Quick Take – Adobe Buying Magento

June 1, 2018

You might have heard this week that Adobe is buying Magento for $1.7 billion. Though if you haven’t been following Adobe, it’s possible you weren’t aware they’ve expanded their product and service offering from creative tools (Photoshop, Illustrator, Acrobat) to marketing solutions. Magento, an open-source e-commerce software platform, was first released in 2008, bought by eBay in 2011, then spun out to a private equity firm in 2015.

Most marketing teams now own the overall customer experience which — for most retailers — includes buying goods and services both online and offline. Prior to the Magento acquisition, Adobe was not able to provide this capability in house.

Marketing arms race

Adobe, Salesforce, Oracle and IBM have become engaged in something akin to an arms race in building out end-to-end solutions for marketers.

Adobe entered this marketing tech space starting with their acquisition of Omniture in 2009, when it was serving creative professionals and content creators. Reporting and analytics around content was a missing piece, e.g., how many people are viewing specific content, how many times something was viewed, how much time was spent, etc. Since buying Omniture, Adobe has purchased in both the ad tech and marketing tech spaces, acquiring businesses including Day Software, Neolane, Demdex, Efficient Frontier, TubeMogul and now Magento.

Luma Partners — a strategic advisory firm focused on media and marketing — believes big data is now critical to marketers, the glue that ties everything together. And data-driven marketing is the basis for marketers to deliver more revenue at the lowest cost. It is critical to all marketing initiatives, e.g., predictive analytics, identity management, personalization, content marketing, lead gen, etc.

Why you should care

Adobe’s acquisition of Magento puts marketers in an enviable position, albeit a potentially infuriating situation. Marketers rather than IT teams now control the budg-ets. And companies like Adobe want to better serve marketers. But with the rapid pace of acquisition and integration, it is increasingly difficult to understand what is as-pirational versus functional, proven and effective within any given solution set. Be-cause of this arms race, we don’t always see potential issues with technology integration. The complete marketing stack is great in theory — but it can also end up being very confusing for end-users.

For others, this acquisition is an important reminder that:

  • We need to be questioning whether our solutions are serving the full needs of our customer.
  • The answer to the question of whether we are moving fast enough is always “no.”
  • We must remain open about what (as a company or brand) we can be with an “and” mentality (inclusivity) — as Carol Spieckman has noted that the answer of whether it is “core or more;” it is always more, more, more. We must build on and expand our services and solutions – multi-format, multi-brand, etc.
  • The role of the marketer has fundamentally changed to that of an orchestrator/conductor that pulls together technologists, analysts and strategists in an effort to better understand and create the best customer experience.

A word of caution on high-tech M&A

Adobe bought Macromedia for $3.4 billion in 2005. In retrospect, the acquisition never paid off due to the fate of Flash. Early on, YouTube used Flash to play videos. When they switched to HTML5, it marked the beginning of the end for Flash. And Apple never allowed Flash on the iPhone. Steve Jobs published an open letter in 2010 about how Flash had flaws, was not open, drained the battery, and that “Flash was designed for PCs using mice, not for touch screens using fingers.”

The Omniture acquisition ($1.8 billion) seems to have fared much better. Although Magento, like Flash, is basically software, it is quite a different beast — the software is more oriented toward SMBs and it is open source.

In a recent LinkedIn thread discussing the acquisition, William Brown cites an article titled “High Tech Mergers and Acquisitions and the Death of Shareholder Value.” The article argues that acquisitions rarely return value given the challenges of integration, rapid market changes, and more. The Magento acquisition could go either way.

On one hand, Adobe could not only sell more product and services to existing Magento customers (primarily SMBs and some enterprise customers like Coca-Cola, Nestlé, Warner Music Group, and Canon) while also delivering a more complete solu-tion to their existing customer, e.g., expanding the capabilities of the Experience Cloud (the current plan) or the creation of a new Commerce Cloud (like Salesforce did after purchasing Demandware).

On the other hand, a Magento-based solution might not be competitive enough, unable to deliver the level of ROI provided by the marketplaces and managed services from the big players (Amazon, Walmart, Microsoft) or newer solution providers like Shopify. It will be interesting to see if things come together in a way that benefits marketers in the long run.