Amazon’s growth is slowing. According to research firm eMarketer, Amazon has 40.4% of the $908 billion U.S. e-commerce market.
But that’s up from 39.8% last year – an increase of just 0.6 percentage points.
No wonder Amazon stock is up only 1.6% so far this year.
We need to look elsewhere for e-commerce growth.
Lucky for us, a company that is more widely known for electronic documents has quietly become an e-commerce powerhouse.
It’s all because of a platform called Magento. No, it’s not the name of a sci-fi character. It’s actually a massive win for the company I have in mind.
In fact, it’s a win so massive that it has helped this Silicon Valley leader crush Amazon by 900% so far this year, with plenty of upside ahead…
Modern Software for Modern Shopping
Before the pandemic, eMarketer was forecasting a 12.8% growth in U.S. e-commerce sales, for a total of 761.26 billion.
But today, after the massive growth acceleration that online retail has seen, the research firm now expects e-commerce to grow 13.7% this year, reaching a whopping $908.73 billion.
So, a $1.7 billion buyout back in 2018 to get a leg up on this high-growth field is starting to look very savvy.
That’s how much today’s firm, Adobe Inc. (ADBE), paid for Magento back in 2018.
They’re the company best known for software such as the Adobe Acrobat Reader software used to read PDF files, and especially for Adobe Photoshop. They are especially notable as a leader in graphic design and video editing software.
It boasts software like Photoshop, Illustrator, and Premiere Elements, considered to be the gold standard among professionals and amateurs alike.
Adobe also offers other, more specialized software, including Dreamweaver for website design, and even the Audition suite for audio editing. Adobe also offers a whole suite of advertising tools.
Up In the Clouds
Now, ten years ago, Adobe’s slow and costly two-year development schedule for selling big new versions of its software on CDs just couldn’t cut it anymore.
Instead, the firm moved its products into the Adobe Creative Cloud, where it’s accessible and constantly updated for a subscription fee. Not only is this a much more successful business model, but it’s only going to become stronger as new technology creates improved wireless infrastructure.
It’s already been an amazing success for Adobe Inc. (ADBE). What was once regarded as a staid, legacy firm is now a leader in cloud software – and as you’re about to see, in e-commerce, too.
You see, in 2018, Adobe acquired the privately-held e-commerce company Magento Commerce for a cool $1.68 billion. It’s turned Adobe into an e-commerce powerhouse.
See, Magento is a content-management system for e-commerce websites. In short, that means Magento is the platform on which anyone can easily and quickly build a fast, secure, and beautiful online store, with built-in functionality for shopping carts, reviews, custom themes and design, and whatever else you might need.
In The Public Eye
Clearly what Adobe is doing with Magento is working, as current clients include giant brands such as Helly Hansen, Canon, ASUS, HP, Liebherr, and even Burger King.
Magento is truly customizable. The platform supports over twenty different payment providers that can be presented at checkout, so store owners can be sure they’ll be able to offer whatever payment method they want.
Of course, even the fastest and prettiest online storefront won’t do much if no one ever finds it. That’s why Magento is built from the ground up to be fully search engine-optimized. This makes it easy for retailers to make their online stores show up high on Google search results, increasing visitors and sales.
This means Adobe now offers the complete package needed for any modern business, whether a new startup or an established corporation. The firm’s tools are indispensable in designing and creating written content, images, or video for use in advertising, or to fill websites.
Those websites can be made in Dreamweaver and hosted in Magento, which also ties into the advertising software Adobe runs.
According to kinsta.com, there are currently over 187,500 live websites that function using Magento.
And just recently, Adobe announced that it’s going a step further and teamed up with PayPal Holdings Inc. (PYPL) to create its own payment system that will work seamlessly with Magento and other e-commerce platforms.
Adobe’s new system will accept credit and debit cards as well as PayPal’s own payment and pay-later offerings, including crypto.
This is especially important for smaller businesses, which cannot negotiate for a good deal with large payment processors and so end up paying more.
Add it all up and you can see why there’s still so much upside ahead for Adobe.
Over the last three years, the firm has grown its per-share profits by 25%.At that rate, Adobe is on pace to double profits again in roughly three years.
It goes to show that great tech leaders know how to reinvent themselves – and hand their investors outsized gains.
Cheers and good investing,
Michael A. Robinson