We’re living in an experience economy. But it’s important to make sure those experiences are shoppable.
Adobe has agreed to buy Magento Commerce for US$1.68 billion. The deal plugs a glaring hole in Adobe’s strategy by adding an ecommerce platform to Adobe’s Experience Cloud.
It is not the first foray by Adobe into e-commerce. It originally acquired a much smaller ecommerce company Business Catalyst in 2009, around the same time it bought Omniture. However it never really evolved the product set and in fact, has announced it is ending support in the next few years.
So why Magento?
One answer is simply that it was running out of options, and perhaps, time.
Oracle bought ATG for a billion dollars in 2011. Then in 2013, Which-50 understands Adobe bid for Hybris in a competitive pitch against SAP with SAP emerging holding the prize. Salesforce meanwhile made a successful $2.8 billion strike on Demandware in 2016 reducing Adobe’s options even further. A month later Oracle bought Netsuite in a much-anticipated move that brought Larry Ellison’s two biggest properties together.
Today’s deal, which Reuters reports is Adobe’s largest in a decade, will extend Adobe’s ecosystem beyond its existing marketing, advertising, data and creative tools.
Sandy Shen, research director, digital commerce at Gartner told Which-50 the acquisition substantiates the fact that digital experience platform is becoming a key technology element in enabling personalised customer experience in digital commerce.
“Both companies can cross sell products to each other’s customers, and a tighter integration will allow customers to enjoy richer functionality on both platforms and a shorter time-to-market. Existing Magento customers using other digital experience platforms need to be wary that they may not be the first to access the newest Magento features and/or need to spend extra efforts in integration.”
Magento was founded in 2008 and then sold to eBay in 2011. Ebay then offloaded Magento in 2015 to global private equity firm, Permira Funds, which allowed the business to run as an independent company.
In 2017 Magento also received a $250 million investment from Asia-focused investment firm, Hillhouse Capital, which has also agreed to sell its stake to Adobe.
The Magento platform is built on open source technology and boasts a community of more than 300,000 developers and a partner ecosystem provides that thousands of pre-built extensions, including payment, shipping, tax and logistics.
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Current Magento customers include brands like Canon, Helly Hansen, Paul Smith and Rosetta Stone. Adobe and Magento share joint customers including Coca-Cola, Warner Music Group, Nestlé and Cathay Pacific.
“Adobe is the only company with leadership in content creation, marketing, advertising, analytics and now commerce – enabling real-time experiences across the entire customer journey,” said Brad Rencher, executive vice president and general manager, Digital Experience, Adobe.
“Embedding commerce into the Adobe Experience Cloud with Magento enables Adobe to make every moment personal and every experience shoppable.”
Upon close, Magento CEO Mark Lavelle will continue to lead the Magento team as part of Adobe’s Digital Experience business, reporting to executive vice president and general manager Brad Rencher.
“Adobe and Magento share a vision for the future of digital experiences that brings together Adobe’s strength in content and data with Magento’s open commerce innovation,” said Mark Lavelle, CEO, Magento.
“We’re excited to join Adobe and believe this will be a great opportunity for our customers, partners and developer community.”
The transaction, which is expected to close during the third quarter of Adobe’s 2018 fiscal year, is subject to regulatory approval and customary closing conditions. Until the transaction closes, each company will continue to operate independently.