Adobe’s announcement that it intends to acquire Web analytics Omniture is intriguing on several fronts.
The brief history of the Web analytics industry has been marked by a flurry of acquisition and consolidation almost from its inception. The analytics function is critical to Web site operators and advertisers. That need, and relatively low barriers to entry need spawned a host of entrants into the space, most of whom were challenged to establish sustainable competitive differentiators. That resulted in a market characterized by price competition and a features arms race and an imperative to consolidate through acquisition. Omniture was a prime actor here, using much of the capital it raised from its 2006 IPO to acquire a string of companies including Visual Sciences, Webside Story, Offermatica, Mercado and Touch Clarity.
One of the ironies of Web analytics in online businesses is that although many companies are swamped with data and often fail to make effective use of the data they already have, there is also much they would like to measure but cannot. One such area of where measurement (and content optimization) remains a challenge is in highly interactive Web sites, such as those that are built using Adobe’s Flash platform.
That fact seems to be a key pillar of Adobe’s strategic rationale for this acquisition. Adobe suggests that with the integration of Omniture tools content authored with Adobe tools will be easier to instrument, measure and optimize.
But integration alone is rarely sufficient grounds for acquiring another company. The acquisition presents a simplified competitive environment for the company and make increase the efficiency of the combined company’s sales operations. Adobe and Omniture undoubtedly have a very significant customer overlap.
The value of the deal is intriguing as well. As noted in today’s Wall Street Journal, worldwide market for Web analytics is some $600 million today, with omniture accounting for half of that, making the purchase price three times industry revenues, or six time’s company revenues.
My impression of both companies over the years is that their management teams are smart and driven. I expect them to create great value for Web publishers, advertisers and merchants over time.
