Aaron Gray // Greater Returns

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Musings on Web Analytics, product strategy + other stuff.

Why the Omniture Adobe Deal May be Brilliant

Like many in the industry, I’ve been mulling over the reasons behind the deal announced by Adobe and Omniture for the former to acquire the latter.  My initial reaction was that of many observers — it makes no sense.

If finally dawned on me, though, that this deal isn’t about advancing how analytics is used in the enterprise.  Much more simply, it’s a business development dream come true.  For Omniture, it is simply about gaining access to more page views.  The more Adobe assets that can be tagged automatically upon creation (or delivery), the more revenue can be generated through the Omniture business.

Adobe benefits from this too, as any incremental revenue to Omniture benefits Adobe overall.  But, for Adobe, the deal is not about owning an analytics solution provider.  It’s about being able to provide performance measurement data at the asset level.  Its not about getting data into Omniture, but rather, using the Omniture infrastructure to provide performance data in whatever applications Adobe wants to.

The synergies, upon thinking about it this way, are stunning.  And its easy to imagine adobe developing new applications or solutions based on this newly acquired analytical capability.  With some work and maybe another acquisition, I wouldn’t be surprised to see Adobe become a serious contender in CMS with an offering that married asset (content, images, applications) creation, storage, delivery with a runtime that does targeting and testing, and with data available from the perspective of each of these tools processed and provided back to the system by Omniture.  This deal is more about adding value to Adobe’s existing assets and creating something new than it is about bringing something new to Omniture customers or advancing how “web analytics” are used in the enterprise.

I also would not be surprised to see Adobe get into the ad serving game, taking advantage of the move toward social apps in advertising.  Adobe Air is positioned here for app development, and Scene7 as well as other products have serving capability.  Leveraging the data infrastructure of Omniture could provide for built in measurement, without needing an Omniture account directly.

One of the big criticisms of Omniture (and other web analytics vendors) has been that they’re headed headlong into competing directly with Google Analytics.  The underlying assumption of that criticism has been that Omniture somehow didn’t get that.  I think Omniture understands that at its core.  This deal reflects Omniture’s understanding that Google will completely commoditize the stand-alone web analytics solution market, and that the future of any current stand-alone analytics solution is to become embedded in other solutions.

We as an industry have been trying to understand this deal based on our own navel gazing about the importance of web analytics to the enterprise, making projections about how the vendors’ products would have to evolve for our daydreams to come true.   We forgot that just because analytics has growing strategic importance to the enterprise doesn’t mean that the products we know today are what will ultimately provide the data and insight needed by the enterprise.

We all forgot to put on our strategic business development hat and so missed the the real factors that drive a deal like this…the need to make more money.  Analytics, at least from a market perspective, is not an academic pursuit. It’s a commercial pursuit, and the industry will move in the direction that leads to greater commercial success for the participants. With this deal, Omniture is leaving the “analytics as a standalone product” market behind while they still can.  What they have triggered is a new era of processed and enriched data embedded where it is needed, and Omniture (or what was Omniture) is powering that new era.

Similar deals for the other vendors are inevitable.  They cannot continue to function independently indefinitely with Google at their heels.  The challenge for them will be to figure out what their core value is, and start looking for deals where that core value can be leveraged as an asset embedded in a larger solution.

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Filed under: Industry Observation, Web Analytics

6 Responses

  1. Aaron,

    An interesting post. I can see your point.

    I have several comments/questions to make.

    First, if Adobe was in the market for a web analytics tool to “provide performance measurement data at the asset level” (as you put it) then why go for a player the size of Omniture?

    $1.8bn is a hell of a price to pay for providing integrated measurement on your applications.
    In addition, I don’t believe Omniture is the ideal tool for measuring such applications in the first place.
    I think Adobe would have been better off buying a smaller vendor such as UK-based Speed Trap with their proprietary tag-less app/Flash measurement method (perhaps Adobe never heard of them before).

    Second, if it was for the stable revenue stream – well – that now seems under (a little) more threat as GA and YWA have upped the game (side note: I believe that post GA v4 the key differentiator will turn from feature set to customer support – all the paid solutions will have to get better at it).

    In addition, the association with Adobe might deter potential Omniture clients concerned about the direction of future product development. Will Adobe be as committed to the other Omniture Suite products such as SearchCenter, Merchandising, behavioural targeting and MVT.

    Hand it to Josh James – he got this deal timed to a tee. Four weeks later and I somehow doubt Adobe would pay $1.8bn. Insight or luck? Perhaps a little of both.

    I have no inside contact to the key players on this deal. So I can only offer my speculative thoughts.

    Omniture were shopping for a buyer for some time now.
    As for Adobe, I’m speculating they are positioning themselves as a potential acquisition target for someone like Microsoft.

    Microsoft can now take out two birds in one go. First and foremost, eliminating the key competitor to Silverlight. At the same time they can get hold of an advance analytics tool to put them on par with Google and Yahoo.

    But I could be getting this all wrong. Time will tell.

    Thanks,
    Michael

    Michael Feiner
    AEP Convert

  2. Aaron,

    I think you’re spot on with this. Great thoughts and insight on the merger.

    -Rudi

  3. Aaron says:

    Michael: I think this is a strategic move on a long-term vision. You are absolutely right that Adobe now has the challenge of maintaining and growing the Omniture customer base while the slow transition to embedded solution takes place. In the process, Adobe will have to figure out what the new business model is for monetizing the collection of page views, and how to make that transition. To make the transition successfully, though, they needed the category leader. Category leadership is an asset most people don’t fully appreciate the value of. It’s incredibly difficult to lose once you have it, unless you really, really screw up. When you buy the category leader, you buy incredible strength in the market, and it is not something that can be achieved by competing at the product feature level.

    Also, perhaps I didn’t emphasize this enough, but I think that these may be building blocks to an entirely new product or solution set. Omniture’s been attempting to build the perfect marketing optimization suite for a long time, and the thing that has been missing is content management and delivery (with a runtime component). Adobe has intellectual assets and financial resources to finish delivering that vision.

    Ultimately, there are multiple ways Adobe can monetize the Omniture infrastructure, both as a direct product, and as embedded functionality in existing and new products.

    As for Microsoft…well, who knows.

  4. Adron says:

    Even though I’m late posting to this entry, as you obviously know Aaron, I’ve been watching the merger closely also.

    I’m also privy to some information that I can’t divulge, but let it be known, the merger was of a far simpler nature than a lot of people realize.

    As for the synergies, those are very interesting, and at the same time very confusing. The technology stacks do conflict and complement each other. If there ever was a company good at merging conflicting technologies together though, Adobe definitely has that experience.

    My biggest interest out of the whole scenario is exactly how will they implement these things into their existing tool sets to complement the new analytics featuresets.

    • Aaron says:

      Adron: Obviously I’d be curious to know what you know but can’t divulge. ;) When you say that it was “of a far simpler nature” than we may realize, I don’t know if you mean that from a technology perspective, or a business perspective. If it’s from a business perspective, I suspect that you mean it from Omniture’s point of view — i.e. they realized either a.) they couldn’t grow any more without help; or b.) they realized they didn’t have the capital or the time or the talent to integrate all of the technologies they acquired over the last few years.

      If (b) above is what you mean, I don’t think they ever intended to integrate them all. Exit strategy = “buy all the ingredients, become category leader, sell to someone with deeper pockets and better talent, let them do the hard work.” Not a bad strategy.

  5. [...] that Adobe is carrying on Omniture’s mission to build a complete online marketing suite, as I predicted they would when I first wrote about the [...]

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