Ecommerce Guide

Adobe Buys Magento for $1.68 Billion

Adobe have today announced they’re acquiring Magento for $1.68 billion. Brad Rencher, Adobe’s Executive VP of Adobe Digital Marketing business, announced the purchase over on Twitter, and via a blog post:

“Combined with Adobe Experience Cloud, the Magento Commerce Cloud will bring digital commerce, order management and business intelligence to enable both B2B and B2C shopping experiences across the customer journey.”

This is good news for Adobe, and fairly good news for Magento who were on a fairly strange path, but brings a little uncertainty to Magento customers in the short term. Switching from Permira Holdings LLP, the private equity firm who picked up Magento from Ebay, to Adobe means some customers may wonder whether they’ll be locked into using Adobe’s marketing cloud at some stage in the future.

Adobe’s past experience

Adobe have of course done this before: They purchased Omniture, instantly jumping them from a pure ‘desktop creative software’ business to a big player in the digital marketing business. Now they’re obviously taking the bet they can do the same with a purer commerce platform.

This does of course also offer obvious ‘synergies’ from a business function point of view: Adobe has a very large sales & marketing operation, culminating each year in their ‘Summit’ conference, bringing together 12,000 marketers who could just as easily be learning about ecommerce product updates as they could digital marketing product updates.

Magento’s strange path

At one time, Magento was the go-to platform for any ecommerce business looking to replatform. Over the last 5 years they’ve given that position away to IBM and Oracle at the very top end of the market, Salesforce at the upper-mid, and Shopify have eaten their way up and up from micro to small to medium businesses.

The comparison with Shopify is interesting: At one stage, Magento had a small business flavour called ‘Magento Go’. Ebay (who owned Magento at the time) made the odd decision to hand all those small business customers over to BigCommerce back in 2014. At that stage Shopify was a fairly capable platform, but still pretty niche. Today Shopify’s market cap is $15.1 billion, or roughly 10x the amount Magento just sold for. The news gave Shopify a little shock: Shares dropped roughly 5%, but we’d expect in reality Magento stick a little higher up the chain for the next couple of years.

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Magento are in the somewhat odd position of having over 650,000 websites sat on their technology, but only 60,000 of those have switched up to the latest version (‘Magento 2’) according to BuiltWith, the scraper who index the technology platforms behind millions of websites. Notably the first 6 months post launch of Magento 2 was a period full of horror stories, though it seems to have found its feet latterly and several very well regarded ecommerce businesses sit on top of the platform.

Why would Adobe do this?

For Adobe it makes perfect sense when you look at this diagram:

At the top right there, Adobe sit there competing with companies offering full-featured ecommerce platforms as part of their main offering. If you’re a top end Adobe customer, IBM, Oracle, and of course Salesforce’s people will be on to you every quarter to try and convert you across to their platforms, each of which now centres around a fully featured online shopping platform.

Equally, if you look at Adobe’s Marketing Cloud product suite, it’s fairly easy to answer the question “What’s missing from this?” with “An ecommerce solution like Magento”:

 

Creative + Performance: Interesting possibilities

Whereas most of the major Marketing/Commerce Cloud providers focus the bulk of their efforts on performance marketing and direct commerce, and more ‘creative’ platforms such as SiteCore, Umbraco, Drupal are somewhat lacking on the commerce side of things, a combination of the Adobe cloud & Magento offers the opportunity for a platform to marry the commercial and creative sides of marketing and retail in a way that offers more than the sum of the two separate platforms.

If they get that right it firstly offers a massively attractive story for both existing online retailers, and for FMCG and manufacturing businesses for whom ‘direct to consumer’ is an ever creeping buzzword, and more importantly it may offer better experience for end customers, for many of whom online shopping is entertainment as much as it is product consumption.

We look forward to updates over the coming weeks.

Karen Bridale

Karen Bridale

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