Magento C.E.O. on Revamped Product Line; Digital Transformation

Magento, the ecommerce platform, launched in 2007, climbed dramatically, and was acquired by eBay. When eBay divested PayPal in 2015, in addition, it marketed Magento, to a private equity company. Magento’s C.E.O. has become Mark Lavelle, a veteran technology executive who co-founded Bill Me Later, the payment services. I talked with him recently to talk about Magento and the condition of ecommerce normally.

Practical Ecommerce: Bring us up to date on the status of Magento.

Mark Lavelle: It is a fairly exciting time here. As a matter of fact, we’re just celebrating the 10-year anniversary of Magento’s heritage. As you stated, we spun from eBay, which had obtained Magento in 2011. I spent time in eBay creating a massive suite of products. When eBay and PayPal divide and went their different ways as stock companies, I have the chance to work with a private equity firm, Permira, and spun Magento and other interesting technologies into an independent company.

Permira is a London-based and Silicon Valley-based private equity company. We ultimately added another investor, Hillhouse Capital, which is a really prominent investor from Hong Kong that’s also helping us with our expansion into Asia. It’s been a really exciting 18 months or so. We’ve really revamped the whole product line. We have updated the core elements of Magento, the Magento commerce platform.

User growth is really tremendous. We do not release those numbers as a private business, but I will tell you that our enterprise software business is accelerating about our cloud platform, the fastest selling component of our business.

The most interesting thing happening is how wide our economy has gotten. We see digital trade being in demand from virtually every business out there. So the most interesting point to me it is not only the B2C commerce marketplace. We’re really a leader in B2B. Forester just named us the leader in mid-market B2B.

PEC: You mentioned a revamped product lineup. Is that Magento Open Source and Magento Cloud?

Lavelle: Correct. We continue to supply and contribute quite heavily to Open Source. The community, the ecosystem around Magento is a key benefit for us in the industry. It’s what our customers love about us, the diversity of solution implementation and technology integrations they get from Magento. We have over 265,000 programmers throughout the world. We’ve got 300 solution providers we certify, and thousands of tech partners that integrate with Magento. That’s a really vibrant economy.

When you look at the installed base between our Open Source and our Cloud product, we will generate about $124 billion of transaction value by the time 2017 is finished.

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PEC: Is your B2B initiative through your Cloud offering?

Lavelle: Yes, the B2B module is primarily via our Cloud product. It’s a module that’s integrated with the core trade digital platform. In addition, we have the enterprise trade product that’s accessible Cloud, but customers also have the option to take that on assumption.

PEC: What’s the starting price assortment of the Cloud merchandise?

Lavelle: an extremely low-end price will be around $24,000 each year. So, $2,000 per month, roughly, which would incorporate the cloud environment. It’s a really compelling value proposition at the low end, and then as customers scale, and want to have more enterprise features, and more powerful services and service, the price would go up from there.

PEC: Are you seeing less expansion with Open Source, given what appears to us to be the appeal of a SaaS platforms, particularly for SMB companies?

Lavelle: It is reasonable to say what we’re seeing is SMBs really gravitating toward our Cloud merchandise. They would like to get that infrastructure as part of their ceremony. Quite honestly, it is not 2011 anymore. Google, Amazon, Microsoft — these men — are taking the cost of computing down to zero. They are also upping the amount of capabilities. It is becoming very much a utility. So SMBs wish to benefit from that. It is getting cheaper and cheaper. It’s a much better environment to host a worldwide commerce platform.

PEC: What is the future of ecommerce merchants, given the dominance of Amazon?

Lavelle: Those realities are upon us, and they are sinking into different segments of the current market, where you are going to be optimistic about the capacity to market responsibly, or you are going to hide your head in the sand.

Consumers are spending some time on social platforms. They are spending time in market platforms. They are spending some time in texting platforms. They are not actually spending it in the conventional user experience in any respect. Hence the merchant still should have a brand that gets projected through these channels. I believe the major challenge going forward is what’s the brand going to be like when the customer isn’t necessarily navigating to your website.

PEC: Tell us about both shareholders, Permira and Hillhouse Capital. What are their strategies along with your strategies for Magento in terms of acquisitions, or maybe an IPO?

Lavelle: Well, we’re a high growth company. We’re a profitable business. We’ve got an excellent funding situation with Hillhouse and Permira. When, for example, Hillhouse kind of came to us and we were right in sync with how this was a long-term secular change to how every business and every vertical is purchasing technology — they are purchasing cloud based technology. They are purchasing digital experience technology. They need business intelligence tools.

Each C-suite, every investor, each board member is asking,”What’s our digital strategy? Is it comprehensive enough?” So even with companies which are shutting physical retail stores, we see them raising their investment in digital. That is exactly what our owners see. That is what we see. It’s a fantastic place to be right now.