Adobe to buy Omniture for $1.8 billion
omniture.com
omniture.com
Every major player except Adobe wants to see changes to how video and rich content are delivered on the web, and some of those changes (the standards-based ones like HTML video) tend to align with what consumers want (more widespread availability of video and rich content on their phones, netbooks, other operating systems, etc.)...and this acquisition is betting that Flash and Adobe content delivery mechanisms will become more important to the web ecosystem in the future. $1.8 billion is an awful lot to spend on something that seems very likely to decline in importance going forward.
Of course, I could be misunderstanding Omniture's value and how diverse their products are. Their website is a bit vague and confusing. Then again, I don't have an MBA, so I might just be missing something.
I understand why you think adobe is betting against open standards and against consumers, but why do you think that this move is doing that?
BTW, I am definitely not an expert on this matter, but it seems to me that people can get pretty dogmatic about standards. Adobe managed to get more options in to most people's browsers in a way that works. Even standards might benefit from a little competition.
way too expensive
Can you elaborate? Stock is at a relative low. Omniture's revenue is about 1/6 of sale price (they are not profitable, but they are growing).
This strikes me as a poor fit
I don't know a huge amount about this company, but judging by their income statement, they seem like a services company at least as much as a product development one.
- 31-Dec-08 31-Dec-07 31-Dec-06
Revenue 295,613 143,127 79,749
Cost of Revenue 125,940 53,364 31,826
Research Development 36,966 17,257 8,732
Selling General & Admin175,851 85,828 47,334
I'm just wild-ass guessing, as usual.
My impression is that Omniture's unique strength is in Flash video analytics, in particular. But I may be wrong about that. I don't know much about them, actually.
The graphic Adobe provided led me to believe that they view this as fitting analytics into Adobe's existing content workflow, which includes Flash/Flex/Air/whatever, and not a lot of standards-based approaches to the web (they work with standards, too, but it always seems an after-thought and an also-ran technology). So, if they envision this as a way to further lock companies into the Adobe web deployment silo, which is what it seems like to me, then I think it's a bad move...because it's betting against open standards and consumer freedoms winning in the end, and I always consider that a suckers bet.
Can you elaborate? Stock is at a relative low. Omniture's revenue is about 1/6 of sale price (they are not profitable, but they are growing).
They're a service business, as you noted, and a service business that isn't profitable (but growing) seems like the old, "We're losing money on every sale, but we'll make it up in volume!", philosophy. If growth doesn't result in increased efficiency, as it rarely does to a significant degree, in a service-based business, it seems like growth isn't a useful metric.
I wouldn't think this would be a good fit for Adobe because their value to the market is product-based, and this gives them a (currently money-losing) service-focused business to manage.
But, as I said, I have no idea what I'm talking about. I just choked a bit on the 1.8 billion number for a company that I can't imagine being worth that much (and it is entirely plausible that I'm showing a lack of imagination).
That $1.8b is more or less a market price. Think the market is over inflated? What difference does that make if you're own assets are valued by this mechanism also?
Regardless, my primary concern, if I were at the helm at Adobe, would be trying to figure out how to make this seeming odd couple work out right. I don't see how it can possibly add $1.8 billion to the value of Adobe, but maybe I'm short-sighted.
If they have any sort of plan for really integrating (I think they might have a history of doing this), it probably means they want the mature sales/consulting/customisation part of the business. The technology side, as mentioned elsewhere, is not that interesting.
And how does this mesh with Adobe's product line? Based upon initial comments, it looks like this may be the bigger question.
They're trying to move that model into more traditional apps as well. Like tracking flash or AIR apps, they even do some analytics on some connected game consoles.
On the surface its a strange fit.
1) It's a buyers market because a lot of companies are looking for an out even at reduced valuation. 2) Employees are similarly not going anywhere in a climate like this so you can cut benefits for the time being because everyone is cutting benefits.
Look at the acquisitions as a long term investment whereas the reduced benefits are a band-aid.
and when the benefit reductions are in lieu of lay-offs, morale shouldn't be affected. people should be far-sighted enough to realize that everyone has to scale back.
if the companies don't readjust later then it goes without saying (or so I thought...) that they will lose employees.
the bottom line is that there is good sense in it.
"if the companies don't readjust later" .. i don't think people forget so soon. Also, the most effective people still have options in the downturn and are the ones you really can't afford to lose.
Mergers are really hard to get right, and you need buy-in from on high all the way down through the effected organization.
The bottom line is that you need to account for the ill will internally when you are considering making a decision like this. It may very well be the optimal choice for increasing short-term shareholder value, which is a publicly traded company's number 1 priority.
Now, if Adobe also announced that they'd pay doubletime for vacation for employees that took the unpaid time off and stuck it out, that'd be a Good Thing.
Here's why its strange to me. The web analytics space is very competitive and not very defensible. 1.8B for a company seems like a lot of money to spend when there are likely many smaller players that could be gotten for less.
Even as I write this though here's why I could see it making sense.
1. If Omniture is profitable. So you don't really lose too much if the investment pays itself back. (edit: they're not right now, but their stock is at about 1/2 where it was at the end of 07 so it could be considered a value?)
2. If Omniture is way ahead in the app tracking space. Web traffic isn't really new, but app tracking for Flash and other types of apps isn't as crowded a space, Omniture _might_ lead by leaps at this.
3. Turns on the Adobe as a service model. Adobe isn't a company with a lot month over month service revenues. Omniture fills this gap nicely.
I think this, combined with Omniture's appeal to large corporations who understand that web analytics done properly is more than just throwing a ga.js tag on your page, was one of the major motivating factors for Adobe.
Adobe is primarily about creating a consistent user experience across multiple channels. Large content production teams driven primarily by creative energies still struggle with using data-driven optimization, but this is going to be a competitive differentiator for teams that can do it well. This move helps Adobe adapt to this new game with arguably the strongest analytics data provider in the market.
It could even mean they start to make more money off what is produced with their technology and cheapen their developer and designer tools or even open it up more.
In terms of web analytics and putting return to web marketing, Omniture is probably the best at it.
* I'm not sure if this is related at all as it is a lot smaller. Adobe recently purchased Business Catalyst, a hosted CMS that differentiates itself by combining CMS, CRM & Analytics. It might be a general strategy of services that replace custom or patched together solutions with hosted solutions. Adobe has a general strategy of eventually bringing together products to work together.
This disease abounds in the industry. Sun overpaid for a series of companies over a 7 year period; Intuit has acquired and done nothing with a whole lot of them; the less said about Yahoo the better; and VMWare + SpringSource ($400 million?) ...
I guess there is hope for a lot of start-ups yet ;-)
Definitely seems like a baffling move from the outside, but to be honest virtually everything Adobe's done in the past few years has been bizarre and counter-productive. Frustrating, because skunkworks projects like Lightroom (sorry, Adobe Photoshop Lightroom) show that the engineering heart of the company beats on. It's just got arteries clogged with bullshit, nonsense and Flash.
Since the second acquisition (by Adobe), Flash has been buried under the mountain of bullshit you've mentioned, but Flash was and is a great product, as evidenced by its ubiquity -- 98% of desktops in the world have Flash installed, more than have Microsoft Windows. Pretty amazing stuff.
Flash may have been a great product, but it certainly isn't anymore. And its ubiquity simply shows the popularity of things people have done with it -- video being the big driver -- and doesn't prove that it is "great", any more than the number of Windows seats prove its greatness.
The Flash runtime on the Mac is so poor that even their Flash PR-blogger suggests you get a flashblocker (there are also rumours that ClickToFlash was originally an inside job -- thanks for taking pity on us!) to deal with it. All the while he protests that Adobe doesn't need to do anything to improve it to deal with the challenges of HTML 5, because only "minority" browser vendors care about that, and IE will always be king. He'd better hope so.
In my opinion, it's a bloated piece of software, but hey, I'm just a developer.
jonathan@beilabs.com
Omniture+Adobe leads to: deeply integrated content+analytics, eg the ability to author web or flash content with very fine-grained data capture and analytics.
I can see that it might be big for video analytics (since most web video is Flash/FLV), but ...
Perhaps Adobe is hedging it's bet on Flash being a dominant web platform in the future? ... maybe they have plans for other (HTML5?) web publishing products/services?
I was thinking it'd be also like pdf and that other format adobe's been working on for ebooks (basically similar to pdf but better about reflowing text for different screen sizes) would wind up having fine grained analytics platforms built in (obviously in supported readers only) @ the chapter and paragraph levels or whatnot.
That kind of thing.