Letter from the CEO to the Magento Community: Magento’s Evolving Role in Our Ecosystem

August 1, 2016

Letter from the CEO to the Magento Community: Magento’s Evolving Role in Our Ecosystem

Today we announced the acquisition of RJMetrics, a powerful cloud-based analytics solution for digital commerce merchants. It is our first acquisition since becoming an independent company, and represents another milestone in this historic year of change for Magento.  I’m excited to welcome the RJMetrics team to our company.  Their advanced capabilities will be integrated into our core platform, giving our clients access to significantly better reporting within the Magento Admin, as well as world-class analytics to drive better customer experiences.  Customer acquisition, conversion rates and retention are at the top of everyone’s list.  For our Solution Partners, these capabilities represent yet another service to bring to clients and to help them realize their full potential on the Magento platform.

As this is the first acquisition in our history, I want to share with you, our global ecosystem of partners and developers, the rationale for this move and give the broader context for what this implies about our strategy.  Many of you have heard me talk about our “Say/Do Ratio,” which represents the commitment we make to all of you to a) communicate in a transparent, consistent way what we intend to do, and b) follow-through on our stated commitments in a dependable, high-quality manner.  We are a unique, community-driven business with an open source ethos of transparency, peer production, and collaboration at the core of our DNA. Maintaining the “Ratio” at 1:1 is critical because thousands of people and businesses rely on Magento for their livelihoods, and Magento’s success depends upon the trust and confidence of the Magento Community.

Our primary strategy for growth and innovation remains building products and forming partnerships to distribute, extend and enhance the Magento platform.  But as an independent company, acquiring other businesses or assets is a new capability we can use to grow and extend the Magento platform.  Like internal R&D investments, M&A is an important tool that all companies use to expand markets and remain competitive.  In this fast-paced environment, today’s innovative extension is tomorrow’s core “must-have” feature.  In a smaller way, we’ve executed on this strategy in the past.  We acquired responsive design code from Classy Llama and visual merchandising technology from On Tap.  In both cases, we leveraged the diversity and creativity of the ecosystem to evolve the capabilities of Magento’s core software application, making it better for the entire Community and enabling delivery of cutting-edge technology to our clients ahead of the competition.  In the case of RJMetrics, we were able to accelerate our product roadmap for reporting and analytics, and to broaden the solutions that we can provide to clients.

Our Imagine and MagentoLive conferences serve as the primary platform for us to communicate plans and intentions, such as priorities for our R&D investments or changes in our role within the ecosystem.  Partners do not always like or agree with our decisions, but we strive for transparency and accountability.  We don’t always get it exactly right.  We might change release dates or pivot our strategy to react quickly to competition or opportunity.  Nevertheless, we listen and we work to get better all the time.

But unlike a product roadmap, which is directly in our control and therefore easier to communicate, it is much more difficult to predict when or if an acquisition might occur.  We’ve done a lot of thinking about this topic since we became an independent company, so in the interest of transparency, I want to give you a sense of where we are particularly focused on accelerating the Magento roadmap.  Transparency like this would be considered, at the very least, counterproductive in a typical “closed” software company.  But Magento is far from a typical company.  My goal is to build upon the trust and confidence you have in us, so that you can continue to invest, grow and thrive within the Magento ecosystem.

Our Investment Strategy
Again, our primary strategy for growth and innovation remains building products and forming partnerships to distribute, extend and enhance the Magento platform.  We will not necessarily pursue acquisitions in all areas but for where it makes sense, there are two major objectives that frame our acquisition strategy.  First, we are actively looking for companies and software that accelerates our roadmap in the following key areas:

  • Content & Product Information Management

  • Performance & Security

  • Business-to-Business features and services

  • Marketplaces & Digital Marketing integrations / management (e.g., eBay, Amazon, Facebook)

The second tenet of our strategy is to identify areas where our investment and leadership can aggregate “economies of scale” to the broader ecosystem.  With a client base of over 250,000 customers processing over $50B in GMV annually, Magento has a unique capability to play a role where data and computationally intensive services require scale to effectively compete.  Scale that even our largest clients or partners cannot achieve alone.  Our unique ability to aggregate services will provide significant benefits to our clients, delivering advanced capabilities with higher quality and lower costs.  Here’s where the “network effect” of the Magento ecosystem could be harnessed as a competitive advantage for the entire Community:

  • Cloud Computing

  • Fraud & Risk

  • Advertising Networks

  • Geographic Expansion (opportunities that accelerate Magento’s market position in developing economies)

What should you take away from the above?  In addition to organic product development, investments in a growing partner program, and expansion of extensions in the Magento Marketplace, we are also actively and selectively leveraging M&A in certain areas to enable “Magento the Company” to drive growth and extend the Magento platform. Our ultimate goal is to expand and strengthen both “Magento the Company” and “Magento the Community” for the benefit of our merchants, partners, and developers.  As CEO of Magento, my ongoing commitment is to continue providing as much transparency as possible for all of you.

Mark Lavelle, CEO, Magento Commerce