Darth wrote in this post: http://discussion.fool.com/the-magento-acquisition-is-certainly-…
Perhaps that is why there is an extreme disconnect in revenue generation for the two companies. Magento has a large base generating $155B in gross merchandise volume on their platform in 2017. But in their conference call on the acquisition announcement Adobe disclosed that Magento only produced $150M in revenue.
Compare that to Shopify with 2017 GMV of $26B and revenue of $673M. No need to do the math, Shopify completely blows away Magento for generating revenue from GMV.
I am having trouble keeping up on the board lately and have admittedly been skimming posts, but I can’t believe I missed this. Thanks to Saul for calling attention to it again. He didn’t quote Darth, so I wanted to repost this so everyone sees it. This is huge. No wonder Shopify is so confident in their opportunity, their TAM. Clearly there is significant buy-in with Shopify. You can see from those revenue numbers that SHOP’s customers value what they offer enough to pay a lot more than Magento’s. But SHOP is only handling 1/6 of the volume that Magento handles! So not only does Shopify have green field ahead of them from all the enterprises who are still coming online and figuring out omnichannel for the first time, but they can also attract any of Magento’s current customers, already in the ecommerce game, who may believe (as SHOP’s customers do) that they can get so much more from Shopify that they are willing to pay up for it.
Thanks Bear, I read Darth’s post a couple of days ago and he did a great job discovering the important information and made this comparison.
This is great and reassuring, but it is as of now, before the acquisition. The follow-up question I would ask myself is that, 1) viewing the competitive landscape, why is Adobe willing to pony up 1.6 billion to acquire Magento, besides the reasons Adobe stated in the news release? 2) by integrating Magento into Adobe’s existing business section, will Adobe be able to improve the Magento’s products and services and reverse the tide for Magento, and will there be additive effect if not synergistic one? 3) Will Adobe be able to convince the current and prospective Magento customers that, from now on, they will not only get what Magento currently offer, but also whole lot more from Adobe’s side of products?
If the answers to those Qs are somewhat yes, then the potential impact will be material, just like the way Tinker put it.
I am long SHOP and so I hope the TAM will be big enough to accommodate both.
I’m a big fan of Stratechery where Ben Thompson actually addressed this acquisition in Tuesday’s newsletter.
His take is not so much a pure “build sales site for company”, but as an evolution of Adobe moving up the ad technology space. He mentioned the following acquisitions over the last few years:
2011 - Demdex - a data management platform
2012 - Efficient Frontier - programmatic ad buying
2013 - Neolane - marketing tools to manage ad campaigns
2015 - Tumri - product that allows delivery of ads personalized in real time
2016 - TubeMogul - buying & measuring of video ads
Note that this still is an issue for Shopify, but that Adobe didn’t necessarily have in mind direct competition.
I think the reason that Shopify is so successful in the targeted space is because they allow SMB customers to focus on their business and not get into “do it yourself IT”. some like the nuts and bolts of IT but most don’t have that inclination.
I may be wrong but it does not appear to be a material threat.
If I’m Adobe and plan to purchase Magenta, what prevents me from leveraging Magenta’s current client base by having software developers produce a simplified and customizable version of Magenta’s software that mirrors Shopify’s ecommerce website and selling it to their current Magenta clients to compete with Shopify?
It’s not so easy to do it right, and Shopify is already the go-to vendor. Adobe bought Macromedia many years ago, and they’re still struggling with making Flash work safely.