Adobe acquisition of Magento puts Salesforce in its sights

Adobe looks to challenge Salesforce by adding e-commerce capabilities into its CX suite of products, just months after Salesforce doubled down on e-commerce with CloudCraze purchase.

Adobe has acquired e-commerce vendor Magento for a reported $1.7 billion. This is the most recent e-commerce acquisition from the marketing automation provider, following two high-profile acquisitions over the past two years.

Salesforce started the trend with the 2016 purchase of Demandware, turning the product into the Salesforce Commerce Cloud before supplementing it this year with B2B commerce product CloudCraze.

The Adobe acquisition of Magento adds a much-needed element to the Adobe suite of products, which is among the industry leaders in B2C companies.

"Microsoft, Salesforce, Oracle, IBM and Adobe all have pieces of the B2C consumer space, but they all come at the market from different angles," said Ray Wang, founder and principal analyst at Constellation Research. "Adobe used to be the vendor to get you from creative to campaign, and now getting that commerce piece is the holy grail."

'This fills a gap'

It's been a long time coming for Adobe to enter the commerce space. Known for its suite of publishing tools, the previous way Adobe customers would add an e-commerce aspect to their companies was by integrating with a third party and connecting the APIs with an API-based product like Elastic Path, for example.

"Despite partnerships with more than a dozen commerce platforms, Adobe has had a gap in digital commerce for a long time," said Jason Daigler, a research director at Gartner. "[Adobe] couldn't offer a native commerce platform as part of their suite, so this fills a gap for them."

While it makes sense on the Adobe side, the answer to the question "Why Magento?" is based on the growth of the e-commerce product over the last couple of years.

"Magento has been available for a couple of years since they spun out of eBay, but they've had recent success in the enterprise market," Daigler said. "The order management and B2B offering they introduced in the last two years make them a more complete solution."

This idea of creative-to-commerce is an attractive one for prospective customers, according to Wang, as it's the only suite of products that can supply that end-to-end capability.

"Everything from creating the assets to delivering the content and the experience and finally closing the sale -- that's what people want to do," Wang said. "Adobe had options in the market, but [Magento] is one of many that were on that list."

Finding growth within e-commerce

By having its own e-commerce tool built into its products with the Adobe acquisition of Magento, Adobe fills what Wang called a "white space" in Adobe's product offering -- and in the Adobe-Microsoft partnership that both companies have been behind.

The CRM space has flattened -- same with the CX space -- so most of the growth now is coming from commerce. If you can't sell or click on an ad, no one cares.
Ray Wangfounder and principal analyst, Constellation Research

"Customers may have their own commerce solution, but many customers have been asking for this," Wang said. "It doesn't mean Microsoft won't go out and buy a commerce solution, but this is about expanding [Adobe's] footprint in the long-run."

The move toward commerce for both Adobe and Salesforce may also signify a plateauing of growth in the traditional CRM market.

"The CRM space has flattened -- same with the CX space -- so most of the growth now is coming from commerce," Wang said. "If you can't sell or click on an ad, no one cares."

'[Salesforce] accelerated a lot of this'

And while Adobe executives would never admit publicly that Salesforce and its Commerce Cloud had any bearing on the Adobe acquisition of Magento, it's too apparent looking at the customer experience space that Adobe is hoping to go toe-to-toe with the CRM industry leader.

"We think of both Salesforce Commerce Cloud and Magento as two of the leaders in the [commerce] space, so I think they will continue to challenge each other now that Magento is part of Adobe," Daigler said. "I would expect Magento to appear on the radar of even more enterprise clients going forward."

And one benefit that Adobe and Magento may have over salesforce is ROI: Adobe spent a substantial sum on Magento -- $1.68 billion, according to an Adobe press release -- but it's also significantly less than the $2.8 billion Salesforce spent on Demandware in 2016, plus the undisclosed amount it spent on CloudCraze this year to add B2B commerce capabilities.

Salesforce's head-first dive into commerce over the last two years may have expedited Adobe's plans, although Wang said the San Jose, Calif., company may not admit it.

"What you've seen with the Demandware and CloudCraze on the Salesforce end -- that accelerated a lot of this," Wang said. "Adobe would say that didn't do it, but Adobe has a pretty good lock on the B2C side of the world and the piece they were missing was commerce."

Both Adobe and Magento were mum on the Adobe acquisition, aside from releasing blog posts and press releases announcing the news. There's no available timeframe on when Magento will be fully integrated into the Adobe suite of products or how it will be available for licensing. Magento CEO Mark Lavelle called the Adobe acquisition "the next step in our journey to drive innovation across every facet of commerce," while Brad Rencher, executive vice president of digital experience at Adobe, said the acquisition will "make every moment personal and every experience shoppable."

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