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EP133 - Hot Take: Adobe acquires Magento
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EP133 - Hot Take: Adobe acquires Magento Adobe announced that they are acquiring Magento commerce for $1.68b. It was disclosed as part of the deal that last year magento’s revenues were $150m, so that’s a 11X multiple which is pretty awesome. Adobe’s largest deal in decade. Adobe announcement Magento Blog Mark Lavelle, CEO, and Peter Sheldon VP Strategy at Magento Commerce were on Episode 50 of the Jason & Scot Show. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 133 of the Jason & Scot show was recorded on Monday, May 21st 2018. http://jasonandscot.com Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:25] Welcome to the Jason and Scott show this is episode 133 being recorded on Monday May 21st 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your hoes Scott Wingo. Scot: [0:39] Hey Jason are welcome back Jason Scott show listeners this is one of those unusual times. You're actually recording back-to-back shows and Publishing them simultaneously that's because we had previously planned put out our. NPD idea show recap which you should be able to find right there in your favorite podcast listener, device select / technology, and then the universe was curveball there was a big announcement after the market today and that announcement was that a Doe B is acquiring which into Commerce for 1.6. Billion dollars that's billion with a B it was. Disclosed as part of the deal that last year magenta revenues were a hundred fifty million that's already some analysts notes that are saying they would expect that to be about 180 million this year that's 11% multiple witches. Pretty awesome for Magento and also adobe's largest deal in over a decade. So what we're going to do here is a pretty short show because it is very timely and, just got to get share some background on these two companies and their aspirations and some of the things that have happened to them before and then. Jason is our resident. [1:58] E-commerce platform Guru I'm going to send him some lightning around rapid fire questions to kind of get some analysis what that means for both Adobe Magento and then some other. [2:11] Books out there so we can kick it off with a brief history of Magento. [2:16] And I'll cover that and then Jason oil run you run us through adobe's e-commerce history. So would you do was born in 2007 it's an open source project which means you have this collaboration of people, they got together and there was a commercial company and Roy Rubin and you've cut his eyes at you. Jason: [2:38] Aren't you don't know a Metroid but I never met you oh so I'm going to assume that's you got a ride. Scot: [2:46] Listening you can write in and I would have better phonetic. We have six new they released this isn't what they were planning on doing was taking a. You know I previously open sourcing in making improvements but they did so much changes they came up with the whole new offering and so. That started as a community project and then they monetize it to an Enterprise offering that initially just had some support and then later on had, kind of different feature set than the community offering Bob Schwartz join in 2009 he is a guy that I think pretty much everyone in the world e-commerce is met several times he still out and about, a great guy has enterprise software background really ramped them up and. Jason: [3:27] Side note is a Jason and Scott show Wisner as well so shut out to Bob and Bob used to run e-commerce at Nordstrom. Scot: [3:34] Hey Bob Hope you had still had some more options in here somewhere I'm not sure if that's possible but hopefully did he so then they sold Magento to eBay for $180 which was a great eggs. Because we didn't raise a ton of capital of my recollection is maybe 20 to 30 million. [3:53] Pair to today's companies you know, 6 x 2 money raised so that was good eggs. Jason: [3:58] And by the way I think a bunch of that raise was from eBay. Scot: [4:03] Yeah yeah eBay wasn't investor through the PayPal site but they. A combined company at that point and it's part of that deal they got PayPal integrative Magento that was kind of what they were after there, oxa 2011 eBay acquired the whole entity and owned it until 2015 eBay had bought both GSI and Magento and then, put them out in 2015 along with the PayPal split so eBay sold the Magento asset to a private Equity Firm called permira. And that was for about 200 million so kind of sideways kind of a deal I don't know the specifics that I've heard mentioned took kind of went sideways while I was in the in the eBay ownership Cyril the key people left. [4:48] Then once it was free from eBay in 2017 the private Equity Firm raise an additional 250 million from a large Chinese investor called Hillhouse capital. And. We actually had the CEO of Mark Lavelle here on episode 50 of the Jason Scott show so that was exciting to have him on a side note we do have a 10% finders fee so when there's an exit, I at we and you put on the show we would like a 10% finders fee it's just a small thing of it is like that it's just a very small thank you to the podcast doomed. Look at you that exit it's hard to nail down exactly how big Magento is because unlike a sass platform you no one there. Publishing the source code out there they don't have many people are licensing dinner price version they don't really know how many people are using the Community Edition. There are companies that spider the web and they'll kind of show tell you there's this many websites that they don't know how big they are from a sales perspective so it is hard to know how many active users there are over gento. I've seen kind of numbers in the 300,000 range for both Community Enterprise I think Enterprises in the low thousands so like 1 to 3000. And that is a brief history of magenta. Jason: [6:09] Yep and I just one other side note on how hard it is to know what size they are like also because it's it can be at one time. License or or download a free version like you don't know where there's someone that that got your software is still using your software a year later and so there's actually a lot of sort of. Orphan sites out there that might still be turned on but aren't actively selling stuff that are running running Magento so it makes it even harder to know how many how many active sites you know with meaningful volume Iran on the planet. Scot: [6:41] Yeah a lot of times you'll see this announcement you know like he was Pottery Barn Pottery Barn. That's a huge win the you dig around you look around and they find it's like. The kids furniture couch category in Australia. So it's really tricky. These things can pretty seamlessly be integrated with each other and and you'll find a lot of times, I see Magento used by larger players as a cross-border trade kind of thing of increasingly that's going over to different platforms like Shopify because just the ease of use of spending those up is a lot lower than the on the SAS guys can spend up a new store pretty quickly compared to the open-source guns. Jason: [7:25] Yep for sure Magento for some smaller Brands it's their primary platform but for many bigger Brands it's a. A utility platform that use for particular use cases in and you know smaller markets would definitely be one of those, I was in a side note it's mainly an on-premise solution but there have been a couple efforts over the history of Magento to sell it is SAS so I think even during the eBay ear or maybe right after that you bet your other was this product Magento go, that was sort of intended to be a low in SAS solution that might have competed more directly it was low but now Shopify. But yeah it's you know it's it's a mix of of implementation patterns for for Magento and as we talked about with Mark. [8:15] The bulk of users are on this first generation platform that the Troy and you are put together magenta one when Mark was on the show they had just released a major, re architecture Magento this called Magento to but you know obviously. He a significant number of those the small clients did not immediately move over to to Magento 2 and so you know there's. When you're talking about the Magento installed base right you know one of the questions that you're you want to know is like what percentage of the users are even on the the current. [8:49] The newest iteration of the platform review off. Scot: [8:54] Yeah so then why would a Dobby care about this day how's the Titan with Photoshop. Jason: [9:00] Adobe has a very popular product that we are all from there with Call of the Adobe Creative Suite which is like a Photoshop and Premiere and the the audio editing software we use for this podcast called in addition, but they have another Suite of products that they call the Adobe experience cloud. And this is a sweet of sort of Enterprise products that are used to host a lot of commercial websites so the. To my way of thinking the disorder, Cornerstone of the experience cloud is Adobe AEM which is there big CMS I think it's the most popular most successful CMS in the world it hosts, tons of Big Brand websites like Mercedes-Benz and all these different. Brands that you don't have non transactional websites would use Adobe AEM it's hosted SAS solution for for those kinds of. [10:01] Use cases you actually can also buying on on Prime version of am still but then there's a bunch of other app. Pieces of the experience Cloud that are pure SASS and so the one that comes up the most often in the Commerce world is. A product they bought a number of years ago called omniture which is a web analytics platform that competes with like Google Analytics. That's been rebranded Adobe analytics over the years and it's a very popular e-commerce analytics sweet that used by a lot of commercial websites we've had Tamara on number of times, change some of the data from. From that platform and they have a bunch of other e-commerce tools that they bought ATM was originally from a company called a software. They bought an image technology called seeing seven that that a lot of website you use to resize images on the Fly four different sides. They now have a other marketing tools I got DMP campaign manager. [11:09] Sort of a next-generation ESP personalization engine they have a a b testing platform that used to be called the Adobe test and Target. Insa Dave Dave sort of in the same way that they put together all of their their creative software for end-users together. [11:27] They put this whole sweet of Enterprise packages together that are used by big companies to host websites and the one big glaring hole in that sweet is an increasing number of those, does companies that are relying on the Adobe experience stack to create their web experience. Want to sell stuff online and Adobe did not have an e-commerce platform so you know what Adobe historically has had is a. Integration framework to let you use the Adobe experience sweet alongside someone else's e-commerce platform like. [12:02] IBM Oracle sap or Magento elasta path and I think digital River or the big ones. So for a long time we suspected that adobe did want to own a platform. You know obviously I mention IBM has has their their big platform and they're trying to grow out a full marketing Suite to compete with the Adobe experience platform. Oracle you know bought a number of companies and is put together a marketing Suite that competes with Adobe in or colognes. Several e-commerce platforms but I think the the one we think of most for e-commerce is used to be called atg. [12:43] And then back in 2013 sap bot hybris. A lot of people were using hybris and Adobe together at that time and they were you know they were rumors that adobe was one of the. The bitters on hybris and lost out to sap in 2013 I'm not sure that deal size was disclosed but like all the estimates were over a billion dollars back then. Then we know in June of 2016 like the most successful. SAS base in a B2B Cloud out there salesforce.com bought demandware and I think that was 2.8 billion dollars. And I think it was fully disclosed that adobe was one of the bidders. Fordham and where and so we seen Adobe out there trying to acquire a Commerce platform and seems like today's the day they got it done. Scot: [13:37] Cool so that gives us the background let's do kind of a little lightning around here what's this mean for Adobe so they've got this content peas that got this experience Cloud why, yeah you know why does Adobe need an e-commerce platform. Jason: [13:54] Hot tub, again like most of the brands that are hosting websites on AEM and that are tracking analytics on Adobe Analytics. [14:05] Either already are selling Goods or want to sell goods and so historically adobe's had to partner with someone that provided an e-commerce platform and the functionality of that e-commerce platform competed with the functionality of the Adobe experience Cloud so. Adobe would want you to save the data and they experience the customer data in the experience cloud and I would want you to say the customer data. And in Webster Commerce and promotion engines and all these different things and so. [14:34] Now Adobe has the potential to have a seamless solution that allows all these brands that are hosting websites on AEM to sell Goods, and you know they can have a very homogeneous solution that shares data across all these these different pieces of the solution. Scot: [14:54] Got it, and then so most of the Magento customers are kind of SM he's so small medium size Enterprises it sounds like the Adobe customer service trying to make transactional you mention Mercedes-Benz that's obviously you know very large company. Probably I don't know how big this Adobe content management thing is but it's probably pretty expensive so it feels like adobe's going to want to take Magento upmarket does that is going to create a problem for existing users. Jason: [15:22] Potentially you registered it on paper this is not a perfect match up right it's a well-known popular e-commerce platform and a well-known popular experience platform so that you know that superficial level it makes sense, but the, right below that you're exactly right like the the bulk of the Magento customers are long tail smbs or you know mid-market at best and that the core Adobe customer is an Enterprise client you know there are you likely spent several million dollars on their implementation of the rest of the the, the Adobe experience Cloud Adobe is a pierce a solution, you know it the moment you know most of the magenta stuff is not sass add Adobe stack is mostly based on Java the Magento stack is based on on lamp or PHP so, like they're they're definitely going to be some, some challenges I got you know it's super early I haven't seen a Doe B come out with the message yet but hopefully in the in the next you know several days they should really put out a message to put the Magento customer base at ease, because if I was in Magento customer I might be nervous that adobe is going to move them up Market going to want to move it to a SAS illusion, and a lot of in a small businesses pick magenta because they could own it they could, you know customize it and have access to the code themselves and they could host it themselves and so you know I think, on the one hand I'm sure those customers are excited that there's some deeper pockets and you know potential for bigger Investments to kind of accelerate the Magento road map. [17:01] But you could also imagine that the Adobe is going to shift the Magento roadmap in a way that isn't particularly advantageous to a lot of those SM Beats. Scot: [17:11] Cool so another Domino has fallen or I like the musical chair metaphor so so now we've got to know the Discover the marriage here between Magento in Adobe one of the companies that's kind of always mentioned that doesn't have any Commerce platform now on the large software Cloud side, is Microsoft you can make a stretch and say. Google does Charlie have one you can even straight to say Amazon doesn't have one but but Amazon was in that business and kind of got out of it I think they pretty squirrely believe though. [17:44] The marketplace is coming to the Future there I guess eBay doesn't have one but they don't wanted and didn't really suggest it very well so it's a. Now that's that's one side of the equation then you have Shopify and Bigcommerce shopify's a public company with about a 20 billion market cap. That's a really big bite for someone to take there and then Bigcommerce is private but they've raised three or four hundred million so that's going to be probably a bigger lift than. Magento what what do you think is the next Domino toppling in this platform world. Jason: [18:18] Yep I don't know that there's going to be an immediate counter-reaction here so the. The other you know the Enterprise company that you mentioned that has a lot of the other elements of a quote-unquote marketing cloud like you can really think of. Sap IBM Oracle salesforce.com and now Adobe, really competing for the same core Enterprise customer right and in today I'll even need complete offering skin to compete with each other the the other company that competes with the awful lot of those Stacks is Microsoft, and so you know you on the one hand you'd say hey they would be a really interesting acquire now Microsoft at the moment doesn't have a CMS or a e-commerce sweet but they do have a very robust Erp system, Microsoft dynamics that includes a CRM that competes with. Salesforce.com they of course have the the web hosting Services through azure, so you on the one hand you could imagine Microsoft wanting to more directly compete with IBM Oracle sap and Salesforce in Adobe but on the other hand, Adobe actually I think is moving most of their SAS hosting services to azure, and they're actually several a cms's I know a sitecore and episerver that RT run on the Microsoft stack so there is a. A counter argument that that Microsoft is doing well by supporting. [19:52] Multiple players and that you know if they were to acquire a single CMS in a single Commerce platform. Did they would potentially alienate some other partner so you know I don't know whether the calculus is there for Microsoft. Show choir and I would say Microsoft in the distant past did on a Commerce platform and didn't do very well with it it's actually. It changed hands a number of times and is I think now part of the sitecore solution. So you know maybe they they eat are a little tainted from their their previous unsuccessful Commerce ownership that they don't make that play again. There are a bunch of smaller Converse platforms that don't have the kind of traction that Magento has from a customer base that are much more. [20:40] Are arguably more modern architecture there's folks like Commerce tools and Symphony Commerce mahzu there's a host of these other you know. Companies that probably hoped to be acquired but never you know don't have the customer base yet that the Magento does. I'm so will they continue to go out alone is it going to be harder for them in this world where you know that their competitors are owned by these big Deep Pockets. That's going to be interesting play and a dark horse to buy a Converse platform to me would be some of these social networks so could you imagine Facebook, buying a Commerce platform either to make available to their their customers or enable better at Commerce, functionality and their echo system could you imagine Pinterest. Or you know Instagram or SnapChat you know having more robust Commerce features to integrate into their platform would be another. [21:37] Potential play like that there's some problems with that but you know there will be guys that you might you might see sniffing the tires on some of these these e-commerce platforms. Scot: [21:47] Sniffing the tears I never heard that usually you sniff around or you kick tires at yes. Jason: [21:51] The tires or sniff around yes I don't know if I mentioned this or not but this is the second show we recorded in a way. In a row so I'm I'm mixing some metaphors sorry. [22:04] I'm not the brightest bulb in the in the knife drawer away. Scot: [22:06] Any last thoughts on the platform Wars as it were before we close up. Jason: [22:18] No I mean from my perspective I'm excited to wear a big Adobe partner I should say and I'm excited to see them making a bigger investment in Commerce oh that is exciting it again. Yeah I don't think Magento is a plug-and-play Panacea for Adobe and so it's going to be interesting. Adobe has done a really good job of integrating all their other Acquisitions but they they were not in a particular hurry to do it they took a long time, and slowly evolved all these Acquisitions into this this more homogeneous Cloud so you know where they going to do the same slope play with Magento, that would be good for the existing Magento users but it would take a long time for Doby to get value out of this acquisition or you know will they do something on a more accelerated Pace to build Magento into the kind of. Enterprise solution that fits the rest of the Adobe stacked like I'm going to be really, eager to follow that and I would argue that we're still having those same conversations around demandware and Salesforce in that like Salesforce with predominantly of B2B play, demandware you know Excel to be to see you and wasn't very good at B2B. You know they were not on the on the same stack and so you know along while we're watching Adobe in and Magento figure out their negation plan I think we're still closely watching. The the demandware which is now called Salesforce Commerce cloud and Salesforce integration play out and then I think we mention this. [23:53] This is maybe a couple weeks old news but the Salesforce actually bought another Commerce platform called Commerce cloudcraze, that is a pure B2B e-commerce platform that was actually built on top of the. The Salesforce tax so so so sources continuing to evolve there there, strategy in some really interesting ways as well so this. [24:16] We kind of been static in the Commerce platform Wars for a little while and this is you know where this this month we're seeing some pretty exciting disruption so I'm I'm eager to see how it all plays out. Scot: [24:27] Yeah who knows maybe sap and Oracle decide they could always use one more platform. Jason: [24:32] Yes I do like. [24:36] Clearly these platforms are all have a significant amount of volume through it and you know a lot of the Legacy sites are on them I think it's an open question whether these any of these Legacy platforms are the future of the business like there's, there's an argument that we're at the the most recent trend is I'll call it done platforming is actually moving off of these like shrink wrap full-featured e-commerce platforms. And moving to a lighter-weight set of apis and microservices you know you talked to a lot of cio's and that's the. The the kind of stacked that they're more interested in but we don't have a ton of great examples of big retailers like embracing that model just yet so it'll it'll be interesting to see if. Any of these big Legacy platforms kind of transform in that direction or whether they. They continue to win out against that there's newer architectures or whether some of these up-and-coming architectures can can kind of disrupt the market. [25:34] But that's a great place to retrieve the quick-hit cuz I know we wanted to get it a short quick read out for a listeners in as things evolve what will you know. Potentially do a deeper dive on some of these platforms down the road but if you have any questions about the platforms or would like to discuss this and more length. We certainly encourage you to jump on our Facebook page and the post a question and will, will get back to you as always if you found any value in this heartache we would love it if you jump over to iTunes and give us a a 5-star review. Scot: [26:07] Thanks for joining us everyone and remember if you're going to sniff the tires make sure the car is not running. Jason: [26:14] And while you're doing that have a happy commercing.