Adobe announced today that it was acquiring Magento for $1.68 billion. The purchase gives Adobe a missing e-commerce platform piece that works in B2B and B2C contexts and should fit nicely in the company’s Experience Cloud.
It should also help Adobe compete with Salesforce, which offers its own marketing, marketings and service offerings in the cloud and which bought Demandware for more than$ 2 billion in 2016 to provide a similar decide of functionality.
Brent Leary, who owns CRM Essentials and maintains a close eye on the intersection between marketing and CRM, tells this fills an obvious pit in Adobe’s Experience Cloud.” Now they have an offering that allows them to close the loop with customers, who are able to finalise a digital transaction that started online with digital marketing tools Adobe already offered ,” Leary explained.
Leary also assures this deal bringing Microsoft and Adobe, who have already announced partnerships in the past, closer together.” But maybe even more interesting is a possibility how this may farther the relationship Adobe has with Microsoft. As they also are missing an e-commerce piece to their customer participation platform[ as well ],” he pointed out. Leary theorizes this could lead to an even deeper concerning the relationship between the two companies as they are each battling Salesforce.
Salesforce is the 10,000 -pound gorilla in this space with revenue across its various clouds reaching more than$ 8 billion last year. The company is on a run rate to surpass $ 10 billion in 2018. It has set a long-term company goal to reach $ 60 billion in annual revenue by 2034.
Leary says this isn’t necessarily the perfect deal because up until now Magento has concentrated on SMB clients, whereas Adobe’s target audience is clearly the enterprise. If you look at the other players in the space who have already taken the e-commerce platform plunge, Salesforce get Demandware and SAP got Hybris, which were geared more to the enterprise target demographic, but he believes it was simply a case of the best option available.
But Cindy Zhou, VP and principal analyst at Constellation Research says Magento has some big-time customers too.” Magento has become the commerce platform of selection for many big and mid-size companies including Coca Cola. There is great synergy for Adobe to complete the customer journey ,” she told.” From my point of view, the marketing-to-sale insight potential is what’s exciting ,” she added.
This isn’t the first time the company has been acquired. Magento was founded in 2008 and bought by eBay in 2011 in a deal reported to be merely $180 million. The company went private again in 2015 with help from Permira Funds, which sources tell paid around $200 million.
Today the company sold for nearly $1.7 billion. That’s a hefty increase in value since that 2011 purchase and a tidy five times return for Permira, which brought in Hillhouse Capital Group last year as a fellow investor. At the time, Hillhouse invested $250 million in Magento; presumably, it will see a nice return on its investment in only one year, too.
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