Web analytics firm Omniture has agreed to buy San Francisco-based Offermatica and its online marketing and testing software for $65m in a paper and cash deal.
The deal calls for $35m of Omniture shares and $30m in cash to change hands. The transaction is expected to close in the fourth quarter this year.
Offermatica’s on-demand software supports so-called A/B split testing and more sophisticated multivariate testing techniques that test visitor response to real-time changes in online content so that online marketers can quickly tweak content to maximize conversion and revenue.
The patented techniques effectively automate the definition and testing of structural elements in web sites, such as various versions of the site, which is a cumbersome task that has normally been done manually by marketers.
Josh James, co-founder and CEO of Orem, Utah-based Omniture, said that the inclusion of Offermatica’s software as part of its flagship SiteCatalyst platform that blends web analytics and behavioral targeting will result in the industry’s first and only integrated website optimization suite that provides a comprehensive suite of solutions for analyzing, testing and targeting online marketing investments.
James said that while web analytics provides the foundation for building any business optimization platform it is only the start of a continuous measurement, testing and refinement cycle.
We recognize that A/B and multivariate testing is the next natural step for marketers who need to act on their web analytics data.
Our SiteCatalyst and Discoverer products are critical measurements tools for delivering insight into which areas an online business can improve. The next step is for customers to test various scenarios of navigation and visitor flow, and continuously measure results to reach optimum website design.
Integration of Offermatica’s software with SiteCatalyst has already been achieved through Omniture’s Genesis technology. Offermatica is an existing member of the Genesis Network and also shares a significant number of customers with Omniture.
James said that the company was attracted to Offermatica because of its robust test methodologies, focus on easy-to-use, self-service tools, and an interface design geared towards average marketers.
The traditional process of creating and testing multiple scenarios has been manual and cumbersome. In fact the biggest barrier to quality testing has just been doing testing at all.
What really differentiates Offermatica’s software from other testing products is its self-serve and easy to use design that doesn’t require the involvement of professional services and IT to build and run tests.
We’ve spoken to Offermatica customers that had implemented the software in days.
James said that Offermatica provides a rapid and easy to use framework for online marketers dipping their toe into testing for the first time.
When it comes to testing many prefer to crawl before they walk, for example, they may want to start by just testing a single campaign landing page or isolated part of their site.
Offermatica allows you to apply testing strategies to specific segments of visitors identified by SiteCatalyst to test strategies of visitors who abandoned a shopping cart on a previous visit or those who purchased more than $100 worth of products over the past 30 days. The results of those tests can be displayed directly in the SiteCatalyst interface.
James, however, was less clear on what would now happen to other testing partners that were part of Omniture’s Genesis Network, saying only that there are some areas we can make the customer experience better by owning that particular technology, which allows us to control the product road map and integrate the back end more deeply rather than just through APIs.
The swoop for Offermatica builds on Omniture’s acquisition of UK-based TouchClarity, a provider of automated behavioral targeting software, in February this year for $51.5m.
The two are highly complementary and together address the spectrum from A/B testing and multivariate testing to behavioral targeting, James said.
Once this optimum design is achieved, TouchClarity can then apply highly sophisticated algorithms to determine the content that is shown to a specific visitor at a specific time.
James said that combination paired with its SiteCatalyst platform completes the range functionality required for the next phase of the online market and is years ahead of anything available on the market today.
We’ve often compared to web analytics as turning the lights on – seeing what happened on your site and online campaigns. Utilizing SiteCatalyst our customers are able to identify where visitors are getting confused, where they’re missing offers, or why they are abandoning their shopping carts.
This is critical information. But the next logical question is how to I fix these situations that the web analytics is identifying?
Because Offermatica will be part of a single integrated suite it provides a very nice, straightforward pass for that customer to transition into behavioral targeting also. This full spectrum of functionality is a very powerful combo.
Offermatica has 70 employees in engineering, sales and marketing, operations, and client services, all of whom are expected to be bought on board. Offermatica’s CEO Matt Roche is also likely to stay on.
Omniture also gets 100 new Offermatica customers including AIG, Circuit City, eLoan, Skype and T-Mobile. James claims that over 50% of Offermatica customers also use Omniture’s software and that 20% are in Omniture’s sales pipeline.
Offermatica’s average annual subscription contracts are north of $100,000, which is more or less in line with Omniture’s Enterprise deals.
According to Omniture, Offermatica recorded $5.5m in revenue 2006 and as standalone business was on track to achieve 100% revenue growth this year and reach profitability at the year’s end.
Omniture said it will update its fourth-quarter guidance as a result of the acquisition when it announces its third-quarter results later this month.
Even with acquisition we’re still confident of being able to manage our business to achieve our goal of 6% operating margin in the fourth-quarter, James said.
We see considerable revenue synergies and cross-selling opportunities by buying a strong growing business that sells complementary technologies into our existing audience.