Adobe ties web design to business results

The more I think about Adobe's decision to acquire Omniture for a mouthwatering $1.8 billion (Techmeme coverage), the more it feels like a smart move (though I know others are wondering how the deal makes sense). The growth of SaaS and cloud services gives Adobe a looming problem, which depends for its revenues on sales of conventionally licensed software, most of it to the creative people who design corporate websites. Even if those users turn out to be the last people on earth to switch their allegiance to cloud-based applications (as well they might), they're still going to slow their spending on licensed alternatives in the meantime. Adobe needs a way to tap into the faster growth that's available from online solutions, and Omniture, which I once named one of The four horsemen of SaaS, will help it jump on the gas.

By the way, some financial analysts are saying Adobe overpaid because competition from the free-of-charge Google Analytics service is already putting Omniture's revenues under pressure. I don't think the analysts who are saying that really understand much about business. Omniture's core customer base are enterprises that spend huge amounts of money on web marketing and their online presence, and who want to measure the effectiveness of and return on that spending. They're going to rely on a free-of-charge service for such a critical business process? One that's provided by the same company that accounts for a large proportion of their online ad spend? Puh-leeze!

But back to why Adobe made this move now. Its existing strategy, which I described last year in a post on SAP, Adobe, Microsoft: three monkeys take on SaaS, has been to develop a new line of collaborative applications that compete on Microsoft's turf rather than cannibalizing its own licensed revenue stream. That strategy continues, but it's inevitably taking a while to build it out. Hence the decision to open a new front in the company's transition into online services.

Omniture makes a superb fit for reasons that are succinctly summarized in this graphic presented on yesterday's analyst call:

The thinking behind this is the same meme that led SuccessFactors last week to refocus its strategic positioning around the notion of 'business execution'. The new strategy at SuccessFactors makes an explicit link between employee performance management and business goals. Similarly, Adobe's new strategy makes an explicit link between website design and business goals. Instead of simply enabling its customers to build websites, adding Omniture's service means that now its customers can also measure and tune the effectiveness of that activity, as part of an integrated, round-trip process. Not everyone in Adobe's customer base is going to like having all this instrumentation and accountability thrust upon them, but it's in tune with the way the world increasingly works these days. The connectivity and real-time data streams of the Web allow us to join up processes that have always previously been disjointed.

Of course there are other elements of synergy in this deal, such as being able to do a better job of tracking user behavior when navigating Flash objects, especially multimedia — companies like Omniture have always struggled with the Adobe web technology. Similarly, there's a lot of scope to do a better job of tracking how readers interact with online documents, which maps well to Adobe's other online service strategy as well as its PDF technologies. Finally — and perhaps most importantly — Omniture's top management will bring much-needed SaaS 'DNA' into Adobe — CEO Josh James has wowed several SaaS conference audiences with his pitch on how to drive SaaS revenue growth.

But the reason this notion of joined-up web design and usage analysis is so front-of-mind for me is because I know how much history and expertise in this already exists within Omniture. One of the earliest SaaS content management vendors was a company called Atomz, which launched an on-demand website search engine in 1998 — my website at the time, ASPnews.com, was an early user, and I continued to use it on subsequent web properties. Atomz, which later launched a complete on-demand web CMS, ended up being acquired in 2005 by web analytics provider WebSideStory, in a deal which presaged some of the synergies I've outlined above. As Atomz founder and CEO Steve Kusmer said at the time: "So much is possible by taking the analytics data you have and marrying it with the applications running your Web site." WebSideStory's then CMO Rand Schulman elaborated on this notion in an interview later that year:

"the effect of combining the full suite is to give marketeers the ability to assess and react to the success of their online marketing in real-time ... Traffic analysis allows them to measure where visitors have come from and what they do while on the site. By controlling search and content they can make changes at any time to optimize how potential customers explore the site and find the information or products they’re looking for. Keyword bid management allows them to fine-tune the efficiency of their spending on contextual advertising, bringing new prospects to the site more cost-effectively. Because all this happens on-demand and in real-time, marketeers can put themselves directly in control of the effectiveness of their campaigns."

WebSideStory, which renamed itself Visual Sciences after an acquisition, was itself acquired by Omniture in January 2008. I feel sure that legacy of knowledge and experience of what can be achieved from marrying web content design and management with web analytics formed a big part of the sales pitch when Omniture negotiated the price of its deal with Adobe.