Content co-chair Tim O'Reilly kicked off the discussion with Adobe Systems CEO Bruce Chizen by noting that Adobe should be dead. The whole idea of Web 2.0, he said, is that everything should be free and ad-supported. Companies like Adobe should be dinosaurs. Yet Adobe is thriving. How is that possible?O'Reilly: "I don't think people realize how successful Adobe is." Revenue growth was 41% year-over-year, stock at all-time high. "Clearly, Web 2.0 has not been hurting you."

Chizen: "Don't tell anybody." "If you think about Web 2.0, and you think about rich applications." Designing great apps, with perfect graphcs, images great, animations are interesting, interactive video, even enterprise apps need to be engaging. "We are the enabler of a lot of that." "There isn't an image on any web site that probalby hasn't been touched by PhotoShop." Most enterprise workflows use PDF, Flex and Flash, to display and render. More than 300 million non-PC devices have Flash, including Sony PlayStation and Nintendo Wii.

O'Reilly: More than that, YouTube and Flicker are Flash-based.

Chizen: Thanks to YouTube and other places, Flash is the way to share video. More than that, people want quality. Mediocrity is not good enough. And if you want more than mediocrity, Adobe products are the way to go. Photoshop is $700 -- but people use it.

For professional sites - if a company can charge $100,000 for a Web site, every image needs to be perfect. Photoshop (and other software upgrade costs) become irrelevant.

Chizen: "Buzzword" is an AIR-enabled word processor. You download it. Can use it online through the browser, or use it offline, using an AIR version. "If you happen to be on an airplane that doesn't have Wi-Fi connectivity-- "

O'Reilly: Explain how AIR works, online-offline mixx.

Chizen: Adobe Integrated Runtime, formerly code-named Apollo. Best of Flash, with core attributes of Adobe Reader, created a runtime that is lightweight and can be rendered... browser is built into runtime, can integrate HTML in seamless way with Flash, and render PDF in the same application. Can create a Web app through the browser without the design limitations of the browser. And can take advantage of local resources of desktop computer, like storage, and periperhals.

O'Reilly: Vision of Java, write-once, run-everywhere, is happening.

Chizen: Yes, because of ubiquity of Flash.

We have a $700 million Acrobat business today, people can create PDFs for free, but people like to collaborate, build forms, sign, etc. Building a host service called "Share," to edit and create documents.

O'Reilly: What's the business model - free or pay for it?

Chizen: Either subscription or ad-based.

Example, now have a host product called Premiere Express, let anyone do a video. Photobucket, YouTube, etc., use Premiere Express. MTV.com lets you remix professional music videos. Business model: In some cases we share in the advertising revenue, other times share transaction fees.

Working on Photoshop Express, image editing hosted application. It will be a hosted service, and it will be probably advertising based because if you think of the tens of millions and hundreds of millions of people who would like to do photo editing with Photoshop---

O: Is there enough volume on ad rates?

C: Too early to tell. Could OEM it to partners, as we do today. Could do it subscription-based.

Adobe apps require lots of compouting power. Desktop applications will be more powerful than hosted apps, because desktop apps can take advantage of desktop power.

O: Microsoft has Adobe in sights, with Silverlight.

C: Silverlight is trying to imitate Flash in the browser. 99.% of PCs have Flash, and 300 million non-PC devices. Silverlight has less than 3% total market share, period.

Even Microsoft doesn't use Silverlight! Halo 3 promotional site uses Flash video. MSN uses Flash video. It's embarassing to Microsoft.

O: "The Web starts to re-colonize the desktop." How about mobile? Do you see Flash as an enabler for interactive experience across all devices?

C: When we first acquired Macromedia, we thought the model would be the same as for PC. Give the desktop away -- like Acrobat reader. But could get people to pay for clients. Any time you see a Flash player on a mobile device or game player. Apple has demonstrated to the world that you can view the Web on a mobile device -- but it needs Flash. (The iPhone does not support Flash.)

Will be adding VoIP ability to Flash player.

O: You see Flash player evolving into universal communications client?

C: Yes.

O: So companies like Hotbox that are evolving Flash in that direction had better watch out....

O: How do you spend your time? How much do you spend on building quality, and how much about revenue generation?

C: He's jealous of Mark Zuckerberg (facebook), who gets to wear sandals and doesn't worry about investors. As CEO, he does a lot of things he doesn't want to do, and not much time doing what he wants to do: Looking at developing products and the competition.

ten years from now will change business model from desktop to host, many will be subscription rather than advertising.

O: So the net will be the platform?

C: Over the long term, yes, But in the meantime, the desktop is a powerful platform and broadband isn't there yet.

Question from audience: Adobe makes great products - how do you keep the quality up?

C: Employees understand that people buy Adobe products because of the quality. And Adobe builds discipline into the prooduc lifecycle.