Recently Adobe announced its agreement to acquire Magento, one of the leading commerce platform companies globally. The deal has been struck for USD1.68 billion. So what does this mean for the two companies?
“This marks the next step in our journey to drive innovation across every facet of commerce. As Content + Commerce capabilities have become inextricably linked, commerce plays a more integral part of the consumer experience than ever before. With Magento’s position as the world’s most popular commerce platform and Adobe’s leadership in designing and delivering great digital experiences, we will enable every business to create and deliver compelling real-time experiences, engage with customers across every touchpoint, and transact anywhere across the entire customer journey for both B2C and B2B,” wrote Mark Lavelle, CEO, Magento Commerce in a message regarding deal to the employees, and partners.
While Lavelle looks at this deal to accelerate the company’s product roadmap driven by the breadth and depth of Adobe’s capabilities and technology, for Adobe this will mean a strong foothold in the ever-growing and very profitable digital commerce segment. Explaining this move, 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.”
With this acquisition, Adobe will be able to fine tune its Adobe Experience Cloud with digital commerce enablement and order orchestration delivering a single platform that serves both B2B and B2C customers globally. The two together can enhance the overall selling experience of physical and digital goods for companies across industries, including consumer packaged goods, retail, wholesale, manufacturing and the public sector. The two already share joint customers including Coca-Cola, Warner Music Group, Nestlé and Cathay Pacific.
Analyst viewpoint on the deal
Market analysts like Forrester feel that this deal will benefit Adobe in a bigger way than Magento, which already has a strong developer and market following. In fact, by adding the commerce capabilities, Adobe establishes a stronger position to compete against players like SAP Hybris, Salesforce and Oracle. According to Forrester senior analysts Mark Grannan and John Bruno, “Adobe should take lessons from Magento, rather than the other way round. Adobe created and then saturated the enterprise market for digital marketing capabilities, whereas Magento thrived in the SMB and midmarket and now is steadily marching into the enterprise realm. Adobe’s track record with developers has been touch-and-go for years as it embraced and later neglected developer tools. Whereas Magento’s open source roots and community developers bring nimbleness and a vitality that Adobe desperately needs.”
However, there is also the fact that both the companies have offerings that overlap and compete. For instance, Magento’s BI and lightweight CMS infringe on Adobe Analytics and AEM territory, which is expected to develop into a complementary and fruitful relationship. However, Magento rebuilt its marketplace, but Adobe also rebuilt its partner program, Exchange, which have very different operating and pricing model. Giving an insight on how the technology platforms will get impacted by this deal, Grannan and Bruno, say, “Magento’s open source PHP heritage — and the 250,000 Magento Community Edition installs — will find itself at risk given that Adobe’s flavour of “open” is typically built behind closed doors and “opened” up to the community (e.g., Apache) at the 11th hour. Conversely, Adobe now has the opportunity to embrace a sizable development community — something it has lacked. Adding some additional friction, Magento’s cloud offering is built via Platform.sh on AWS, thus making Adobe’s in-progress pivot to Azure awkward.”
Despite this, Magento brings a tone of pragmatism and successful midmarket commerce strategies to Adobe’s AI-driven personalisation, which can be the winning formula that Adobe needs to experience major success in the market.