On Magento/Adobe Acquisition

This week, Adobe announced that they are acquiring Magento. This is the third time Magento has been acquired in the past 6 years; what was once the most premier ecommerce platform available has likely found it’s last foster home.

Magento is known for its flexibility. If you have a unique store that requires just the right configuration, Magento is the solution for you. Flexibility is often coupled with complexity; Magento 1 required that stores host their own servers and the UI, while functional, is reminiscent of web design from the early 2000s. This isn’t to say that Magento isn’t a viable, powerful solution — it is. So much so, there are more than 150,000 stores using it today. Which is why Shopify is so interested in this market.

Shopify launched Shopify Plus in 2010 with an eye towards selling a more robust feature set to larger businesses. Shopify’s business model is to take a monthly fee that scales with your transaction volume, so it’s only logical that larger businesses would pay more — a good equation for Shopify.

Magento has been looking for ways to bolster their offering, retain their customers and continue to grow. So came Magento 2 — a noble attempt to simplify and modernize a previously complex platform. They originally announced a full cutover from and deprecation of Magento 1 to Magento 2 for November 18, 2018. They have since decided to support Magento 1 for the foreseeable future and will give an 18 month notice, putting deprecation off until at least November 2019. Why? Who knows. Magento claims there are not enough developers to convert all of the outstanding sites to Magento 2 in time. Maybe merchants are dragging their heels and Magento is afraid that forcing them to switch would force a larger re-platform discussion, with an increased potential for churn. Maybe Magento 2 isn’t as easy to spin up as they had hoped, meaning customers just aren’t doing it. Maybe Shopify Plus is better than Magento expected. Regardless, we have a robust duo of Magento versions with a huge community that seems to be lost in its pursuit to grow.

Enter Adobe. The creativity suite giant who successfully turned itself from a downloaded software product to a fully SAAS product while retaining its customers and growing. Scott Belsky, their new Chief Product Officer, who spent time at Benchmark Venture after selling Behance (the creativity market place) to Adobe, has publicly remarked at the growing popularity of Shopify and the number of ecommerce merchants he discovered using them. Additionally, Adobe has stated clearly their interest in connecting creatives with marketers as a product strategy.

Adobe Campaigns seeks to compete with other enterprise marketing clouds like Salesforce’s ExactTarget and Oracle’s Bronto (both acquisitions). On the surface, it seems like a logical play that Adobe is extending its suite for ecommerce businesses and using it’s unique wedge into the marketing stack — design — to stitch together marketing and building ecommerce sites. If the design for a business is done in Adobe, why shouldn’t those designs seamlessly integrate with and be hosted by the same provider as your store and marketing cloud? Makes a lot of sense.

There are 3 basic elements that a business selling through an owned ecommerce channel needs to exist:

  • A website
  • Ability to transact
  • Ability to communicate with customers

There are independent solutions that exist to cover each of these categories:

We’ve seen consolidation among enterprise players either trying to enter the B2B2C space or extend their offerings:

But how good is this play? Most of the top Ecommerce sites are brick and mortar brands that have extended their sales channels online. Will their strategy for choosing vendors be to go with the enterprise approach, picking a single vendor that covers all use cases? Or, will these brick-and-mortar rooted businesses look at pure play Ecommerce brands to see what tools they use to run their business?

At Klaviyo, we’re betting that giving pure play Ecommerce businesses the most powerful and intuitive tools to grow, understand and communicate with their customers is a winning strategy. We believe that small brands will grow and large brands will look for proven technology that serves key use cases at an inexpensive price.

Personally, I look forward to Adobe, Salesforce and Oracle beating each other up on price and not investing in integration quality of competitor-owned ecommerce platforms. I’m thinking this will cause longer sales cycles for them and, of course, larger deal sizes.

It will be interesting to see what happens to other vendors that were strongly coupled with Magento, like Dotmailer, now that there’s a marketing platform that Adobe is incented to push to Magento’s customer base.

I doubt we’ll see any material market shift until a year from now. Re-platforming can take 3 months to a year and it certainly can’t interfere with Black Friday and Cyber Monday. Today, we’re 6 months from Black Friday/Cyber Monday which is dangerously close for a business to re-platform unless they were already in process. The start of 2019 will introduce lots of platform shopping and if it coincides with the deprecation of Magento 1.x, it will be exciting to see if customers ultimately choose to upgrade to Magento 2 or move to another platform Shopify Plus. Personally, I’d bet on the latter.

Obsessed with building and marketing products that make people happy.