Adobe believes in creativity for all, as they are uniquely committed to empowering the world’s creators.
Many people have heard of and used Adobe because of its best-quality editing app, Photoshop. However, it does not only stick to design tools; it is much bigger than that.
In the last 35 years, the company has grown significantly from a few visual design applications to a diverse software provider. Let us delve into the past, present and future of Adobe by understanding their success story.
1982-1993 Era
Adobe founders John Warnock and Chuck Geschke met while working as engineers at a research center called Xerox Palo Alto. They came to a collective point that businesses need more publishing and printing software. They took a big leap of faith and decided to move and go out on their own.
Warnock & Geschke in a serious discussion
In 1983, their first product, PostScript, was their method of experimenting with desktop printing software. It was a program that enabled users to print from personal computers to external printers. In a year, they were able to generate $83,000.
They got a positive feedback on Postscript from tech players like Steve Jobs. When Steve heard about the product, he offered to partner up with Apple’s hardware.
The partnership grabbed many eyeballs which evoked another company, Aldus to partner up with the above two companies.
The Partnership
In 1985, there was a partnership between Adobe, Apple, and Aldus. They came up with a product that let users do their own printing. Users can input words and images and print them on paper.
Aldus created a product called Pagemaker which was a graphics manipulator. It added as a complete piece to the puzzle as it would show how responsive the Macintosh’s interface was and how effective was the PostScript program.
Birth of Illustrator
Moving on, Warnock was inspired to work on developing a drawing tool. In 1987, he released Adobe Illustrator, which had a pen feature that allowed users to draw curved lines. The company sold it for thousands of dollars cheaper than the graphic drawing software that was already available.
Let’s Photoshop
Adobe’s Illustrator, had generated $19 million in revenue, which was decent. They released Photoshop, a photo editing tool that was an add-on to Illustrator in 1988.
This tool allowed users to work on photos from sources like scanners instead of having to build the image from scratch. The sales skyrocketed as it had a huge revenue impact which was a stooping $82 million.
Welcoming the Video Editing Software
In 1991, Co-founder John Warnock was convinced that their company should not be a one-product business. So, he started to think of ways to expand the market.
They wanted to create graphics creation, image editing, and other video editing features. This led to the release of a video editing software called Premiere. The software was successful in the market as it became the first desktop video editing application of its kind.
Creation of Acrobat
In 1993, Warnock realized the requirement to communicate between different computers and systems. They released Acrobat, an application for creating and viewing files in a new way. They coined the term PDF (Portable Document Format).
The Revenue Game and Future Vision
The products of Adobe generated a lump sum amount with their unique features. They had a strong marketing team that focused on showcasing Photoshop through tutorials, roadshows and other methods. The profits of Photoshop eventually overtook the profits of PostScript.
Adobe engineers and designers worked closely to keep updating Photoshop and adding new features.
But this was just the beginning! Adobe had a long-term goal.
“The application business lost money, but we kept plugging away at it because we knew PostScript would run out of gas.”
- Bruce Nakao, former CFO of Adobe
Adobe generated $313 million in revenue in 1993. This led to the expansion and acquisition of Adobe. Let’s move to the next stage in the journey of the company.
1994-2006 Era
In the initial years of Adobe, they transformed desktop publishing, making it easier for businesses to print from their own computers. Gradually, with time, the team was met with a few challenges –
- There was a shift from paper to digital
- The competition spiked between software companies making similar design tools
The Acquisitions
Adobe dived into smart acquisitions to expand in the market. One of them was Aldus. The fact of the matter is both the companies helped each other in their early years. But with time, both of them started to develop the same time of products. They also released a drawing program called FreeHand and a photo editing app called PhotoStyler.
Another company that they acquired was a competitor called Macromedia in 2005. With the internet growing at an unprecedented rate, Macromedia had products like the Dreamweaver, a Photoshop competitor and Flash, which the web was built on top of. This led to Adobe being a crucial player in the web’s era.
Adobe gained a few advantages out of these acquisitions
- The acquisition led to a new consumer market.
- It removed their potential threat i.e. the competitors.
- It opened a gateway to a new consumer market.
Adobe tried to become a monopoly who would rule the markets and move relentlessly into the consumer market in the next few years.
1994
The company doubled in size and became the fifth-largest software company in the world.
Their profits were $49.3 million which was ten times than that of Aldus’s.
1996
Adobe released PhotoDeluxe which was an easier version of Photoshop. Within a year or two, it became the number one consumer photo editor and it proved a point that even consumer products can gain popularity.
1997
The company was generating $917 million in revenue annually. 80% of which was coming from the applications. The secret to their success was they took complete advantage of bundling their products with their other useful tools.
1999
Adobe released Acrobat 4.0 which contained a new set of updates and features. They had features like password protection, digital signatures and other features.
These add-ons led to a lucrative sale amongst the corporate offices. This alone generated $58 to $129 million annually.
2000
Bruce Chizen becomes the head of the new Consumer Products Division at Adobe. It was back in 1998 where he was promoted to executive VP and started working closely with the co-founders. When Geschke retired in 2000, Chizen was made the president of the company. After Warnock retired to spend more time with his family, Chizen was made the CEO. He was the pioneer who turned this design tool software to a diverse company.
2001-2002
The company released a page layout app called InDesign. This was create to give competition to their rival company, Quark who had come up with their page layout app called QuarkXPress. InDesign was way more modern and stood out from Quark.
2003
They combined all their products in the Adobe Creative Suite to blend unify their company.
2005
Adobe acquired another competitor Macromedia who had released a product called Dreamwaver which was similar to Photoshop. Macromedia also had a video player called Flash. This led to Adobe getting into the huge consumer market.
After 2006, Adobe took a holistic transition and moved from a traditional software to the cloud.
2007-2017 Era
The Economic Recession back in 2008 and 2009 was the turning point in the organization as they decided to make a risky move to protect their company and customers. This is how they converted themselves to a cloud SaaS Company.
For over two decades, Adobe was able to stay competitive. When the software industry started changing, many companies started to sell software over the cloud on a subscription plan.
In 2007, global revenue from SaaS Enterprise apps was around $5.1 billion, and it was predicted that it would grow over 100% in the next few years.
2007
In 2007, Shantanu Narayen took over as Adobe’s CEO which became a turning point for the company. He wanted to build out more digital media and marketing services to expand usage. His vision turned Adobe into a full-service enterprise cloud provider.
2008
In 2008, Adobe released a webtop version of Photoshop called Photoshop Express. It was designed as a consumer product that was easy to use and learn. This highlighted that the company was taking a big step towards embracing the internet by creating a web product.
2009
In 2009, Adobe acquired the top enterprise analytics company Omniture. This was crucial as it allowed the company to offer web analytics and optimization technologies to Adobe product users.
2010
In 2010, the company released eSignatures, which is a cloud-based signature tool that demonstrated that the company was reaching for the sky and building for the cloud.
2011
In 2011, Adobe announced that it would leave Flash behind after Apple and Mobile rejected it. They planned to focus on HTML5. This was a turning factor because it became clearer that software companies need to adjust around hardware companies.
Breakthrough
2013 was a breakthrough in Adobe’s history. They released Creative Cloud (CC) to replace Creative Suite.
They made an announcement saying that the future versions of Creative Suite apps would only be available for purchase through subscription-based service.
Their service went from a one-time purchase of $1800 to $50 a month for the entire CC. Adobe’s movement to the cloud is a classic example of how companies made transitions.
A few key factors to consider as to why they stood out
- The company ensured that they upgraded their features to cloud-based tools.
- They catered to the digital workplace.
- They expanded their target market beyond creative to sell more to the C-suite.
Let us understand the revenue valuations and share prices in depth.
Revenue
SaaS businesses have higher valuations than licensing companies, and Adobe’s share price and valuation increased over the last several years.
Recurring revenue subscriptions represented 86% of the company’s total revenue in 2017, which was $7.3 billion. Adobe grew 25% YoY, and its stock enhanced by 20% a few weeks ago in reaction to a strong forecast for FY18.
Adobe is growing significantly in comparison. Back in time, Adobe and Salesforce were both $40 stocks. Now, Salesforce is $107, and Adobe is $183.
Rounding Up
Adobe’s story is a journey of transition. They’ve seen various eras in software and are acing their game. It’s plausible to continue growing and thriving as they have by making difficult
long-term decisions. They have a behemoth of potential, so it’s only time that will speak for the upcoming success of the company.
