What’s new in Adobe’s Business Model Q4 2023?
Today we are looking at Adobe’s latest investor update from a business model perspective.
Key highlights this time include:
A staggering amount of AI-innovations across all their product lines
While AI has been the buzzword of the last 12 months (esp generative AI), many of the innovations that Adobe unveiled were long in the making.
They include AI updates to:
Adobe Document Cloud products
Adobe Creative Cloud products
Adobe Experience Cloud products & the underlying platform
What’s new in Adobe’s Business Model Q4 2023?
You can also jump to the respective section clicking the link below:
00:00 Highlights
01:02 Business Segments Overview
02:01 AI-Innovation highlights Document Cloud
07:46 AI-Innovation highlights Creative Cloud
12:06 AI-Innovation highlights Experience Cloud
18:08 Growth Opportunities
18:32 Customer Acquisition Funnel
Here we are showing some key highlights.
Business Segments Overview
Let’s start with a brief Business Segments overview as a brief reminder
Adobe Creative Cloud: these are all the tools (and related services) that make all the visual tools, including creation and editing of images, videos, illustration, photos, etc
Adobe Document Cloud: this is everything related to pdf and documents but it is far more than the good old pdf viewer/editor (more in a sec)
Adobe Experience Cloud: everything related to marketing tools as well as the underlying technology platform
How does Adobe make money?
Adobe mainly monetises via subscriptions to their apps and there are various layers, such as individual apps, bundles of apps, all apps, then there’s the business version with number of seats.
Segment results for FY23 look as follows:
Adobe Creative Cloud: $11.5b
Adobe Document Cloud: $2.7b
Adobe Experience Cloud: $4.9b
At an overall level Adobe runs a Software-as-a-Service business model which we described under that link quite extensively.
With the introduction of AI features, they have also introduced a credit-based monetisation model, which is pretty much a pay-per-use model (or more correctly a purchase credits model similar to Adobe Stock).
Now let’s go to their key innovations in the different product lines. And let me say that these are all pertaining to AI innovations
Adobe Document Cloud AI Innovations
Document Cloud is really all things (apps, web offerings) related to pdf. And there are very fascinating ideas enabled by AI.
Liquid mode was introduced in 2020 and is leading to considerable increase in usage & revenue. It enables among others:
Display of responsive pdfs: ease of using on different sized screens (esp mobile)
The document gets reformatted to avoid the need for pinch & zoom. It makes it a dynamic document, incl adjustability of font sizes (reminds much of Kindle)
It generates intelligent outlines, collapsible and expandable sections, and searchable text for quick navigation.
Use of AI to understand structure & content of PDFs: headings, paragraphs, images, lists, table, etc
Searchable text, quick navigation
Document Cloud AI-innovations & long-term vision
Adobe is using of their Sensei AI technology for value-adding purposes, for example:
Already in private beta are things like generation of documents via conversational AI. Use cases mentioned are getting and AI summary of a report and generating a document based on the summary via a conversational interface.
Long-term visions include:
“Replace months of intensive document research with a quick query that cross-references millions of PDFs in your organization at once”
“Uncovering groundbreaking medical insights from PDF data spread across millions of scientific research reports, medical records, or academic studies.”
“Unleashing this technology to state and local governments could also significantly improve document accessibility and collaboration across disparate agencies.”
“More insight and power from the trillions of PDFs housed in enterprise storage systems, PCs, mobile devices, and on the web.” -
With an estimated 2.5 trillion pdfs worldwide, there is rich knowledge grounds to draw upon. But the examples above also show the need for domain-specific AI language models.
All in all, a very exciting outlook.
Adobe Creative Cloud AI Innovations
Creative Cloud are all apps in relation to visuals (image, video, photo editing, illustrations, 3D, etc). It includes their flagship apps Photoshop, Express, Illustrator, InDesign, Lightroom and more.
And notably it includes the recent addition of their new AI App: Firefly. It allows image creation & editing via a conversational interface (text based as of Q124).
Firefly is a new AI-first app launched in March ‘23. It comes as a an app as well as via an interface. Firefly is also the name of some of their foundational AI-models integrated already across their flagship apps.
How does Adobe monetise on AI?
Most of Adobe’s Apps are based on a subscription model including bundled subscriptions.
As for AI they are using a credit-based pay-per-use monetisation model. If you subscribe to Firefly (currently $6.99 / months, you get 100 credits per month included for AI editing features). Currently most AI-diting features cost 1 credit but this can also change.
Here is an overview of their monetisation approaches from Freemium, via individual users to businesses & enterprises. It follows the typical SaaS monetisation patterns.
This is just an abridged version of our coverage of Creative Cloud AI-Innovations in the video.
Adobe Experience Cloud AI Innovations
Last but not least let’s cover Adobe’s exciting space of marketing solutions for businesses that tie into all of the above for corporate users.
The underlying AI-technology in Experience Cloud is called Sensei on which they started working from 2016. Experience Cloud of course also leverages the Firefly models via the respective Creative Cloud apps.
Key capabilities of the various Experience Cloud apps include:
Creation of (personalised) marketing media
Customer journeys tracking, management & optimisation
Automated, lean website creation
Marketing campaigns, including targeting & personalised offers,
Extensive data & analytics capabilities
GenStudio
Instead of recapping what we are saying in the video, we show one example of workflows for GenStudio which manages the supply chain for creative materials for marketing campaigns and websites.
GenStudio allows to start with a brief of what the content/media is expected to achieve, look like, addressed customer segments, etc. It then is shared with the creators allowing collaboration across the stakeholders. Once the content/media is created, it can be uploaded (to the content management system) and deployed across the respective websites and campaign. All if followed by measurement and improvement loops. You can get more details on their pages here. All of this happens within the GenStudio tool that can be accessed by a wide variety of involved stakeholder and roles keeping all workflow, data and content in one place.
This is just one example within Adobe Experience Cloud. You can learn more about this in the video section on Experience Cloud AI Innovations.
With that we are concluding our coverage of Adobe’s business model and AI-innovation updates from Q4 2023. Hope you have enjoyed the fascinating updates on Adobe’s amazing flurry of AI-innovations. It is no surprise that they won over 25 accolades in 2023 in various industry reports.