commercetools Buys Frontastic – The First of a New Portfolio Strategy

Acquiring Frontastic is a no-brainer for us at commercetools and for our customers, and is the first step of an entirely new portfolio strategy.

Dirk Hoerig and Denis Werner founded commercetools with the explicit vision of offering a catalog of independently consumable commerce “tools.” We’ve offered our market-leading commerce platform since 2013 but it’s essentially been one library of 300+ individually consumable commerce APIs. We still debate whether it even makes sense to call it a “platform.” We’ve made a conscious effort to go deep and stay within the three pillars of a traditional core commerce platform – product discovery (product catalog, search, etc), customers (login, profile, personalization, etc) and orders (shopping cart, checkout, etc). We’ve built up a substantial development organization to continue to ensure we have the absolute best APIs on the market for core commerce.

That strategy has worked well to dominate the upper mid market through the upper enterprise market. Our flagship customers like AT&T, Ulta Beauty, L.L. Bean, Lululemon and a who’s who across dozens of verticals use our APIs to support billions of dollars in annual sales. They want to build and buy a catalog of APIs that each go very deep and solve a very specific problem (shopping cart, product recommendations, A/B testing, analytics, etc) exceptionally well. They want a full MACH-based solution (Microservices, APIs, Cloud and Headless) and aren’t afraid to build frontends from scratch. We will still fully support building frontends from scratch and expect that approach to remain the default in the upper end of our market. That upper end of the market has been great to focus on, but there are only so many enterprises out there with the vision and ability to adopt MACH.

While we’re best known for our enterprise customers, mid-market brands and retailers regularly purchase our solution. We define mid-market as $50m - $250m in GMV. We’ve quietly built up a substantial sales team to go after this market.

The feedback we’re clearly getting from the market is that folks in this segment love MACH, our approach to commerce, our product, our company, etc but having to build a frontend can be a substantial undertaking for organizations whose core competency is not technology. Basically - they want a pre-built head on top of our amazing commerce platform.

Our acquisition of Frontastic allows mid-size customers to use our product, with an experience that offers the time to market of an “all-in-a-box” solution, while also providing a full MACH-based platform that’s also composable. Also, adding Frontastic to our portfolio allows larger enterprises to quickly deploy us for smaller countries, lines of business, etc but still have the freedom to build their flagship .com. For example, many of our larger retailers have an outlet brand, or specific frontends for Canada. With our acquisition of Frontastic, the most flexible commerce platform can also be the easiest to use.

We specifically chose Frontastic because they have a market-leading “head” for headless commerce. We spent months evaluating the market and while their competitors all had great offerings, Frontastic’s vision and execution were market leading and strongly differentiated. Their product has four pieces:

1. API Hub: Connects Frontastic UI components to back-end data (like a headless commerce platform or headless content management system)

2. Developer Tooling: Framework for building UI components, workflows, a command line interface, and CI/CD tooling

3. Frontastic Studio: A visual UI for business users (and developers) to build pages, screens, etc. Includes very immersive live preview experience

4. Frontend Delivery: SaaS-based delivery of the Progressive Web App (PWA), numerous performance optimizations, and logging/monitoring

Here are a handful of screen shots from Frontastic Studio.

Business users and developers alike love Frontastic. Like commercetools, Frontastic is a product-first company and it shows across their entire product in details large and small. For example, their QR code-based preview is really well thought out.

Even the configuration JSON files are beautiful - perfectly formatted, proper variable names, nice comments, etc. Their attention to detail really shows and their product development culture meshes neatly with ours at commercetools. 

On the commercial-side, we’ve worked closely with Frontastic since they were founded in 2017. Our products are extremely complementary and many of our customers have also bought Frontastic. As an example of the success we’ve had together, I’d like to use Universal Music as an example. In 2018, they selected both commercetools and Frontastic for the use case of rolling out more than 100 shops that artists like The Beatles, Dua Lipa and The Weeknd can use to sell their merchandise directly to fans. These highly customized apps are deployed in an average of a couple days and provide a substantial revenue stream to both Universal Music as well as to the artists. Building each of these by hand would have been orders of magnitude more expensive and time-consuming. In these and many other use cases, it makes perfect sense to use Frontastic. 

Harder to quantify but also important, is cultural alignment. We have many long-standing relationships between the two companies and we work well together from development through sales.

Finally, Frontastic was the very first non-founding member to join the MACH Alliance when it was little more than a website and a press release. I still remember starting to pitch the idea to Thomas Gottheil (CEO) and he cut me short and said “we’re in.” We’ve worked together through the MACH Alliance to promote MACH and are thankful that they saw what we were doing and joined us so early.

Frontastic is the first of a larger portfolio-based strategy we at commercetools are adopting. To date, we’ve basically offered only one product in our eight years on the market. We will always offer our core product as-is today (basically a collection of APIs with business user tooling) but we will increasingly be offering individual pieces of our platform as standalone, sellable products. For example – we have a solid PIM that’s easily usable as a standalone, market-leading product. Many organizations just want to start with a PIM, or some other granular piece of our platform. That’s the beauty of composable commerce – easily mix and match different components from different vendors. In a future where commerce is increasingly commoditized and available in granular composable pieces (as I’ve written about and been advocating for), we anticipate that vendors will further fragment and specialize in one or more of the following areas:

• Checkout

• Subscriptions

• PIM -> product discovery

• Promotions

• Pricing

• Customer profile -> Personalization

• Search

Talon.One, for example, is leading the promotions category. Fast and Bolt are making early inroads into the standalone checkout category. Constructor and Algolia are leading the enterprise search category. Fragmentation is generally good because it allows each vendor to go exceptionally deep in their space. Whereas a mega vendor might have a team of four working on promotions, Talon.One has 100 people working on just that one function.

Fragmentation is a good thing for our customers and it’s a good thing for us at commercetools. Frontastic uniquely positions us to dominate this new landscape, as it allows these different APIs (whether our own, third party, or customer-developed) to be easily surfaced in shopping experiences. Companies can also buy many of these APIs from us, rather than doing business with many smaller vendors.

Back at the dawn of time (aka 1994, when the first commerce platforms hit the market), organizations didn’t have any real technical competency. At the same time, it was incredibly difficult to implement and integrate software. That gave rise to suites. Suites are an “everything in a box”-style of solution that’s offered by one vendor and is relatively easy to implement as an atomic unit.

Customers wrote out a giant check and <mega vendor> was on the hook for delivering it. One throat to choke (or one hand to shake, depending on how well things went) was the motto. The components of the suite are basically glued together and therefore must be carefully updated together. This led to very long release cycles, a focus on breadth of offering (vs. depth), and a general malaise that’s hard to shake. Oracle, IBM, SAP, etc all neatly fit into the “suite” category.

Another approach is to build a platform where one application is the center of gravity and there are small apps/modules built around this large, single entity. Platforms can be great for those wanting a seamless experience. If you’re selling $100k of widgets a year on Shopify, you want this approach. Shopify, Magento, Salesforce, Spryker, etc all neatly fit into the “platform” category. Similar to suites, the core of the platform must be released as a single atomic unit. Individual apps/modules can be released independently but there’s a core to the platform that on one hand offers a tight customer experience at a low cost, but comes at the expense of flexibility and innovation.

After much deliberation, we’ve decided on a portfolio strategy whereby we have one company strategy but many products that are each market leading on their own, built on their own, brought to market on their own, and very loosely coupled (via events and API calls). Customers can buy one or all of our products and we offer the same MACH-based experience. Leaders of these new products are essentially mini CEOs of their respective products and are evaluated on the strength of their standalone product rather than the strength of the overall product line. This allows each product team to go deep, as we’ve done to date, while also offering a breadth of product that we have historically not had. We’re building our organization so that these products could (in theory at least) be easily spun out as standalone companies. Amazon, for example, has pioneered this strategy and any number of its products (AWS, advertising, fulfillment, etc) could easily be spun out as their own standalone companies. 

Twilio is a great case study in a portfolio-based product strategy. Between organic product development and acquisitions, they’ve assembled a clean catalog of independently consumable communications-related APIs, but without sacrificing the depth of product offering that made them into the market leader they are today.

We want to be the next Twilio, but for commerce – and we have the vision, strategy, team, and capital on hand to make that happen.

We will never compromise on our commitment to MACH, and we’ll never bring a product to market that’s not leading in its own category. Products will be competitive standalone and they will each have their roadmaps, release cycles, product leaders, etc. We hope you’re as impressed by Frontastic as we were and are as keen on the future as we are. We will spend considerable effort and resources to be the clear #1 commerce solution for mid-market through upper enterprise. Our onramp will be Shopify plus and our offramp will be when a customer has $100m/year to build their own platform entirely from scratch. We have the vision, ambition, financial backing and people (though we’re always hiring!) in place to completely own this space.