Analysis: Higher Logic’s acquisition of Socious

Last week, we reported that Socious had been acquired by Higher Logic, which recently received a $55M round of private equity funding. Higher Logic co-founder Andy Steggles and I had a chat, and a Q&A from that conversation was posted to this blog.

Since Socious and Higher Logic are the two largest community software vendors in the association market, I thought a little analysis of the deal would be in order. As someone who has followed these companies closely for years, I’ll also opine a bit on the deal and make some predictions.

Here are some of the acquisition’s implications:

1. Higher Logic and Socious were the market leaders. I’ve always described Higher Logic as the 800 Pound Gorilla in the association community business. Higher Logic can now boast close to — perhaps more than — 1,000 clients. Most of them are associations. Combined, Socious and Higher Logic command a huge lead over the next closest competitor focused on the association market, Small World Community from Personify (formerly Small World Labs).
2. Despite speculation that Higher Logic would need to make a hard pivot towards the for-profit market in order to pay back their investors, the Socious acquisition reinforces Higher Logic’s commitment to the association market. However, both companies have respectable portfolios of for-profit clients.
3. Socious and Higher Logic were both usually on the short list for online community acquisitions. Most organizations want bids from three vendors. Now two of those three slots have been reduced to one. This acquisition creates space in the market, which is a big opportunity for another online community vendor to establish a presence in the association sector. Community vendors in the association market I’m expecting to gain a foothold in the market include Breezio and Rasa.io.
4. Higher Logic’s CEO has said that only a small percentage of its client base uses all of its modules, and that the company can grow tremendously by selling more modules to its existing customers. Higher Logic now has another +/- 300 customers to sell other modules to.

Predictions:

1. Both companies are growing rapidly (Socious and Higher Logic have moved into larger offices in the past year or so), but there is going to be some overlap in personnel, and I predict that there will be some reassignments, layoffs, and resignations.
2. The core Socious product will eventually be deprecated, and Socious customers will be moved over to the Higher Logic platform. Despite claims that Higher Logic will support the Socious AMS product, it too will eventually be deprecated. Some customers who use the Socious AMS product will be frustrated that the AMS isn’t getting enhancements and will move to other AMS vendors.

Opinions:

1. I’m surprised that this was Higher Logic’s first investment. I had predicted they would snatch up a social media monitoring/publishing platform; like a small Hootsuite.
2. In the past year, Socious had pivoted to selling its AMS product more aggressively. Customers who purchased Socious recently — primarily for the AMS functionality — are likely to be pissed off.
3. Higher Logic should spin off the Socious AMS module as a separate company.

I may have more to say after speaking with some more Socious customers. Stay tuned.