If the early results are any indication, Adobe, has become a model for companies coping with tech’s changing landscape. But the Business transition is easier said – Adobe will have to navigate the rise of cloud, Mobility, social media and highly targeted online advertising. It also pits Adobe against some very well entrenched competition – Microsoft and Apple in productivity programs, IBM and Google in digital marketing.
Adobe’s move into digital marketing- which has its roots in the acquisition of Omniture, a web analytics company in 2009 is an equally adroit move. The second leg of Adobe’s strategy re-orientation includes data driven marketing – real-time bidding on Google search ads, targeting display ads using Facebook profiles, analyzing which Tweets or blog posts drive traffic, testing different site designs to see which generate sales. To make those features possible, Adobe has spent $800 million in the last 3 years on acquisitions since Omniture: Day Software for website-content management, Demdex for ad targeting, Efficient Frontier for search and social media ad exchanges, and Auditude for inserting ads inside streaming videos. According to Gartner, marketing budgets will grow 9% this year, compared with 4.7% for IT. Adobe wants to benefit from that growth by selling marketing services and software simultaneously. Thus, Adobe tools once relied on just for creating a website, have become much more useful as a digital marketing suite.
Still, Adobe’s marketing push means going up against deep-pocketed companies like IBM, Microsoft, Oracle, and Google — all of which are more experienced in the enterprise software market. The next year or so will be critical for Adobe as it changes tracks and dons a new gear. It is a risk but then its vastly better than waiting for the emminent death of Adobe Flash.Adobe’s post-Flash strategy was announced in November 2011, alongside the restructuring that made digital marketing and Creative Cloud the company’s top priorities Adobe saw the writing on the wall and conciously anchored itself on the Creative Cloud and Digital Marketing as the next streams of business. Now we await the new Adobe!
In the age of Cloud,Mobility,Social Media and altering business models,Companies that simply try to preserve the status quo will fail – Inspired
Adobe is the midst of transition would inspire many a case studies. A company that epitomized Shrink Wrapped High Quality Software is working on complete re-doing of its business and revenue models with an eye on the future. Historically, Adobe has been a productivity suite company with its software being centred around enterprises, film-makers, webmasters and content creators and it has done well till recent times. Not wishing to be caught on the wrong foot holding on to status quo, Adobe has readied and implemented a radical change in its business model- It has embraced the cloud based distribution and digital marketing and is phasing out the CD based version of “pay beforehand $1400-$2400” software distribution to Software in the cloud, monthly subscription service. This sachet service works three ways – It steadies revenue per month, it reduces piracy (Adobe was losing a reported $1bn to piracy of its software) and it also increases penetration (The move to subscriptions is a clever and thoughtful way to lower the price point). This model works on a $20-$50 subscription model – and this would bring 325K subs by end of 2012 as per Adobe. Lready Adobe has a million free memberships on its Cloud.The current onboarding rate is 11K per week. Overall average revenue per user is 20% higher compared with the old product. That number will rise even further, the company says, because it is much more likely to sell support services, website hosting, or server management to cloud customers. Already Adobe is augmenting its cloud product by addition of features and functionalities such as Creative Cloud for teams, making it easy (collaborate effort); Adobe Muse (For creation of Mobile websites); Creative Cloud Connection for desktop synching and collaborative sharing;Creative Cloud Training; and demonstrating the unlimited access to the Digital Publishing technology used by major publishers to create interactive content for the smartphones and tablets.
Sure this audacious moved spooked the stock which lost steam in 2011 but it is back in action and has traced a healthy recovery. The stock is way behind its historic highs of $47.9- however at $35.5 it is trading 47% above its 2011 trough of $24.17. Even while the stock is underperforming as per analyst’s expectations- the 3Q, 2012 profits have reversed a trend of 3 quarters of dipping profits. In the most recent quarter, profit increased by 3.2% year-over-year. Looking back further, profit dropped 2.4% in the second quarter, 21.1% in the first quarter and 35.4% in the fourth quarter of the last fiscal year. The turnaround seems to be working for Adobe and we would get to know more about this in time. As for the shift from boxed software to subscriptions: It is far from over. In fact, it is the company’s greatest source of uncertainty.
Cloud storage and applications are quickly becoming critical to consumers’ mobile lives in a converged world. The age of carrying personal memory devices or mailing documents to oneself is yesterday. Cloud-based productivity tools are now principal and key to manage documents access content and control one’s data from multiple devices. The cloud truly represents the future of storage beyond physical media.
The launch of Google Drive drives the competition in clouds to the next level. Apple, Google and Microsoft (the trio yet again) are at it… each trying to reinvent and redisgn cloud to augment their world of converged services and seamless connectivity. Google starts off from Gmail by providing all account holders 5GB space in the cloud. One can opt for higher capacities in storage albeit for a price.
Interestingly enough Microsoft which was magnanimous with 25GB of Skydrive space has offered a miserly 7GB. The cost factor can be a real dampener both for Google and Microsoft. Even while Microsoft seems to have a better product compared to Apple and Google and Google needs to perfect its cloud storage solution….Again the pricing and storage is a masterstroke from Apple given that most of the storage is used in media files. By tightly integrating and controlling media (video, audio and games) in its eco-system and making the storage of such items free, Apple is offering a value to the consumer in terms of judicious and prudent use of storage space.
Here’s how the three giants stack up on the cloud storage solutions -
Let the battle of cloud spaces begin….
Convergence has been the buzz word for a good part of the last decade and will continue to do so in this decade as well. However, for the discerning the definition or at least the meaning of convergence has now shifted from device convergence to technology convergence. The later being the superset of which devices are just another maifestation. So earlier its was the camera, the mobile phone, the GPS, the MP3 player and other such device charecterestics that really converged. However, in the present context it is the convergence of enabling technologies and the three big technologies that seem to be convergent at this time are: Mobility, Cloud Services and Big Data.
However, it is a relatively small lynchpin that drives the convergence of these three mega trends. Small in terms of what it is, but large in terms of the innovation spurts that it provides. The key here is APIs or Application programming Interfaces. APIs tie together the mega-trends in a fundamental and unalterable way. APIs are the lingua franca of the new wave in internet of all things combined with super mobility and seamless connectivity. In my mind, each of these three technology trends (on their own) will be on the fast track to commoditization and will risk facing the same fate as did most social business software plays. The magic and the premiums will come from contextual application of this innovation and smart integration.
To stake a few examples, Box.net as storage without document and device sync and collaboration is commodity. Apple’s iCloud as storage without ubiquitous local and iTunes media sync across devices is commodity. And Google Drive (as discussed here in Ben Kepes’ CloudU community) is also a commodity business not worth getting into had it not been for Google’s services such as Google Apps, Piccasa, and its media and unified communication capabilities under the Google Plus brand.
The premiums from big data, mobile access and cloud comes from
a) dynamically assembled media and content, and interpreted data in the cloud,
b) available wherever you need to consume and / or collaborate and
c) insanely focused and simple interfaces to complex backends.
Thats where money would be made in these commoditized services. APIs provide the integration through the value creation network. The only other differentiator in this case being experience!