The big news this week, aside from the wonderful pack of GDPR emails we are all being blessed with in our inboxes, was Adobe agreeing to acquire Magento for 1.68B. While the real details of the plans are known to a small group, we do know enough to make some informed guesses about what this means to those who are likely effected. Here are three winners and three losers from the deal.
Magento has a long and complex history, beginning as an open source PHP e-commerce platform, and eventually becoming a privately owned commerce platform based on PHP and open source technology. It made it’s way to about 180MM in revenue (estimated this year, 150MM last year, as disclosed) through it’s client base, and has played footsie with the enterprise e-commerce space nearly enough to be going steady with it. That being said, it’s customer base is made up of largely smaller players, and their flagship package, Magento 2, is plagued with performance issues that have been costly to many of the larger retailers who have tried it out. This is something I have more than one bout of experience with personally, and can attest to. Magento gets top dollar for their hard work, (remember they sold to eBay for 180M previously) client base, and the value of their developer network. If you own Magento, this is a great week for you.
The debate about the software as a service (SaaS) approach versus the packaged software one has quieted down since Salesforce purchased Demandware for two billion dollars in 2016. SaaS works, and it works well all the way up through the enterprise level. With Shopify and Magento appearing over and over as the primary choices for mid-level clients, the primary competitor up-market for Shopify is now on a journey to fit the Adobe suite of products and technology. Shopify can take it’s place as the “big boy” in the SaaS market for clients looking for something smaller and less expensive than Adobe or Salesforce.
WINNER: Digital Experience Platforms
For years now Adobe has been eating up the content management / experience management software market by integrating Adobe Experience Manager (AEM) and its suite with all of the major digital commerce platforms. This recent move means that Adobe will be pushing it’s clients to use Magento, no matter what they say now. If you don’t want to play on that field, it will be up to platforms like BloomReach and the like to step in and fill that gap. The good news for us all is that they are ready, and the technology is only going to get better with this opening in the market.
Rather than take a chance on a fresh, new, SaaS product, Adobe took the bet that the clients they acquired via Magento would be worth it, and that they could overcome the integration challenges associated with making a PHP open source package (with noted performance issues, and a die-hard global network of developers) work with an enterprise Java software suite. The perception of this acquisition is hard to reconcile with that of SalesForce when they purchased Demandware. Adobe has purchased a giant challenge that consists of technology, culture, market structure, and model. That’s a lot to chew on, and I think it will take some time to begin to understand what that will look like.
LOSER: Magento Clients
Are you on Magento 1? Did you just pay a few hundred thousand dollars to re-platform to Magento 2? Worse, did you happen to exceed your budget and nearly lose your mind trying to get your company on Magento 2? If the answer is yes, I bet you have a lot of questions about what the next several years are going to mean for you – and you’d better start looking at Adobe’s suite of products and the rates their consultants charge to implement it. Or better yet (and more likely) you should start looking at commercetools.
Microsoft, where is your digital commerce platform, and what are your acquisition prospects? Shopify has about a 20M market cap, and Big Commerce is private with 300-400 million in funding raised. We would all like to see Dynamics add a digital experience platform and e-commerce soon, so please message me directly with your thoughts.