How Adobe's Magento deal puts it at forefront of fintech

In the year leading up to Adobe’s $1.68 billion purchase of Magento, some of the e-commerce platform’s biggest strategic moves centered on payments technology such as one-click checkouts, installment payments and instant credit.

Those services—combined with Adobe’s powers to drive digital customer experiences with cloud-based systems—will reshape Magento's offerings and underscore how critical a robust payments stack has become to commercial infrastructure providers serving a global, omnichannel audience.

“Payments and commerce are inextricably linked parts of the buying experience, and what Adobe saw in Magento was how we had planned for the shopping experience in ways that are becoming important for every firm,” said Mark Lavelle, Magento's CEO, following the Monday announcement.

The deal will give Adobe, which competes in the broader e-commerce industry against giants including Salesforce.com and Oracle Corp., deeper strength through Magento’s platform serving millions of web merchants with services for building storefronts, checkout pages, payment, shipping and returns, with a strong focus on social media.

The intricacy of payments isn’t easy for a company like Adobe to deliver alone, Lavelle suggested.

“Payments are complex, because you have to pick up the payment in every locale, making it secure and fast; and it has to connect to shipping systems that have links to every carrier everywhere, with deep levels of support to the individual merchant, which Magento is already designed to do,” Lavelle said.

For months Magento has been working on a streamlined checkout module to be released later this year that Lavelle said will remove even more friction from the shopping experience.

“When this is complete we’ll offer checkouts with every imaginable payment module linked—especially through our partnerships with PayPal and Braintree—to make that simple and out-of-the-box,” he said.

Magento, founded in 2007, was plucked by eBay in 2011 and absorbed into its X.Commerce development platform (named for one of PayPal's earlier brand names) until 2015 when eBay spun Magento off. The company, based in Campbell, Calif., provides an open-source platform supported by a community of 300,000 developers, which is another plus for Adobe, Lavelle said.

“Adobe has a great open-source ethos that we’re very excited about for developing software and technology together,” he said.

Magento's open-source development approach was the key reason the company was the first to offer one-click checkout to its merchants late last year after Amazon's 1-Click patent expired.

Magento also added a monthly credit-payment option for its merchants last year by integrating Splitit, and supports instant credit via Klarna.

The pairing of a digital content company with a dedicated e-commerce and payments platform is part of a growing trend.

Earlier this year Square paid $365 million for Weebly, which provides website hosting, design and marketing for 625,000 subscribers, to help the mobile payments pioneer accelerate its international reach. Forty percent of Weebly’s customers are outside the U.S.

In a similar way, Adobe’s purchase of Magento brings it to merchants who may consume Adobe’s services differently, Lavelle suggested.

“Adobe helps create brand experiences with products they created like Photoshop, the PDF, advertising and analytics, and we have a lot of similar analytics which when combined can drive some really interesting outcomes and experiences for an even broader client base and addressable market,” he said.

Lavelle will continue to lead Magento’s team, which includes 700 employees, and will report to Adobe’s executive vice president and general manager Brad Rencher, Adobe said in a press release.

The deal is expected to close during the third quarter of Adobe’s fiscal year, subject to regulatory approval.