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Wen 丨 Lei Yu
Editor丨Zhang Rui
Who is the most successful SaaS company in the world?
Not Salesforce, which shouts "kill the software", or Shopify, which leads the army of independent stations, and certainly not entrepreneurial companies such as Workday, Zendesk, and Atlassian, but Adobe, the world's leader in creative software.
Adobe's latest financial report shows that its revenue in 2022 will be $17.606 billion, a year-on-year increase of 11.42%; Net profit reached US$4.756 billion, with a net profit margin of more than 27%; Among them, the revenue of the subscription business exceeded 16 billion US dollars.
Although the current market capitalization of $160.1 billion is down from its all-time peak of $327.5 billion in 2021, Adobe has surpassed Salesforce (current market capitalization of $148.4 billion) to become the world's most valuable SaaS company since 2020.
As the parent company of Photoshop and PDF, Adobe, which has a history of more than 40 years, is mostly traditional and low-key in public perception. In fact, Adobe is very innovative and self-transforming, and in recent years, through active transformation, Adobe has become the world's largest marketing SaaS company.
According to market research institute Synergy Research, Adobe maintained an absolute leading position in the creative and marketing technology field with a market share of 27.9% in 2022. Therefore, Adobe is also the favorite benchmarking model for startups in the marketing SaaS space in China.
This article will explain in detail how Adobe, which produces PS and PDF, has risen to the top of the leading SaaS enterprise position from the perspectives of enterprise development history, strategic transformation strategies, and core cases.
01
From software tools to marketing SaaS
How Adobe is inventing itself
Adobe's name comes from a small river.
In November 1982, Chuck Geschke and John Warnock, computer engineers who had worked at Xerox Parker, decided to start a company together, and while naming the new company, Chuck saw a stream near his home on a map, "How about Adobe?" Chuck asked John, who thought about it and agreed, and Adobe was born. No one expected that this "small river" would become an ocean in the long years to come.
Initially, Adobe's business was a programming language called PostScript, which allowed printers to recognize the color and size of fonts set by the user and adjust them for the best results. Soon, the technology was adopted by many technology companies, including Steve Jobs and Apple behind him.
In 1986, Apple successfully defeated many competitors, successfully bought a 19% stake in Adobe, and purchased the five-year rights to PostScript for Apple printers, which was worth 5 times Adobe's valuation at the time, and made Adobe the first company in Silicon Valley to be profitable in its first year.
On the one hand, Apple broke out of the siege and led the desktop publishing revolution that year, becoming the world's second largest personal computer manufacturer; It also allowed Adobe to take this opportunity to quickly occupy the market and successfully went public on NASDAQ in the same year.
In the third year of the collaboration, in 1989, an image processing program called "Display" caught Adobe's attention, which made Adobe realize that there was a larger market behind the publishing industry - image processing. That same year, Adobe acquired the product for $34.5 million, and in 1990, Photoshop was officially launched, which is now known as PS.
With simple operation, rich functions, and a huge Apple user ecology, Photoshop quickly became popular, and Adobe also took the opportunity to open a new stage: successively launched cross-platform document format pdf, video editing software Premiere, special effects production software After Effects, audio processing software Audition, 3D model production software Dimension, etc...
By 1997, a family of Adobe products around publishing, design, audio and video and other fields had sprung up on the market. That same year, Adobe's annual revenue reached $917 million, 80% of which came from these software products.
However, after 10 years of good times, in 2008, Adobe, whose market capitalization soared to $20.5 billion, suddenly fell into a doldrums.
With the outbreak of the financial crisis, a large number of enterprises have to open source and reduce costs, and in the face of high software purchase costs, most enterprises choose to continue to use the old version; At the same time, rampant software piracy is further eroding Adobe's profits. That year, Adobe's revenue fell by about 18%, and its stock price fell from a high of $48 to $15, and Adobe ushered in its "midlife crisis."
While teetering on the brink of decline, Shantanu Narayen, then CEO of Adobe, was keenly aware of a new transformation, a historic opportunity in the cloud. In 2008, the revenue of SaaS companies worldwide was about 5.1 billion US dollars, and some industry insiders estimate that the growth rate will remain above 100% in the next few years.
(Santanu Naran)
Seeing this, Santanu pondered that subscription revenue is more predictable and can increase over time, which is conducive to steady revenue growth. It was also in that year that Adobe made a key decision -
The traditional Photoshop, Illustrator, InDesign and other design software tools are "cloudified", packaged into Adobe Creative Cloud ("Creative Cloud"), and charged as a subscription-based SaaS service. At this point, Adobe became the first major software company to abandon the buyout system and transform into a subscription-based SaaS cloud service.
At the time, however, the SaaS model, which was still "avant-garde," didn't gain much customer favor, in the words of Mark Garrett, Adobe's chief financial officer at the time: "The business didn't grow and sales were flat." "But in the long run, this approach has undoubtedly accelerated the cultivation of Adobe's mid- and long-tail customers; At the same time, faster customer feedback helped Adobe make a correct judgment.
With the gradual formation of cloud data and visits with sales staff in the promotion process, Adobe noticed a long-neglected pain point of TOB companies: most consumers only have some vague perceptions of B2B brands such as GM and Lycra, which can be summarized as "I know this is a very powerful company", but they don't know what these brands are doing and how they relate to our lives. It can be said that there is still a long gap between B2B brands and consumers.
Thus, at a board meeting, Santanu said: "I think our business has started to stagnate, our existing customer-facing business is not enough to maintain high growth, and the existing [creative software] market is saturated." "The implication is that Adobe should not stop at providing tools for customers, but should further assist customers in managing, analyzing, and monetizing content.
It was also at this time that Adobe targeted the second growth curve of the enterprise into the "marketing technology" (MarTech) field.
In 2009, in the face of the foreseeable era of digital marketing, Adobe came up with a set of digital experience solutions - Adobe Experience Cloud, and began to acquire data marketing company Omniture, etc., trying to form an industry chain from content creation to marketing effect analysis to serve B-end customers, in order to use Adobe's global influence to penetrate new regions and emerging markets faster.
Although Adobe, which was in the throes of SaaS transformation between 2009 and 2013, revenue growth almost stagnated; But by 2013, the company's SaaS subscription revenue accounted for 50%.
That year (2013), Adobe's product matrix was almost complete, and the "three clouds" business represented by "Creative Cloud" Creative Cloud, "Experience Cloud" and "Document Cloud" accounted for 97% of revenue; "Creative Cloud" and "Experience Cloud" accounted for more than 78% of revenue.
The synergy between "Creative Cloud" and "Experience Cloud" can provide customers with full-chain services from content production, customer insight, marketing strategy to advertising and analysis to meet the needs of customers for a complete set of marketing solutions. Adobe's customers cover almost all advertising and marketing companies, digital media companies, and designer teams in North America.
Also in that year, Adobe, which was "fledgling" in SaaS, once again took the initiative to change the rules of the game, announcing that all its products could only be purchased through cloud subscription services, and launched monthly subscription/single project monthly purchase and other charging methods.
Although this shift had a slight impact on corporate revenue, revenue fell 8% in 2013; But soon, starting in 2015, sales began to rebound. According to the 2017 financial report, revenue increased by 25% year-on-year, and subscription business revenue reached $6.3 billion, accounting for 86% of total revenue.
Up to now, the cloud migration rate of Adobe products has exceeded 95%, the star product Photoshop has a market share of 90% in the image editing software market, and the "Creative Cloud" suite has also become the preferred toolkit that designers are difficult to replace. The market value of enterprises has also increased nearly 10 times from US$27.6 billion in 2013.
In the field of marketing technology, Adobe has become the preferred digital marketing service provider for Fortune 500 companies with a market share of nearly 30%.
02
Buy buy buy
The Adobe family bucket is getting fuller
As a successful example of traditional software transformation SaaS, in Adobe's nearly 15 years of "cloud" development, mergers and acquisitions have to mention the main theme in its growth process. It is also on the basis of extension mergers and acquisitions that Adobe has realized the development and integration of core products, and formed a product matrix of "three clouds" under the extension of service boundaries and the strengthening of product depth.
As mentioned above, in 2008, under the economic pressure of stagnant growth in the field of design software, the company began to consciously test the "cloud track", and mergers and acquisitions are undoubtedly the most efficient way to achieve cross-border layout in one step.
After a period of exploration, in 2009, Adobe officially opened the "buy, buy, buy" model, and successively acquired Omniture, Day Software, Efficient Frontier, Neolane, ComScore, TubeMogul and other marketing technology related companies, in order to strengthen its data analysis and marketing capabilities through acquisitions, and occupy a leading position in the field of marketing and analysis outside the field of design tools.
Among them, the acquisition of Omniture was the most representative event of the year. It is understood that Omniture is a marketing data service provider, mainly through website analysis, search engine advertising analysis, business intelligence, visitor research and other tools to optimize corporate marketing strategies.
Through this acquisition, Adobe has achieved horizontal expansion from design creation tools to marketing analysis tools, making Adobe's marketing technology (MarTech) business from scratch and making "Experience Cloud" the second growth pole of the year.
In 2018, Adobe did the same and acquired Marketo, a marketing campaign management service and real-time customer data analysis platform, for a $4.75 billion transaction consideration, through which Adobe successfully entered the financial, healthcare, technology and other industries, contributing absolute growth to its second curve growth.
A few months later, Adobe, which was still "ambitious", bought Magento and a B-side artificial intelligence marketing company for $4.8 billion, and reduced its stake in Magento's rival Shopify.
The former helped Adobe complete the full scenario coverage of e-commerce marketing with a complete set of point-and-shoot e-commerce tools, including website building, store order management, marketing tools, analysis tools, and application market expansion functions; The latter sends a strong signal: Adobe will bet on the artificial intelligence track; After the acquisition, in 2019, Adobe officially launched Adobe Sensei, a nested SaaS product with a pedestal.
Adobe Sensei features such as its name (the word Sensei comes from the Japanese pronunciation of "teacher"), in photo editing, Adobe Sensei can recognize the content of photos, color black and white images or change the background weather; In the video, Adobe Sensei is able to identify different frames and add appropriate transitions. In audio, Adobe Sensei understands passages and automates and simplifies operations, freeing people from the mechanical tedious tasks of the past.
With the help of artificial intelligence technology, Adobe not only develops functions for its software that it did not have in the past; Through intelligent cloud integration, the software usage mode is transformed into a "cloud download plug-in", which further improves the user experience, and also promotes the scale effect of enterprises in reverse, reducing the cost of Adobe AI development.
In 2021, Adobe acquired social media marketing company ContentCal for more than $100 million, aiming to provide small B businesses with creative software tools for publishing content through various channels.
In September 2022, Adobe announced that it had signed a definitive acquisition agreement with online design collaboration unicorn Figma to acquire Figma for 50% stock + 50% cash for a total consideration of $20 billion, which is also valued twice as much as Figma raised Series E in June 2021.
Subject to regulatory clearance and approval by Figma's shareholders, the transaction is expected to be Adobe's largest acquisition in history and one of the most expensive acquisitions in the SaaS space.
As a graphic design software that has only been established for 7 years, Figma is one of the few innovative companies in recent years that can be called the "speed of Silicon Valley". Figma was positioned as a graphics editing platform in its early days, with a valuation of just $100 million in early 2018; In 2021, after transforming into a one-stop graphic design software, the valuation skyrocketed to more than 100 billion US dollars.
At that time, Figma's position in the global design community was almost comparable to Adobe's, and Figma had a long and close relationship with Microsoft, and even Jon Friedman, Microsoft's vice president of design and research, publicly stated: "Figma is like air and water to Microsoft." As a result, the industry has been rumored that the end game of Figma will be captured by Microsoft.
Adobe's unexpected acquisition of Figma has skyrocketed Figma's value far faster than the investment circle's prediction of Figma's investment and financing actions. In this regard, Mirabaud's analyst Neil commented after the acquisition was exposed: "This deal has its own reasons, external acquisitions are wiser than starting from scratch, which is to kill the disruptors before they are completely subverted." ”
From Adobe's point of view, Figma is pioneering and irreplaceable in the field of graphic design.
In the past, due to the awareness of copyright protection, the design prototype tools under Adobe and Sketch were localized, requiring designers to save them locally and then transmit them to others, which greatly reduced production efficiency. In today's Internet companies, design is no longer an independent business unit, a product from creative output, design to prototype, and finally output, the whole process may involve UI/UX designers, R&D engineers, product managers and other different roles.
Therefore, since its inception, Figma has clarified its characteristics of "running based on web browsers", as a lightweight collaborative SaaS tool, its product process tenet is "real-time, sharing, transparency, traceability", and boldly breaks the long-term working rules, so that users can save the design documents as offline documents as in the past, or store the files in the cloud, and share and collaborate in the form of links.
Although this function seems simple, for Adobe, which accounts for 90% of the B2B business, Figma really solves the complicated and repeated communication pain points between different departments and different roles in large enterprises. In addition, by acquiring Figma and its fully cloud-based, lightweight platform integration capabilities, Adobe was not only able to further refine its product positioning as a design-to-market "one-stop collaborative SaaS service," but also to take the lead in securing its strategy with defensive acquisitions.
In this regard, some people commented: "Adobe family barrels, more and more full. Although it is a crude statement, it means that Adobe has built a rich and diverse product matrix and packages based on multiple cross-border acquisitions.
03
The world's most profitable SaaS company
How do Chinese companies learn?
From the financial data, since 2013, in addition to several times the increase in revenue, Adobe's net profit has also increased significantly.
In the second quarter of 2018 and 2021, Adobe's net profit margin reached 35.4% and 35%, respectively. In the first fiscal quarter of 2022, it became one of the few SaaS companies with a net profit margin of 31% during the downturn.
As the world's most profitable SaaS company and No.1 in digital marketing, Adobe "Three Clouds" owns Adobe Photoshop, Adobe Illustrator, Adobe Premiere, Adobe after effects, Adobe acrobat, Adobe Dreamweaver, Adobe InDesign, Adobe Lightroom, Adobe XD, Adobe animate, Adobe audition, Adobe Spark and other popular suites and plug-ins.
From desktop publishing to imaging, to electronic documents, videos, games, and digital marketing and commerce, Adobe's real barrier lies in building a professional user ecosystem through a multi-dimensional product matrix, more than 90% of the world's creative people use Adobe's creative software for visual design, and its online creative community has more than 10 million members. It can be said that without a product matrix with a better experience than Adobe, Adobe has no possibility of being replaced.
According to CITIC Securities' calculation and IDC's forecast data, the TAM (Total Addressable Market, potential market range) corresponding to Adobe's core products will reach $128 billion in 2022, with a compound growth rate of 27.6% from 2018 to 2022; Creative Cloud is $31 billion, Document Cloud is $13 billion, and Experience Cloud is $84 billion.
Among them, Experience Cloud part, data analysis, content management, customer life cycle management, e-commerce and advertising business scale of 23 billion, 28 billion, 13 billion, 10 billion and 10 billion US dollars.
It is worth noting that Adobe itself is still constantly innovating, and there has been a trend of integration between various businesses, that is, the PaaS platform "One Adobe" emphasized by the company - based on the company's creative tools, material library, and marketing tools, the enterprise digital marketing is one-stop and coordinated development.
Due to the rigid nature of Adobe's products, the effect of its transformation SaaS is obvious. The addition of a large number of lightweight users (small B and C-end users) has accelerated the popularization of products and the cultivation of long-tail customers.
However, compared with the global SaaS industry, China's SaaS industry started late, with many participants, and there has not yet been a leading enterprise with a market value of more than 100 billion US dollars like Adobe. For domestic SaaS enterprises that are still in the initial stage of development, the following three questions need to be answered before ushering in the future highlight moment:
How can you innovate faster?
How can I actively acquire new customers?
How can you continue to build a more predictable and circular revenue stream?
These three questions are also the first questions that Adobe first thought about in the early stage of transformation, focusing on the three core elements of product innovation, customer acquisition and stable cash flow.
At that time, Adobe clearly realized that if from the perspective of customer life cycle, as long as the renewal rate can be guaranteed, the repeat revenue from a single customer will be higher than the traditional one-time buyout, and the subsequent value-added services will also bring additional growth; With a stable income over a long period of time, the scale of the enterprise will also grow faster.
Therefore, in order to be able to provide value-added services on a sustainable basis, when it realized that the company did not have a certain professional ability, Adobe did not hesitate to "borrow blood" from the outside.
Not only Adobe, mergers and acquisitions can be described as the main theme of the growth of North American SaaS giants. From the perspective of industry data, in 2019, the number of SaaS M&A transactions in North America increased by 26.8% year-on-year, reaching 1,248, with more than 1,000 transactions for the first time. Salesforce, Adobe's "archrival", is also keen on acquisitions:
In 2018, Salesforce acquired Mulesoft, which focuses on API integration and specializes in SaaS platform integration, at a premium of about double.
In 2019, Salesforce successively acquired marketing analytics software company Datorama, data BI analysis company Tableau, and cross-border acquisition of RPA vendor Servicetrace; Among them, Tableau's purchase price is as high as $14.9 billion;
In July 2021, Salesforce acquired Slack for a "sky-high price" of 27.7 billion yuan, bringing SaaS deep into the collaborative office field.
On the other hand, in China, the SaaS market has great potential, but the digital empowerment market is still in the early stage of development compared with the United States, and the competition pattern of SaaS segments is highly dispersed, there are many small and medium-sized manufacturers, and the general field is divided into two or eight; However, there are always two sides to the matter, and this situation provides opportunities and conditions for SaaS leading companies in various tracks to extend their advantages and market competitiveness through mergers and acquisitions.
It can be inferred that in 2023, when the market is gradually picking up, a major theme of domestic SaaS may be the accelerated integration of different channels, and China's SaaS merger and acquisition boom will gradually emerge with the development of related fields.
From the perspective of funds, technology and products continue to iterate, and leading enterprises can maintain technological leadership through mergers and acquisitions; From the perspective of M&A effect, enterprises can also better realize the integration of functions and data and processes after the completion of M&A, and complete the launch of new functions without affecting customer experience, so as to obtain new genes and growth engines and consolidate industry dominance.
Combined with Adobe's development trajectory, in the future, domestic leading SaaS companies may follow the strategic layout of international leading enterprises, vertically acquire PaaS and IaaS layers, and build their own public clouds through mergers and acquisitions or investment; It also horizontally acquires SaaS vendors in other business segments to increase its monopoly capabilities and build a product ecosystem.