Seeking Firmer Grip on E-Commerce Market, Adobe Buys Magento

Adobe has made a big bet emphasizing the “shop” part of its best-known product.

The maker of the Photoshop suite of software announced late Monday it is buying fellow Bay Area firm Magento Commerce for $1.68 billion to gain a larger foothold in the growing e-commerce industry, which is now dominated by Salesforce and Oracle on the business tools side. Magento is a developer of software that helps businesses build and run e-commerce sites and broker online purchases, shipping, and returns. Magenta’s customers include well-known corporate names like Canon and Coca-Cola.

“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,” Mark Lavelle, Magenta’s CEO, said in a prepared statement.

Combining Magento’s Commerce Cloud software with Adobe’s Experience Cloud product “enables Adobe to make every moment personal and every experience shoppable,” Brad Rencher, Adobe’s executive vice president and general manager for digital experience, said in the release.

It’s that expectation—our increasing times spent online or on our smartphones are opportunities for commerce—that’s fueling Adobe’s interest in building up its technologies focused on e-retail. Retailers from Walmart on down have ramped up their e-commerce toolkits in response to consumers’ increasing demand to be able to shop more efficiently and on their own time. And with mobile fast becoming the preference for online shopping, retailers want to embrace technologies that will reduce the friction in the process of a shopper seeing something she wants to buy and her being able to buy it.

Arkansas-based Walmart, along with competitors such as Whole Foods and Costco, have announced new initiatives such as free delivery and expanded “click it and pick it” programs to woo shoppers to their stores and websites.

And to help meet the demand from shoppers, retailers need to buy the requisite e-commerce software from someone. That’s the opportunity Adobe sees in its purchase of Magento. Combining Magento’s technology with what Adobe already has in-house enables Adobe to provide retail customers tools to allow shoppers to complete transactions anywhere along the e-commerce spectrum, Scott Webb, president of consulting firm Avionos, said in an e-mailed statement commenting on the Magento acquisition.

“These providers are also recognizing the need to unify both B2B and B2C commerce capabilities to enable a more holistic and seamless approach to the customer experience that reaches across multiple touch points,” he said.

The Magento purchase should also help Adobe better compete with Salesforce, which offers its own e-commerce-related marketing, sales, and service offerings. (Some of those offerings are from its acquisitions of Demandware and CloudCraze.) The San Francisco-based software giant had revenue of more than $10 billion last year, and in January, unveiled a program that allows retailers to create “shoppable” posts on Instagram.

Shopify—Magento’s main competitor—saw its stock fall by nearly 4 percent Tuesday afternoon as the market absorbed news of the Adobe/Magento deal, which is expected to close, pending regulatory approval, in the third quarter of Adobe’s fiscal year, which ends Nov. 30.

“It’s important for businesses to own the e-commerce experience—and the customer—from end-to-end,” said Webb of Avionos. He also noted that “we continue to see customer experience platform providers recognize that an integrated customer journey includes a rich shopping experience.”

 

Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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