Salesforce's biggest-ever deal follows rival Oracle Corp.'s acquisition last week of social media marketing company Vitrue. Industry website TechCrunch said the Vitrue deal was for $300 million.

Buddy Media, which allows customers to publish content and measure the effectiveness of social media marketing programs, serves Ford Motor Co., Hewlett-Packard Co., L'Oreal SA and Mattel Inc.

The move is part of a larger effort at Salesforce, which provides online sales management tools, to court companies interested in marketing on social media platforms.

Buddy Media is the latest piece of that set and will merge with Salesforce's Radian6, a business that helps clients track customer trends on social media sites.

"We see there is a huge demand for one integrated marketing platform," said Salesforce Chief Operating Officer George Hu. "We think this puts in a pole position in the marketing space."

Indeed, Salesforce is eyeing a popular target as advertisers and businesses scramble to gain a better understanding of social media and how it can fit into marketing plans.

Global Equities Research analyst Trip Chowdhry believes the competition between Salesforce and Oracle for marketers' mindshare is going to be intense.

"Investors may need to accept the fact that starting June 6th, with the entry of Oracle into SaaS (Software-as-a-Service), the Industry Structure will be altered," Chowdhry wrote in a note, adding he believes Salesforce's market position will start gradually to erode.

The five-year-old Buddy Media, co-founded by Michael Lazerow, its CEO, chose Salesforce's offer over Google Inc.'s, the All Things Digital website reported last week.

In a blog post about the transaction, Lazerow said the deal is the largest acquisition of a New York City tech company in the last five years.

Lazerow has co-founded four other Internet-based media companies. One was later bought by CBS Corp. and another by Time Warner Inc.

Buddy Media's investors include global advertisement company WPP Plc, Japan's SoftBank Capital, two founders of Angel Investors LP, Zynga Inc.'s CEO, Mark Pincus, and venture capitalist Peter Thiel.

"While the $689 million price tag ... is not cheap, we note that it values the company roughly in line with other recent deals in the social media marketing space," Evercore Partners analyst Kirk Materne wrote in a research note.

Materne, who has an "overweight" rating on Salesforce's stock, said the near-term hit to margins is worth the long-term benefit of building a premiere social media marketing platform.

Salesforce cut its adjusted full-year profit to $1.45 to $1.49 per share, from $1.60 to $1.63 per share, to factor in charges from the deal.

The company raised its revenue outlook to $2.99 billion to $3.03 billion, from $2.97 billion to $3.00 billion.

The transaction is for about $467 million in cash, $184 million in stock and $38 million invested Salesforce options and restricted stock units.

The deal is expected to be completed during the third quarter, the company said in a statement.

Shares of Salesforce were down 2 percent at $128.43 on Monday afternoon on the New York Stock Exchange. The shares have risen by 27 percent since the start of the year.