in May.

In a funding round last year, investors valued Buddy Media at $500m.

San Francisco-based Salesforce was founded as a company specialising in “software as a service” in 1999, before the widespread popularity of cloud computing. It went public in 2004 raising $110m in its IPO.

David Hing & Jenni Baker, London