The small world of e-commerce has been in turmoil since last week’s announcement of the 100% acquisition of Magento by the giant eBay. For the past week, the wildest suppositions have abounded on the net as to the future of what has in record time become the benchmark for open source e-commerce platforms. Some have even predicted the imminent demise of the solution. Well then? Is it time to bury Magento? We’ve provided some food for thought on this subject below...
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We must first recognise that the announcement was not insignificant and that certain concerns, although in some cases exaggerated, may be legitimate. eBay represents a competitor for some and a dictatorial service provider or even the strong arm of counterfeiters for others: in other words, it has not always been seen in a very positive light by e-merchants. However we must recall that the activities of the US based company now largely exceed the simple auction site that formed the basis of its (bad?) reputation. For several years now, eBay has been working to expand its services by offering as many tools as possible to merchants wishing to venture into online sales. Its ambition is clear: to be everywhere where online transactions take place and for everyone: private individuals, microbusinesses/SMEs and key accounts. The 2002 acquisition of PayPal namely enabled eBay to add a serious new string to its bow by banking on this now virtually indispensable payment solution (there are 300 million PayPal accounts worldwide today). And it is rather amusing to note that, although some merchants are upset about eBay’s acquisition of Microsoft, fearing for the confidentiality of their data, these same businesses appear however to be quite confident when it comes to integrating PayPal in their e-shops...
Either way, eBay has proven its ability to engage in widely different activities on multiple fronts while still preserving consistency in terms of its acquisitions and its major strategic movements (the purchase of Skype and its recent sale to Microsoft is a good example of this). We should also bear in mind that the acquisition of Magento did not come out of nowhere: for over a year, eBay has held more than 49% of the capital in the Californian start-up. What are the direct consequences of this new position? Native integration of PayPal in Magento and release of an SaaS service at the start of the year: Magento Go. There has been no indication of a desire to abandon the open source model, but rather an orientation toward even broader use of PayPal amongst as many online shops as possible.
We must not however hide our heads in the sand: the purchase of the remaining 51% will necessarily have an impact on Magento’s future. But clever is he who will be able to accurately predict what this impact will be. For now, based on the facts and announcements, we can simply say:
- the Magento brand will live on, as reiterated once more by CEO Roy Rubin last week. There is no question of rebranding the tool, as the Magento name has too high an intrinsic value to be brushed aside;
- support for the Enterprise version will continue to be provided by the teams in place at Magento. For those who worry about conflicts of interest or that this crucial business will be tossed aside, this is vital information;
- the acquisition of the remaining shares in Magento was made in the interest of strengthening eBay’s mysterious X.Commerce project. While the main lines of this project remain vague and the handful of terse press releases on the subject choose their words with care (leaving it to us to understand the ‘open platform’ concept as we see fit), we do however know that Magento, PayPalX (PayPal’s development API), Omniture, RedLaser and GSI, another recent eBay acquisition (known in particular for its logistics brick), will be incorporated into this new large toolbox. eBay has however been clear on one point: the development of a solution to rival Magento is out of the question. The objective of X.Commerce is to create an enormous toolbox for merchants who, regardless of their size or goals, will find a brick to meet their needs in X.Commerce (hosted shop, payment gateway, merchandising tool, logistics management, etc.). We know little more about the project at present and it is likely that eBay will need more time to refine and market this service (and, incidentally, to await finalisation of the transaction with Magento which will not take place until the end of the year); and
- the final concrete – and crucial – point in this analysis is the continuation of Magento developments in parallel to project X. Magento CTO Yoav Kutner revealed a great deal of interesting info on the future of Magento during Developers Paradise last week in Ibiza. And about Magento 2 in particular, whose release is scheduled for Summer 2012. In a future article, we will be speaking more about the expected additions to this major release but what must be remembered for now is that it is a large-scale project for the vendor’s development teams. A project that includes a large amount of clean-up and the addition of unit testing and new functionalities: all this entails a major investment that would obviously be nonsensical if the solution were meant to be abandoned or radically transformed.
So beware those web prognosticators, some of whose scenarios would make even Paco Rabanne blush. First because it has always been common practice, when open source solutions have been acquired by players from a different sphere, to immediately spout alarmist chatter. The most recent example was MySQL, whose demise and burial were announced after its purchase by Oracle. Yet 2 years later, the DMS has never been so dynamic, with a release cycle far superior to what was seen before it was brought into the Oracle fold... And also because Magento remains, first and foremost, a solution built on an open source model, a model which is by definition unchanging. Any attempt at retreat would immediately be sanctioned by a fork with devastating effects for the vendor. Today this is neither desirable nor likely, but the rules of the game are clear, which eBay full well knows.
Should we now be wary of Magento? If, as we expect, Roy’s and Yoav’s team continues to pursue its efforts to maintain a competitive solution in a more and more cut-throat sector and with (open source and proprietary) solutions that are gradually making up ground, then there is no doubt that Magento still has good times ahead of it.