Adobe Acquires Magento: Magento Is Now Adobe Commerce
Magento Commerce is now Adobe Commerce officially. The popular eCommerce platform gained a new moniker and is now a full-fledged part of the Adobe family, according to a statement made by Adobe and Magento on April 21, 2021.
Adobe announced the rebranding of Magento Commerce and Adobe Commerce Cloud as a single, unified Adobe Commerce brand ahead of this year's Adobe Summit conference. This is the last step of an integration that has been going on behind the scenes for over three years since the Magento platform was acquired.
The news came nearly three years after Adobe declared in May 2018 that it would purchase Magento Commerce. The $1.68 billion purchase was made to improve Adobe Experience Cloud, the company's marketing and sales platform.
Magento would now be part of well-known tools like Adobe Analytics, Adobe Experience Manager, Adobe Marketo, etc.
The addition of Magento will give Adobe customers seamless eCommerce connectivity, allowing them to utilize a single platform that serves both B2B and B2C clients internationally. By incorporating digital transformation into Adobe Experience, businesses will deploy highly tailored, customer-centric business solutions. For Adobe, Magento, and its clients, this merger seems to be a win-win-win situation.
Before we get into the specifics of what such a transition would entail, let's look back at Magento's history to see what made it one of the most popular platforms on the market.
Magento: A B2B and B2C leader
Magento was founded by two college mates, UCLA students Roy Rubin and Yoav Kutner. Rubin and Kutner's newly formed firm got a large contract for the development of an eCommerce website, but they believed that osCommerce, the most successful ecommerce solution at the time, wasn't up to the task.
They created their platform, based on osCommerce, and published it under an open-source license in 2008. The color "magenta" was employed in the logo, thus the name. According to legend, the domain name “magenta” was already occupied, so they altered it to Magento.
Using open architecture and the most popular framework of the 2000s, PHP-MySQL, was the key to early success. Magento grew swiftly to become one of the most popular eCommerce systems, earning multiple accolades for "best open-source software."
The next major event occurred in 2011 when Magento was purchased by eBay, which was aiming to expand its community of eCommerce developers. On the other hand, years with eBay proved to be rough, and in 2015, after eBay's internal business issues, Magento became a different company once again.
The turbulent years of eBay ownership did not dampen Magento's desire to innovate, and in 2016, the company debuted its Enterprise edition, which gives customers unrivaled freedom and growth possibilities.
This leads us to 2018, when Adobe revealed its acquisition of Magento for $1.68 billion, making it Adobe's biggest M&A deal in the last decade.
The integration of Magento into Adobe Experience Cloud is nearly done as Adobe approaches the third anniversary of the purchase. The major news for April 2021 is that Adobe is unifying its brands, and Magento Commerce will now be referred to as Adobe Commerce. (The open-source version of the platform, which will continue to be known as Magento, will not be affected by the move.)
So what does the acquisition mean for Adobe?
Adobe's stock has risen in the last two days; however, it's unclear if this is due to the acquisition news or the buyback. Regardless, Adobe stockholders are in for a good time.
Adobe purchased Magento Commerce from Permira, a European private equity firm that had acquired the business from eBay Enterprise only three years beforehand. Given that their principals will receive a 5x return on their 3-year investment – netting over a billion dollars – it's reasonable to assume that there are some pleased investment bankers as well.
But what does it signify for the rest? Let's have a look.
We anticipate the purchase to have the greatest effect on existing Magento customers, particularly the smaller to mid-size businesses that make up most of the approximately 200,000 Magento sites.
According to Adobe, the typical AEM contract costs roughly half a million dollars in upfront licensing charges and three to four times in implementation expenses, bringing the initial cost of an AEM installation north of $2 million. This would seem rather expensive to many existing Magento customers, who depend on open source alternatives such as Drupal, Joomla, and WordPress to handle their digital content.
Adobe will undoubtedly want to advertise their other products to existing Magento customers, and it's easy to see how they would be tempted to cut down on funding and support for Magento plugins and adapters that compete with Adobe's own. This issue should cause a lot of existing Magento users to think again about their eCommerce platform decision.
Magento's existing partners, including integrators, agency partners, and plugin manufacturers, will also be impacted. While many of them – especially the bigger ones – already work with Adobe, many smaller ones have purposefully chosen to concentrate on the lower to mid-range market.
All of this will cause market uncertainty, which will provide an opportunity for Adobe's rivals. Salesforce and Oracle, for example, are likely to try to take advantage of this by spreading some FUD (Fear, Uncertainty, and Doubt). Expect some of the more recent upstarts in the industry, particularly the rising next-generation SaaS pure-plays that are already threatening to disrupt the industry, to be considered by potential customers, even some of the bigger ones.
While Adobe has several problems and hazards, they are not any more severe than those faced by huge corporate rivals Oracle, Salesforce, or SAP. Remember that their "full solution offerings" are mostly acquired, that many of them depend on outdated technology, and that they are not necessarily "seamlessly integrated."
Adobe's purchase of Magento is significant and will have a wide-ranging influence on the market. It remains to be seen how – and with what result – this will be accomplished. As we've seen in the past, huge acquisition integrations seldom go smoothly, if at all, and they always generate uncertainty, risk, and opportunity in the market.
Another problem will be that, like most corporate solution areas, the eCommerce software industry is experiencing a tremendous shift as businesses adopt cloud and SaaS-based subscription models. Only time will tell what lies in the future for Adobe Commerce.
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