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Founded in 1982, Adobe is one of the world’s largest and most diversified software companies. For fAdobe’s decades, Adobe’s innovations have transformed how individuals, teams, businesses, and governments engage and interact across all media types.
Adobe delivers tools and services to empower individuals to create, collaborate and express their vision, transform businesses with compelling, personalized experiences in streamlined workflows, and connect communities with new levels of collaboration.
Adobe’s goal is to be a leading provider of cloud-based solutions for delivering digital experiences and enabling digital transformation. The Adobe Experience Cloud applications and services are designed to manage customer journeys, enable personalized experiences at scale and deliver intelligence for businesses of any size in any industry.
In this strategy story, we analyzed the business model of Adobe to understand what does Adobe do and how does Adobe make money.
What does Adobe do?
Adobe offers a line of products and services used by
- creative professionals, including photographers, video editors, graphic and experience designers, and game developers;
- communicators, including content creators, students, marketers, and knowledge workers; businesses of all sizes;
- and consumers for creating, managing, delivering, measuring, optimizing, engaging, and transacting with compelling content and experiences across personal computers, smartphones, other electronic devices, and digital media formats.
Adobe’s innovations have transformed how individuals, teams, businesses, and governments engage and interact across all media types for four decades. Adobe has historically specialized in software for creating and publishing a wide range of content, including graphics, photography, illustration, animation, multimedia/video, motion pictures, and print.
Its flagship products include Adobe Photoshop image editing software; Adobe Illustrator vector-based illustration software; Adobe Acrobat Reader and the Portable Document Format (PDF); and a host of tools primarily for audio-visual content creation, editing, and publishing.
Adobe offered a bundled solution of its products named Adobe Creative Suite, which evolved into a subscription software as a service (SaaS) offering named Adobe Creative Cloud.
Adobe markets its products and services directly to enterprise customers through its sales force and local field offices. Adobe licenses its products to end users through app stores and its website at www.adobe.com.
Adobe offers many of its products via a Software-as-a-Service (“SaaS”) model or a managed services business model (both of which are referred to as hosted or cloud-based) as well as through term subscription and pay-per-use models.
Adobe also distributes certain products and services through a network of distributors, value-added resellers (“VARs”), systems integrators (“SIs”), independent software vendors (“ISVs”), retailers, software developers, and original equipment manufacturers (“OEMs”). In addition, Adobe licenses its technology to hardware manufacturers, software developers, and service providers for use in their products and solutions.
How does Adobe make money? What is the business model of Adobe?
Adobe primarily has a subscription business model. The business model of Adobe is organized into three segments: Digital Media, Digital Experience, and Publishing and Advertising. Let’s understand each segment in detail.
Adobe’s Digital Media segment provides products, services, and solutions that enable individuals, teams, and enterprises to create, publish and promote their content anywhere and accelerate their productivity by modernizing how they view, share, engage with, and collaborate on documents and creative content.
Adobe’s customers include creative professionals, including photographers, video editors, graphic and experience designers and game developers, communicators, content creators, students, marketers and knowledge workers, and consumers.
Opportunity: In today’s digital world, content is fueling the global economy, and design and creativity have never been more relevant, providing a significant market opportunity for Adobe in digital media.
Everyone has a story to tell, and they need the tools, services, and capabilities at their fingertips to tell those stories on an ever-increasing number of canvasses. In a creator economy that is continually expanding, creators are looking for tools to help them easily make and share unique and beautiful content with speed and ease.
Strategy: Adobe’s goal for Adobe’s Digital Media business is to be the leading platform for creativity and digital document solutions; where Adobe offers a range of products and services that allow individuals, teams, small and medium businesses, enterprises, and government institutions, including both professionals and enthusiasts, to design and deliver content seamlessly.
With content creation, consumption, collaboration, and monetization happening across all surfaces and media types, Adobe aims to deliver new ways to unleash creativity and accelerate document productivity. Adobe believes this is an area of significant growth opportunity through expanding Adobe’s customer base.
Creative Cloud: Adobe Creative Cloud is a cloud-based subscription app that enables creative professionals and enthusiasts alike to express themselves and collaborate with apps and services for photography, design, video, web, and more that connect across devices, platforms, and geographies.
Creative Cloud includes Adobe Photoshop, Adobe Lightroom, Adobe Illustrator, Adobe Fresco, Adobe InDesign, Adobe Premiere Pro, Adobe Premiere Rush, Adobe Express, Adobe Stock, Substance 3D, Adobe After Effects, Frame.io, and Behance.
Adobe offers Creative Cloud for individuals, students, teams, and enterprises. Adobe has also built out a marketplace for Creative Cloud subscribers to enable the delivery and purchase of stock content in its Adobe Stock service.
Adobe Document Cloud: Adobe Document Cloud is a cloud-based subscription offering that enables complete, reliable, and automated digital document and signature workflows across desktop, mobile, web, and third-party enterprise applications to drive business productivity for individuals, teams, small businesses, and enterprises.
Adobe Document Cloud includes Adobe Acrobat, Acrobat Web, Adobe Acrobat Reader, Adobe Scan, and Adobe Acrobat Sign. Adobe Acrobat is offered both through subscription and perpetual licenses.
Revenue: Creative revenue in fiscal 2022 was $10.46 billion, up from $9.55 billion in fiscal 2021 and representing 10% year-over-year growth. Document Cloud revenue in fiscal 2022 was $2.38 billion, up from $1.97 billion in fiscal 2021 and representing 21% year-over-year growth.
Total Digital Media segment revenue grew to $12.84 billion in fiscal 2022, up from $11.52 billion in fiscal 2021 and representing 11% year-over-year growth driven by strong net new user growth.
Adobe’s Digital Experience segment provides an integrated platform and set of applications and services that enable brands and businesses to create, manage, execute, measure, monetize, and optimize customer experiences that span from analytics to commerce.
Adobe’s customers include marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, and executives across the C-suite.
Opportunity: Digital transformation is a macro trend that affects every business, government, and educational institution today—every business is a digital business. Consumers today buy experiences, not just products, and they demand personalized digital experiences that are relevant, engaging, seamless, and secure across an ever-expanding range of channels and devices.
Strategy: Adobe’s goal is to be a leading provider of cloud-based solutions for delivering digital experiences and enabling digital transformation. The Adobe Experience Cloud applications and services are designed to manage customer journeys, enable personalized experiences at scale and deliver intelligence for businesses of any size in any industry.
Products: Adobe Experience Cloud is a comprehensive collection of best-in-class products and solutions to manage the customer experience, all integrated into a cloud platform, along with service, support, and an open ecosystem.
Experience Cloud comprises the following solutions for Adobe’s customers: Adobe Experience Platform; Data, Insights, and Audiences; Content and Commerce; Customer Journeys; Marketing Workflow; and Digital Enrollment and Onboarding.
- Data insights and audiences: Adobe’s solutions, including Adobe Analytics, Adobe Experience Platform, Customer Journey Analytics, Adobe Audience Manager, and Adobe’s Real-time Customer Data Platform, deliver robust customer profiles and AI-powered analytics across the customer journey to provide timely, relevant experiences across platforms.
- Content and commerce: Adobe’s solutions help customers manage, deliver and optimize content delivery through Adobe Experience Manager and enable shopping experiences that scale from mid-market to enterprise businesses with Adobe Commerce.
- Customer journeys: Adobe’s solutions help businesses manage, test, target, personalize and orchestrate campaigns and customer journeys across B2E use cases, including through Marketo Engage, Adobe Campaign, Adobe Target, and Journey Optimizer.
- Marketing workflow: Adobe offers Adobe Workfront, a work management platform for marketers to orchestrate campaign workflows.
Revenue: Digital Experience revenue was $4.42 billion in fiscal 2022, up from $3.87 billion in fiscal 2021, representing 14% year-over-year growth. Driving this increase was the increase in subscription revenue across Adobe’s offerings which grew to $3.88 billion in fiscal 2022 from $3.38 billion in fiscal 2021, representing 15% year-over-year growth.
Publishing and Advertising
Adobe’s Publishing and Advertising segment contains legacy products and services that address diverse market opportunities, including eLearning solutions, technical document publishing, web conferencing, document and forms platform, web application development, high-end printing, and Adobe’s Adobe Advertising Cloud offerings.
Graphics professionals and professional publishers continue to require quality, reliability, and efficiency in production printing. Adobe’s Adobe PostScript and Adobe PDF printing technologies provide advanced functionality to meet the sophisticated requirements of this marketplace.
As high-end printing systems evolve and transition to fully digital, composite workflows, Adobe is well-positioned to be a supplier of software and technology based on the Adobe PostScript and Adobe PDF standards for this industry.
Adobe Advertising Cloud delivers an end-to-end, demand-side platform for managing advertising across digital formats and simplifies the delivery of video, display, and search advertising across channels and screens.
Adobe generates revenue in Adobe’s legacy Publishing products and services by licensing Adobe’s technology to OEMs that manufacture workflow software, printers, and other output devices. Adobe generally generates revenue in Advertising through usage-based offerings.
How does Adobe make money by offering these segments?
Adobe made $17.6 billion in FY22. Adobe makes money from the sale of cloud-enabled software subscriptions, cloud-hosted offerings, term-based, royalty, and perpetual software licenses, associated software maintenance and support plans, consulting services, training, and technical support. Adobe primarily has a subscription business model.
Subscription: Adobe’s subscription revenue is comprised primarily of fees it charges for its subscription and hosted service offerings, and related support, including Creative Cloud and certain of Adobe’s Adobe Experience Cloud and Document Cloud services. Subscriptions contributed 93% to Adobe’s revenue in FY22.
Fully hosted subscription services (SaaS) allow customers to access hosted software during the contractual term without taking possession of the software. Cloud-hosted subscription services may be sold on a fee-per-subscription period basis or based on consumption or usage.
Product: Adobe’s product revenue is comprised primarily of fees related to licenses for non-cloud on-premise software purchased on a perpetual basis, for a fixed period of time, or based on usage for certain of Adobe’s OEM and royalty agreements. Products contributed 3% to Adobe’s revenue in FY22.
Services and Other: Adobe’s services and other revenue is comprised primarily of fees related to consulting, training, maintenance, and support for certain on-premise licenses that are recognized at a point in time and Adobe’s advertising offerings. Services and Other contributed 4% to Adobe’s revenue in FY22.
Results of Operations
As per Adobe’s FY22 annual report,