The History Of Adobe & How Adobe Makes Money?

Adobe is a Silicon Valley-based tech giant that has revolutionized the global creative and marketing industry. Ranging from photo editing, graphic designing, video production, and animation to PDF, and by developing a variety of software for the publishing industry, the company has become invaluable to businesses and creative professionals.

According to Adobe’s website, 90% of the world’s creative professionals are currently using Adobe Photoshop. More than 300 billion PDFs were opened in 2020 using Adobe products. Creative Cloud, the company’s flagship product, currently has 26 million paid members.

Overview of Adobe

While working at the famous Xerox Corporation’s Palo Alto Research Center (PARC) in the late 1970s, John Warnock and Charles Geschke were working on an application called PostScript. Xerox rejected their proposal to release the application globally and that led to the inception of today’s ‘Adobe Inc’ in a garage of John’s Los Altos house in California.

After the establishment of Adobe, the new company brought its first product to the market named PostScript in 1975, then Adobe Illustrator in 1987, Adobe Photoshop in 1989, Adobe Premiere in 1991, and finally Adobe Acrobat released (PDF) in 1993. Adobe Illustrator and Photoshop are worldwide the most popular tools for image manipulation and graphic designing.

The company’s Premier Pro and After Effects have earned popularity in video production as well. With the “industry-standard video editing software” – Adobe Premiere Pro, notable film director David Fincher has done post-production of his movie- “Gone Girl”.

Moreover, in production work for movies like – Terminator: Dark Fate, A Ghost Story, and Deadpool, Adobe software was used. Additionally, Adobe Audition is the most used software for audio production. Adobe’s Acrobat software is dedicated to creating, editing, and sharing documents, and its InDesign application is vastly used for designing.

The company provides several services for marketing and analytics, including Adobe Commerce and Adobe Analytics. In addition, the Adobe Stock service allows you to purchase various images, videos, illustrations, vectors, 3D assets, and templates.

During 2017-2021, Adobe generated revenue of USD 11.23 billion on average. In 2020, the company generated USD 12.79 billion in revenue which increased by 23% to 15.69 billion in 2021. The company expects this revenue to reach about USD 17.90 billion by the end of the 2022 fiscal year. According to Bloomberg, Adobe’s current market cap is about USD 264.85 billion. But how exactly is the company generating so much revenue?

How Adobe Makes Money?

Subscription fees are the prime source of the company’s revenue, and the rest comes from licensing legacy products. According to Forbes, the company generates its revenue through three segments: digital media, digital experience, and publishing.

Creativity & Design

Digital media is the major revenue-generating segment for Adobe, where the company primarily sells subscriptions to applications for Creative Cloud and the Acrobat Family Document Cloud Suite. Adobe’s subscription-based Creative Cloud platform dominates the market as a desktop tool, mobile app, and cloud-based service for rich, and effective content designing, creating, and publishing.

Adobe Creative Cloud is a combination of several apps including Photoshop, Illustrator, Premiere Pro, Lightroom CC, InDesign, and Adobe XD. In addition, Document Cloud comprises Adobe Acrobat, Adobe Sign, and Adobe Scan that is meant to serve purposes such as documentation, PDF, and publishing. In the 2021 fiscal year, the company’s revenue from the digital media segment amounted to approximately USD 11.5 billion, accounting for 72.96% of the company’s total revenue. On the other hand, Adobe’s revenue from Creative Cloud is USD 9.5 billion and its revenue from Document Cloud is USD 1.98 billion.

Digital Experience

Adobe’s Digital Experience Cloud segment provides apps and services relating to analytics, campaigns, and digital marketing. The company’s Experience Cloud includes analytics, social, advertising, media optimization, targeting, web experience management, and content management products.

Adobe Experience Cloud products can be experienced through 4 plans – Individual, Business, Students-Teachers, and Schools-Universities via the desktop, web, and mobile versions. In FY 2021, Adobe generated USD 3.87 billion in revenue from the digital experience platform, accounting for 24.51% of the company’s total revenue.

Publishing (Licensing)

Adobe also generates revenue by selling its legacy licenses for many publishing products, including eLearning, technical document publishing, and web conferencing. However, due to the current popularity of the subscription model, the revenue of this segment has been steadily declining. According to a Forbes report, Adobe’s Publishing revenue was USD 282 million in 2016 which dropped to USD 258 million in 2020.

Others

In addition, Adobe offers Adobe stock services for creative professionals worldwide, with access to millions of photos, videos, illustrations, vector graphics, 3D assets, and templates. However, to use these assets, everyone needs to take a multi-asset subscription to Adobe Stock Services.

Adobe hasn’t just revolutionized the global creative, document, content-making, and publishing industry, it has also been instrumental in protecting the environment. In the analog era, the world had a paper-based system, which required a huge amount of paper to create, sign, share, and store documents, which caused mass deforestation.

But, using Adobe’s application, 31 thousand trees, 105 million liters of water, and USD 7.2 million are saved globally for signing every 1 million transactions. At present, Adobe is operated by more than 25,000 employees worldwide and the company ranks 234th on the Fortune 500 list. According to Tracxn, Adobe has so far spent USD 13.21 billion on investment and acquisitions.