Macromedia Shocks with Flashy E-commerce Plans

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Event Summary

Macromedia (Nasdaq: MACR) is recreating itself into a major provider of tools specifically targeted for the development of E-commerce software and systems. Besides its best known products, Shockwave and Flash, Macromedia develops software for Web publishing and Web learning. Other Macromedia products include its Dreamweaver authoring software and an E-commerce construction kit called Drumbeat 2000. It has now embarked on a strategic plan - "the Ebusiness Infrastructure" -- to become a one-stop provider of tools needed to develop leading-edge E-commerce products.

Macromedia's announcements include the following:

  • Acquisition of Andromedia, developer of software that tracks and analyzes website users and their behavior and can personalize their experience on a website

  • Announcement of Project Whirlwind, a complete site production platform enabling the management, verification and deployment of website content. Project Whirlwind is based on technology from StarBase, a vendor of software configuration management systems.

  • Partnerships with Internet services provider USWeb/CKS and application vendor BroadVision. BroadVision will be an integration platform for Macromedia's Ebusiness Infrastructure; BroadVision already sells a customized version of Macromedia's Dreamweaver 2 authoring tool.

  • The spin-off of the website as an independent entertainment company.

Market Impact

Many markets were impacted by these announcements. Macromedia comes into this transformation with an impressive set of credentials. Rated number 20 on PC Week's October 19,1999 list of "100 Technology Companies That Are Changing The World", its Dreamweaver 2 is the leading advanced site design tool (used by 66 percent of professional site developers according to Forbes), and its Drumbeat 2000 generally exceeds the capabilities of Microsoft's clumsy Visual InterDev 6.0 for creating database-driven Web sites.

Grabbing Andromedia's personalization tools for $275 million in Macromedia stock, just before Andromedia was set to complete its initial stock offering estimated to net the company $48 million, makes strong statements about Macromedia's vision. It's not quite accurate to paraphrase Mark Twain by saying that "everybody talks about personalization, but nobody does anything about it." However, personalization has been an add-on, frequently handled by websites on an ad hoc basis. Making it part of the basic suite of site creation capabilities will make personalization much more routinely available.

Finally, although it was not generally noted by the early press reports, we believe that Project Whirlwind is the sleeper in these announcements. Content management is a problem faced by all web sites. An elegant solution to this nearly intractable problem would be like the proverbial better mousetrap. Macromedia has announced that its eBusiness Infrastructure will integrate with Vignette, a vendor of software that delivers personalized Web experiences and of enterprise-wide content management solutions. In the long run, this is a bonanza for Vignette, because it creates an entry for companies who new recognize the need for content management on their Web sites and who will soon be clamoring for it throughout the rest of the enterprise.

Vendor Winners/Losers

In many ways, Macromedia is striking out at two industry giants: Microsoft and Adobe. With its $48 million in revenues Macromedia will not dethrone Microsoft's preeminent position as a provider of Web tools, but it promises to offer a capability for building high-end Web sites, suitable for mid-size and large companies, that is more powerful and better integrated than Microsoft's offerings. This is a customer base that leans toward Unix servers and therefore away from Microsoft's development tools, and Microsoft, by emphasizing ease-of-use and software wizards, seems to be somewhat more interested in the smaller companies. But Microsoft is also interested in larger enterprises and can be expected to move swiftly to challenge Macromedia in this arena.

While Adobe's products like PhotoShop are not directly threatened, in comparison with Macromedia it now clearly looks like a provider of individual tools, as opposed to a provider of solutions. In the PC Week company listing Adobe placed 19th, just ahead of Macromedia; it may not have known that someone was nipping at its heels, but now it may well be tasting dust. Adobe has recently launched a $5-$10 million image building ad campaign, largely based at younger Web professionals without prior design experience. There were rumors last week that Macromedia was about to merge with Adobe. That seems not to be in the cards just yet, but it would be a logical step for both companies, creating a single source for the full kit of tools needed to build best of breed E-commerce sites.

Vendor Recommendations

The problem with product suites is that they can be difficult to use, unless developers have good access to first-rate support. Microsoft's SiteServer packages make a good example. They boast a rich feature set but lack sufficient documentation to allow the user to work with them smoothly. In additional, developers encounter annoying problems between different applications in the suite. When Macromedia attracts developers with its new suite, as it will, it will need to cement the relationship in order to keep them. Even more important than additional (but essentially marginal) bells and whistles will be a solid support organization. Almost everyone does 90 percent of what is necessary - on-line documentation, forums, and megabytes of examples on the CD-ROM. But it is the additional 10 percent that developers need, and that is largely to be found in an educated, responsive, and creative support staff. If Macromedia builds the best of breed here they will create an intensely loyal following and become the absolute first choice for E-commerce development.

In addition to the capabilities provided by Andromedia, it would be valuable to provide direct support for ad serving. It would be a mistake to be tied to only one ad model or vendor, but the tagging concepts are similar enough between vendors (See TEC Technology Research Note: "How to Serve an Ad" October 23rd, 1999)that support mechanisms would be possible. Since personalization and ad serving are becoming more and more intertwined, this would be a significant benefit to the developer.

User Recommendations

Users planning to enter the E-commerce website arena or looking to major upgrades of their technologies should place Macromedia near the top of their evaluation list. Given the popularity and quality of its products, it would be safe to evaluate them as if they had already delivered on the promises of the Ebusiness Infrastructure strategy, because the worst possible result still leaves the user with a collection of excellent tools. Of course, users should certainly make sure that future promises are included as part of current contracts.


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