|By Roger Strukhoff||
|February 25, 2011 08:17 AM EST||
Two broad types of business are emerging in the Cloud Era. They follow the traditional, dueling business models found in B2B vs. B2C companies--General Electric selling nuclear power plants vs. Wrigley earning its money a nickel at a time, for example.
Today, it's Salesforce.com and VMWare in the B2B corner, and Facebook representing B2C.
Salesforce.com is on its way to being the first $2 billion Enterprise Cloud Computing company, according to CEO Marc Benioff. Salesforce reported a record revenue for Q4 2010 of $457 million, up 29% year over year.
Benioff pointed out that it took the company a decade to reach its first $1 billion in sales, yet plans to achieve a $2 billion annual run rate less than three years later.
Meanwhile, VMWare reported $2.9 billion in revenue for 2010. About 30% of WMWare's stock is owned by EMC, but it's still an independent company. As most people would consider VMWare an Enterprise Cloud Computing company, perhaps Marc should add the word "application" into his statement about Salesforce.
The Eyes Have It
That aside, probably 80% of the attention given to pure Enterprise Cloud software companies is given to Salesforce and VMWare. Are they really that exciting? One of them simply a modern-day Willy Loman, the other a classic geek. Try to explain what VMWare does to a lay person, and eyes will glaze over quickly. Explain Salesforce, and those eyes will roll.
The two companies have combined annual revenues approaching $5 billion, and a combined worth of about $50 billion. Pretty impressive for companies of this size to be worth 10X their annual revenue in this day and age. Their worth is comparable to the output of a small Latin American or European country.
Compare that Facebook, which has the same valuation with about one-sixth the revenue. Sure, Facebook is not a public company, so its revenue is an estimate and its valuation based solely on recent investors. Those investors are very serious investors, so the crazy valuation number must stand for now.
Look at the Customers
How long will that crazy number stand? Let's take a look at the customer bases.
Salesforce was happy to report that it now has 92,300 customers worldwide, up 27% from a year ago. VMWare reports 190,000 customers, including all Fortune 100 companies, 491 of the Fortune 500, 95 of the German DAX 100, and all of France's CAC 40.
Facebook doesn't care about any of that as it keeps growing steadily beyond the 600 million members it already has in who knows how many countries.
A little fun with numbers shows that Salesforce and VMWare pry an average of about $17,000 from each of their customers, while Facebook yields about $1.33 from each of its members.
The $17,000 sounds low for enterprise software companies, and no doubt reflects a number of small, pilot-project type deals, many of which may have been made to fill out an impressive client roster.
Facebook's buck-plus-change figure is in line with the reported revenue-per-reader of another popular Cloud-era site, the Huffington Post (recently purchased by AOL).
Yesterday and Today
Salesforce and VMWare shouldn't really be compared with one another. But this early in the Cloud Era, they're the standouts. It seemed very odd to compare Microsoft with VisiCalc (let alone IBM) at the dawn of the PC era, too, before it became clear what Redmond really had in mind.
We're at a similar historical point with Cloud today. The consumer businesses behind built behind the Apple iPhone & iPad could eclipse Cloud B2B revenues very soon. Meanwhile, where are all the cool new Cloud B2B companies? (Hint: a lot of them will be at Cloud Expo in New York June 6-9.)
Yet there's something very strange going on today that wasn't part of those early PC days; Facebook earns its revenue through advertising generated by clickthrough rates on the order of 0.05%.
Who knew 30 years ago that some day you could conquer the world by having 99.95% of your potential buyers ignoring what you are selling?
For its part, Microsoft has been competing in both corners of the Cloud-era marketplace, whether promoting MSN and trying to buy Yahoo, developing Azure another, launching Bing, or migrating Office (slowly) to the Cloud. As a social media play, maybe Microsoft Bob can be resurrected as FaceBob some day.
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