Adobe to Acquire Omniture

In a move announced late Tuesday afternoon, Adobe Systems entered into an agreement to acquire Web analytics company Omniture for approximately $1.8 billion in cash. The deal, according to executives from both companies, will lead to solutions for the creation, delivery, and optimization of online content and applications that are far more comprehensive than those available today,

Under the terms of the agreement, Adobe will commence a tender offer to acquire all of the outstanding common stock of Omniture for $21.50 per share in cash, representing a premium of 45 percent over Omniture's average closing price for the last 30 trading days through Monday. The acquisition is expected to close in the fourth quarter of Adobe's 2009 fiscal year, according to a joint statement released by the two companies.

Executives of the two companies say that the combination of Adobe's content-creation tools with Omniture's technologies for Web analytics, measurement, and optimization, positions Adobe to deliver solutions that could change the way companies view customer experience and e-commerce across all digital content, platforms, and devices.

"Adobe customers are looking to us for solutions to deliver engaging experiences and more effectively monetize their content and applications online," said Shantanu Narayen, Adobe's president and chief executive officer, in a statement. "This is a game-changer for both Adobe and our customers. We will enable advertisers, media companies, and e-tailers to realize the full value of their digital assets."

According to company statements, Omniture will become a new business unit within Adobe. Josh James, Omniture's chief executive officer, will join Adobe as the senior vice president of the new business unit, reporting to Narayen. After attempts to speak with Omniture representatives, a spokesperson for the company said in an email statement it has entered a quiet period and cannot comment further on the acquisition, giving a link to Adobe’s microsite giving more information on the move.

Suresh Vittal, principal analyst at Forrester Research, says that the move could have huge implications. For those benefits to be realized, however, Vittal says that Adobe and Omniture needed to enter into an acquisition agreement. "For it to be truly transformational, they had to become a single company," he says. "Too often we hear about partnerships that are just an announcement and very little follow-through. The acquisition is on the other end of that spectrum, and sends the message that they will follow through."

Vittal explains there are two promises implicit in the deal. First, the ability to embed measurement into all interactive and digital assets. "Why? Because you're bringing together the preeminent provider of development platforms...with the predominant player of Web measurement," he says. There's a long way to go, he adds, but with content increasingly created in online channels and social media — thereby circumventing a marketing organization that has not scaled at the same rate as content creation — that content needs to be syndicated and reviewed. "If [content] never gets measured, marketers don't know if they're creating the right types of campaigns," he says.

The second promise, Vittal says, is a "much more challenging objective to achieve." Essentially, the newly combined entity could redefine how media is valued. "By embedding measurement into content, you can compare apples to apples," he says. "Eyeballs and impressions shouldn't be the only deciding factor for where to place advertising. [Companies] should start thinking about very value-based metrics on the eyeballs." Even if a Web site sees fewer visitors, he says, each of the customers who do reach the site may be more valuable. "It helps to think about a new standard," Vittal says, "one around audience evaluation more than measurement."

Marketing vendors also had plenty to say regarding the announcement. According to a statement released by Blaine Mathieu, chief marketing officer at online-marketing-solutions provider Lyris (and a former Adobe executive), the acquisition can help more than just large enterprises. "[The] acquisition of Omniture clearly demonstrates the online-marketing space is heating up and the consolidation we have witnessed over the last five years continues to move ahead," he said. "While the large enterprises that Adobe and Omniture serve will have the money and experience to understand the [return on investment] of an integrated suite, we believe this deal will also trigger marketers in midsize businesses to better understand the value of an integrated online-marketing tool set."

Thanks to Omniture's on-demand platform, the deal also finally gives Adobe entry into the software-as-a-service (SaaS) market — perhaps, Vittal says, providing the long-awaited answer to the question of how the company was going to tackle SaaS. "Revenues declined substantially in the past quarter," he points out, citing the 29 percent drop (to $136 million) in year-over-year third-quarter earnings Adobe reported in its quarterly report (also released Tuesday). "What better way to get into the on-demand market than buying the biggest marketing-software provider that delivers [that model]?" Vittal asks.

Still, Vittal cautions, the acquisition will not come without its challenges. He points out the following four:

• culture — combining the Utah-based Omniture with Silicon Valley–based Adobe;
• company strengths — "Adobe hasn't shown it necessarily has marketing IQ," Vittal says, adding that Adobe serves the right side of the brain, Omniture the left side;
• vision — Omniture's goal of an integrated online-marketing suite may not mesh with Adobe's desktop solutions, Vittal says -- those applications often involves two different buyers within an organization; and
• standards — getting competing interest groups together to agree on measurement standards, such as media planners, advertisers, and television executives.

"I'm not fully convinced that the overall Web analytics space will be affected in the near term," Vittal says. "If Omniture takes its eye off the ball, which is possible, there might be adverse effects for the broader measurement community. We need to let this thing play out more before we make a call on that, though."

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