Adobe has spent the last two years as the tech industry's punching bag, with Apple's former CEO, the late Steve Jobs, as its chief antagonist. Jobs did not like Adobe's Flash platform, and said so in a public letter.
Despite the obvious inconsistencies in Jobs's argument--Apple's proprietary technology is okay, but Adobe's is not--his dismissal of Flash shined a light on the technology's troubling performance problems and even Google's public support of the technology couldn't keep it afloat.
Flash isn't quite dead. It's alive and well and living on the desktop. But the desktop market has been flat or declining for everyone but Apple. The mobile market is where the action is.
That message was hammered home when Adobe in November said that it would cease further investment in Flash for mobile devices--a decision that coincided with the layoff of some 750 people and a $97 million restructuring charge.
To reinvent itself, Adobe has reoriented its tools business to focus on HTML5, the emerging Web development standard. It also has turned to digital marketing, providing companies with data about their online publications, projects, and ads. And evidently, its effort to change horses in midstream has been going well. During its 2011 fourth quarter, Adobe reported record revenue and 11% annual growth.
"Our strategy centers on our unique capability to help customers make, manage, measure, and monetize their digital experiences," said CEO Shantanu Narayen in a December conference call for investors. "Customers are asking for our help in accelerating their digital businesses, and we're doubling down in areas where digital content is mission critical: digital media and digital marketing."
For Adobe, doubling down means buying its way into the digital marketing business. In January, Adobe completed its acquisition of online advertising company Efficient Frontier, the latest in a series of corporate deals designed to build a new revenue stream by providing digital marketing services.
In an interview at Adobe's San Francisco office, Brad Rencher, senior vice president and general manager of Adobe's Omniture business unit, said digital marketing "is the billion-dollar business no one knows about."
That might be a slight exaggeration. It has not gone unnoticed that Adobe has spent some $2.4 billion over the last two years to become a player in the digital marketing arena.
Adobe began its strategic transition in September 2009, with the purchase of Web analytics company Omniture for $1.8 billion, about half what it paid in 2005 to acquire Flash creator Macromedia, its bridge from print to the Web.
"Adobe's acquisition of Omniture actually puts it in a great place to support back-end analytics for its digital marketing platform," said Al Hilwa, IDC program director for applications software development, in an email. "It is true that Adobe has great strengths on the client-side, but Omniture has been an important and successful acquisition for Adobe and has allowed it to develop an end-to-end product. In fact, Adobe's plan for this segment of the market is well-differentiated precisely because it is able to handle the back-end component."
The subsequent acquisitions of Day Software, Demdex, EchoSign, and Nitobi, along with Efficient Frontier, have further facilitated Adobe's transformation.
As Rencher describes it, Adobe's goal is to serve both art and science, by helping people create digital media and then measure the marketing value of that creation. "In marketing today, you can't just think about pretty pictures and throwing out a television ad or newspaper ad or magazine ad, and not understanding what impact that's driving," he said.
Rencher argues that the time to consider analytics is when content is being created, rather than after the fact.
"It's a huge synergy and this is the thing that people just missed two years ago when Adobe acquired Omniture," he said. "We can start to natively integrate analytics into the content creation process."
Adobe aspires to be where .jpg meets ROI--where digital content creation meets marketing data. Rencher says the company wants to bring order to the confusing world of digital marketing. "Adobe can help marketers execute search, display, mobile, and social campaigns, and then help them understand how their campaigns are working," he said.
Realizing that aspiration, however, might take more than an acquisition strategy. Consultant Daniel Brown, a former Adobe evangelist, recounts how he spent years at the company urging Adobe to acquire Macromedia. Adobe 10 years ago was focused on print and fonts and didn't get the Web, he said. He left the company after seven years in 2005, just before the Macromedia acquisition, but recalls hearing from colleagues about the culture clashes between the two organizations.
"I'm worried that the same thing will happen again," he said. "Just because you acquire a company, you don't necessarily get the religion."
How Enterprises Are Attacking the IT Security EnterpriseTo learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
IT Strategies to Conquer the CloudChances are your organization is adopting cloud computing in one way or another -- or in multiple ways. Understanding the skills you need and how cloud affects IT operations and networking will help you adapt.