Adobe, the Digital Marketing Expert

How AI is creating new opportunities for a robust business model

Welcome to the world of Adobe, the biggest Saas company that has revolutionized digital creativity for decades. Adobe is synonymous with cutting-edge solutions in graphic design, multimedia content creation, and document management. With flagship products like Photoshop, Illustrator, and Premiere Pro, Adobe is one of the main actor in digital marketing, providing tools to artists, designers, and content creators.

In the ever-evolving landscape of technology, one of the most pressing challenges faced by Adobe and similar innovators is the integration of Artificial Intelligence (AI) into their tools. AI has emerged as a transformative force, offering the potential to enhance the creative process, automate repetitive tasks, and unlock new possibilities in design and content creation. However, this integration also poses unique challenges, such as striking the right balance between human creativity and machine assistance, addressing ethical considerations, and ensuring that AI-driven features align with the diverse needs of Adobe's global user base.

Let’s deep dive into the company world, the stock metrics, the challenges and opportunities.

Company presentation

The company is divided into 2 main activities:

• The Digital Media Segment. This segment includes 2 main activities Adobe Cloud Document (basically Acrobat) and Adobe Creative Cloud (with Photoshop, Illustrator, InDesign, etc). This segment represents 75% of the revenue.

• The Digital Experience Segment. This segment accounts for 25% of the revenue. It regroups a platform allowing to manage the Digital Experience of the company: content management, data, customer journeys, marketing planning and wokflows.

Source: Adobe

The wide range of available products allows Adobe to address a large market with different pricing strategies. It is nteresting to note that the company has a real focus on ARR (Annual Recurring Revenue) - the word appeared 18 times on the Q4 and FY2023 quaterly report + script! This focus has been the case since the company switched to a Saas business model. Subscriptions revenue are above 90% of total revenue. This is one of the strengths of Adobe: the extreme visibility of its revenue.

As a sign of the recognition of its products, Adobe is regularly ranked as leader in Gartner’s Magic Quadrants like Digital Experience Platform or Digital Commerce.

Source: Gartner

The opportunity of AI

As presented in their last investor presentation, AI for Adobe is integrated in 3 levels: apps & interfaces, models and data.

Source: Adobe

For each product, AI offers a double opportunity: increase the number of customer and better monetize the existing ones. If we detail these opportunities:

• For Document Cloud, AI could bring conversational insight, assisted creation and streamlined collaboration.

• For Creative Cloud, AI could enhance content creation with faster and more powerful tools. This is where Firefly stands, the generative AI from Adobe.

• For Experience Cloud, AI can accelerate the processes (from creation to activation) and create more personalized digital experiences.

The digital marketing software market

Adobe covers a lot of market segments. But we will keep the digital marketing software market as one of the most dominant in Adobe’s future growth.

What is interesting in this segment is that Adobe is already the leader. So it should be able to capture the lion’s share of growth with a strategy based on innovation - and the help of well-chosen acquisitions.

The digital marketing software market was $71.0B in 2021 and is expected to reach $256.4B by 2030. That is a 15.3% CAGR. As always for the software sector, the biggest actors always have an advantage in the purchasing decision process. The main serious competitors are Salesforce and Microsoft, with some challenger like SAP, Marketo or even Hubspot.