Adobe's subs succeed, but Marketing Cloud needs marketing

Profile picture for user slauchlan By Stuart Lauchlan September 17, 2013
Summary:
When Adobe announced it was ditching licensing and moving to a subscription model, it was a gamble, but it's one that looks like it's paying off, albeit with some painful transitioning still to come.

President and Chief Executive Officer of Adobe Systems Incorporated Shantanu Narayen speaks at the Research in Motion Blackberry developer's conference in San Francisco
Shantanu Narayen

When Adobe announced it was ditching licensing and moving to a subscription model, it was a gamble that didn't impress everyone - but it's one that looks like it's paying off, albeit with some painful transitioning still to come.

Subscriptions for Adobe's Creative Cloud are now running at over one million and boasting quarter on quarter growth rates of 47%, which equates to an additional 331,00o subscribers.

As of the end of Q3, 95% of Creative Cloud subscriptions are annual plans versus month-to-month and 81% are for the full Creative Cloud versus point products.

But the shift is inevitably impacting on the bottom line. Revenue for the period through August declined 7.9% to $995.1 million.

Nonetheless CEO Shantanu Narayen is pleased that the subscription push is paying off so far:

“The overwhelming majority of customers are moving away from perpetual licenses towards term-based licenses, demonstrating acceptance of the new offering.

"In Digital Media, we continue to make great progress reimagining our Creative and Document Services offerings as Cloud services. This enables us to innovate at a more rapid pace, attract new customers to our platforms and build predictable recurring revenue streams.

"Individual, team and enterprise customers are realizing the advantages of Creative Cloud. Individuals are receiving a constant stream of innovation at an affordable price. Teams are benefiting from being on the same version and the ability to seamlessly share files, fonts and preferences."

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Marketing the marketing

Narayen adds that he sees enterprises increasing their adoption partly due to simplified licensing models, but also as a result of integration with Adobe Marketing Cloud.

Marketing Cloud sales rose 25%, excluding the Adobe's acquisition of Neolane. Narayen says:

"In Digital Marketing, Adobe is extending its leadership position. We achieved 28% year-over-year growth in Q3 with Adobe Marketing Cloud and are on a run rate exceeding $1 billion in annual revenue. We're driving adoption of multiple solutions, which is increasing the value and size of customer bookings.

"Neolane integrates online and offline marketing data from across an enterprise, performing robust audience segmentation and delivering marketing messages across channels including web, email, social, mobile, call center, direct mail and point of sale.

"This enables marketers to deliver consistent customer experiences, personalized campaigns and increased ROI. Neolane becomes Adobe Campaign and will be integrated into the Adobe Marketing Cloud as our sixth solution, joining Adobe Analytics, Adobe Experience Manager, Adobe Media Optimizer, Adobe Social and Adobe Target."

But with the Marketing Cloud landscape increasingly cluttered - in all its varous Marketo/Salesforce.com/ Infor etc forms - Narayen concedes that Adobe still faces the challenge of getting customers to buy into the entire Marketing Cloud offering.

At the moment that number is pretty low. Narayen says:

"I would say that's a work in progress. The real opportunity is when you're a platform for all of the digital marketing needs that a customer has, whether it's their marketing spend, whether it's their campaigns, whether it's their social presence, it should actually represent significant uplift for us in our Digital Marketing revenue because the average number of products that our Digital Marketing customer is using is still low.

"We are making them integrated, much like we did with the Creative Suite of products. So while we're not quantifying exactly what the uplift could be, we definitely see it as an area of internal focus and external growth because the average number of products per enterprise customer, we can continue to grow that quite a bit."

Narayen insists that the marketing of the Marketing Cloud is paying dividends:

"Awareness of our solution is certainly increasing. As the adoption of our various solutions is taking hold, we're certainly upselling to our customers. So we look at both new customer acquisition as well as within an existing customer, are we selling them increased solutions, and both of those are working.

"We're just executing. We're executing against both platform that we're delivering to our customers, which is resonating with them, and we're executing on the field and marketing side."

Verdict

Paying off, but a long way to go - especially on the Marketing Cloud.

But so far, so good...