More color on Adobe + Omniture
Wow, everyone seems to have an opinion about this acquisition. Some people think Microsoft will ride in at the 11th hour and out-bid Adobe because Microsoft and Adobe compete, and because Google has Google Analytics. On this point I am inclined to agree with Joe Davis, CEO of Omniture competitor Coremetrics, who comments that Omniture has been shopping the company around for some time and it is unlikely that Redmond hasn’t already had the opportunity to play (given the significant investment Microsoft has in Omniture.)
Other folks appear to be worried that Adobe will be integrating Omniture into Flash and this raises privacy concerns. While certainly folks have concerns about tracking and the possibility of embedding tracking into Flash Local Shared Objects (LSO) I just have to believe that management at Adobe is smart enough not to risk Flash’s dominance by subjecting the technology to the scrutiny, navel-gazing, and paranoia of the “privacy police.”
Their customers, at least the ones I am talking to, are more or less 2 to 1 against the acquisition at this point citing a variety of concerns (transition, failure to execute on stated product plans, talent flight, Adobe is not adept at services, etc.) Far be it from me to tell anyone’s customers they are wrong when expressing concerns, especially since this is an out-of-sector acquisition and Omniture is now more or less a medium-sized cog in a very big machine. Arguments for include loving Adobe (I love Adobe!), being relieved that Adobe is a big, grown-up company, and hopes that Adobe will focus on fundamentals like customer support, product execution, and global expansion.
Another customer complaint is that Omniture is now losing the (thin, pasty) veneer of third-party objectivity and that some companies may not actually want Adobe to have access to their site’s data. I think this may be the same boondoggle that Omniture (and others) have used to explain why “the Enterprise wouldn’t use Google Analytics” — except there is more and more (and more) evidence that the Enterprise does use Google Analytics — but it will be interesting to see how the “free-standing” analytics vendors work to make Omniture eat their own words now that they too are part of something larger.
The comment that has me most concerned is one best detailed by Carter Malloy from Stephens, Inc. Research Analyst who I have known for years and who I know to be pretty level headed regarding the sector. Carter sent me this, which I am simply repeating with his permission:
“I don’t understand the strategic rationale on adobe’s part. Different end market buyers. Very different products. No real cost savings or integration between the two products. OMTR is very capital intensive vs. adobe not much at all. Seems like Adobe is buying growth with hopes for cross sells. I would be surprised to find out that OMTR did not shop the business around before accepting the bid from Adobe – we should find out soon in public filings required by the SEC. Omniture will still have to report 3Q09 earnings in October, but I think the deal will get closed before Q4 in Jan/Feb. I also think Adobe will show Omniture’s revenue performance on an informal basis going forward. It will be <10% of Adobe’s total revs, but I still think they will give analysts at least some idea of what growth looks like.”
This was in response to my comment detailing a thesis that I have heard from several of Carter’s peers: that Omniture was about to blow Q3 earnings and that the result would be a dramatic dip in OMTR share price as investors head for the exit. The rationale is, apparently, that the company has over-promised and under-delivered for too long, both to investors and customers, and the economy has been the “last straw” for many who have opted to look elsewhere for web analytics technology. This, combined with slower-than-hoped adoption of non-core solutions (data warehouse, Test & Target, Search Center, Survey, etc.) resulted in a “company who’s greatest days are behind them” (direct quote, and I begged to attribute but was told “no” due to company policy.)
Don’t get me wrong: This is not my thesis, at least not yet.
While I have seen evidence of larger Omniture customers switching, increasingly to Unica, I have not seen enough evidence of the kind of massive shift away from SiteCatalyst that would warrant a sudden exit. The good news is that Carter’s thesis can easily be tested: Either Omniture will make expectations for Q3 or they won’t. I’m sure this will make for an interesting Q3 call, at least for those investors who are taking a bath on the acquisition price.
My concern is this: If the investment banker thesis is correct, if Omniture was about to report a second quarter of, um, disappointing results, then what does that mean for the larger industry? Is Adobe really evidence that the larger market is taking an interest in digital analytics? Or was the company thrashing about looking for something new to cover for recent declines and this really isn’t about Omniture or web analytics at all?
Again, I don’t know, at least not yet, and I don’t think any of us do. But given the very mixed reviews about the acquisition I think we as an industry should take a step back and consider the larger ramifications. Personally I don’t think web analytics is going ANYWHERE — hell, I’m recruiting at Web Analytics Demystified — but we can all admit we collectively haven’t done the best job explaining what we do and what the data we live and die by means.
This interesting acquisition will certainly get more interesting as the days pass. Congrats again to all involved.