You could spin Episerver’s acquisition of Optimizely in a number of different ways.
Trying to climb the digital experience software ladder and knock off Adobe at the top?
Adobe’s lonely at the top in terms of revenue: it earned $3.21 billion in digital experience revenue in fiscal 2019, up 31% for the year. Episerver and Optimizely trail Adobe throughout four reports by Gartner and Forrester the last two years that rank vendors in the digital experience software space.
A business move more so than a technology acquisition?
San Francisco-based Optimizely received a $50 million Series D boost from Goldman Sachs in 2019 to increase its total funding to $200 million last summer. But, in July, Optimizely admitted it laid off around 15% of its staff, or about 60 people, due to business impact of COVID-19. And Episerver presumably has the capital: it was acquired two years ago for $1.16 billion by Insight Venture Partners.
A technology match for the ages that is “second to none”?
Company officials pointed that out in a Sept. 3 press conference about the acquisition, which features content and commerce meeting testing and optimization for relevant digital customer experiences.
Another not-so-surprising acquisition by a digital experience software provider?
Since 2016, Adobe (four), Episerver (three), Acquia (three), Salesforce (four) and Sitecore (two) each have been active in M&A trying to expand their technology software suites.
All of the above?
The truth is, no one knows how the acquisition plays out until practitioners start recognizing the integration and execution realities behind the press-release promises. But those promises of merging content, commerce, testing and optimization look solid, according to analysts in the digital experience software industry.
Expanding the DXP Story
Optimizely offers digital experience optimization technologies, including AI-powered personalization and experimentation, which encompasses A/B testing, multivariate testing and server-side testing. Episerver offers a digital experience platform that includes content management and commerce software. “Paired with previous, relatively recent acquisitions, the Optimizely acquisition helps Episerver expand its DXP story even further and make it more compelling,” said Irina Guseva, senior director and analyst for WCM (Web Content Management) and DXP (Digital Experience Platforms) for Gartner. “It’s also opening up further opportunities for both Episerver and Optimizely customers.”
Episerver acquired Insite Software (B2B commerce) Dec. 16, 2019, and acquired Idio (content personalization, analytics) the month before. While the Optimizely acquisition doesn’t necessarily make Episerver stand out in the digital experience platform competitive landscape, it should help the Stockholm-based provider compete better with larger players that have had similar functionality for a while, according to Guseva.
Related Article: 9 Tips to Consider When Selecting a Digital Experience Platform
Climbing the Adobe Ladder
Case in point: Adobe, which through Adobe Target offers impressive target and testing capabilities, Forrester researchers reported in the Forrester Wave for Experience Optimization Platforms published June 20, 2018. And it already has Adobe Experience Manager, which offers content management. This makes the Episerver-Optimizely acquisition not exactly groundbreaking.
In the Forrester Wave for Experience Optimization Platforms, Adobe was the lone leader. Customers reported that Adobe needed to work on making Target appeal beyond its traditional marketing and ecommerce base and improve the overall platform experience. Legacy systems are also a challenge.
Optimizely trailed Adobe and was classified in the “strong performers” class. It was the second-rated vendor for strategy and current offering categories. Forrester analysts James McCormick and Emily Miller gave Optimizely praise for building a culture of experimentation.
And speaking of Adobe, the provider also beat Episerver in the Gartner Magic Quadrant for Personalization Engines published July 13 of this year. It topped Episerver in the Forrester Wave for Digital Experience Platforms (July 8, 2019) and Gartner Magic Quadrant for Digital Experience Platforms (Jan. 29, 2020). Episerver was a leader in the Gartner DXP report along with Adobe, Sitecore, Liferay and Acquia, but a strong performer in the Forrester DXP report with Sitecore while Adobe, Salesforce, Oracle and SAP took leaders honors.
Smart move @episerver , what is coming next as all CMS companies try to follow the route of Adobe?— Rohit Prabhakar #DigitalTransformation (@rohitprabhakar) September 5, 2020
The Quest to Move Beyond Table Stakes Capabilities
Adobe aside, Guseva said that although testing and optimization are almost table stakes in the current DXP market, at the same time many organizations are not utilizing this functionality to its fullest potential. “Always be experimenting,” she said, “[This] is a critical best practice these days when it comes to digital experiences. Episerver already has a lot of intelligence and content capabilities in place, and Optimizely falls quite nicely on top of that in getting closer to that Holy Grail of getting just the right experience at just the right time to just the right person, wherever they are in their customer journey.”
Optimizely’s story on its own had become relatively commoditized, but Episerver offers a fuller picture and fuller breadth of digital experience capabilities, she said. “Optimizely’s client base will now have access to a broader DXP solution,” Guseva added.
Vision for How Content Is Created
Nicole France, principal analyst and vice president at Constellation Research, called the Episerver-Optimizely acquisition a good move for each company. For Episerver, it provides a significant extension of testing capabilities across digital channels, not just websites, she said. The acquisition also positions Optimizely within a broader portfolio of capabilities aimed at optimizing digital properties while improving and tailoring customer experiences. “I really don’t see any down side here,” France said. “It’s a positive for customers on both sides, especially since leadership has made clear that they plan to provide these capabilities both as part of a platform and as 'composable services,' which I interpret as individual offerings.”
Episerver CEO Alex Atzberger articulated a vision for Episerver to become an integral part of the day-to-day workflow of how content — and the digital properties and channels that transmit it — is created, according to France. That requires, she said, a shared view of not only the behavior patterns on a landing page but all of the touch points (digital and otherwise) that a customer has with a company. “The Optimizely acquisition certainly addresses a broader scope of digital interactions than Episerver had on its own,” France said. “It also incorporates both layout design that marketers manage and the back-end logic that rests with developers.”
Related Article: Insight Venture Partners Acquires Episerver for $1.16B
Why Optimizely Is a 'Huge Win'
Optimizely is a “huge win for Episerver” because Optimizely’s advanced engine allows experimentation at all touch points, not just the web, and provides highly personalized experiences the customer needs and the basis for next-best actions, according to Paul Greenberg, founder and managing principal for the 56 Group.
Optimizely’s addition “dovetails beautifully with ecommerce,” Greenberg said, “when you view it as an interaction engine in which transactions become a subset of interactions, which is what ecommerce 21st Century style is. For Optimizely, well, they have had an excellent product and been around a long time, but sat in the shadows, honestly, due to themselves. This takes them out of the shadows and makes them part of a dynamic visible company that has a lot of potential for a real market impact.”
Developments in Product Recommendations, Algorithms
Episerver’s Justin Anovick, in a press conference Sept. 3, unveiled some initial product outcomes customers can expect to see thanks to the acquisition. One includes taking what Optimizely does “exceptionally well today,” especially on experimentation, testing and targeting and adding Episerver content and product recommendations capabilities. This, he said, allows marketers to create the right layout to be able to test different aspects but also to offer relevant recommendations. Customers will be able to drive evidence-based digital experiences, he added.
Claire Vo, Optimizely’s chief product officer who served as CEO and founder of Experiment Engine when it was acquired by Optimizely in 2017, said the combination of Optimizely’s client and server side experimentation capabilities unlock the ability for companies to test across their customer journey.
The acquisition will allow customers to unlock more value across content and commerce. It will include capabilities like dynamic pricing testing, testing different offers, promotions and timing, search algorithms and recommendation algorithms, “all the behind the scenes stuff that make up a big piece of the customer experience.”
France of Constellation Research noted Episerver’s aspiration is to provide recommendations for what to do next: what to change or improve.
“This would indeed be a major advance in the market,” she said. “The move to guiding which actions to take — what to do next — requires a combination of testing and analytics capabilities as well as the expertise to interpret the results, providing not just insights but suggestions. This is still a future vision, of course, but increasing the scope of testing and analytical capabilities is a critical step to getting there. As far as integration issues are concerned, I don’t foresee any unusual degree of challenges. Both companies placed a strong emphasis on APIs and microservices which should facilitate the process. Execution is the name of the game."