The vision is starting to become reality. For a long time CMOs and advertisers were happy with point solutions. But marketers are now saying, "Stop the madness. I don't want to be a systems integrator. I don't want to be a technologist. I'm a marketer. I understand brand, direct response, whatever it is that I'm trying to drive."
Whether it's ad tech, whether it's site‑side technology to do personalization on the site or within the mobile app, whether it's social, whether it's mobile, all of this combined is going to top $50 to 60 billion, and it's going to continue for the next decade. This isn't a one‑to‑two‑year cycle. Globally there will be one to three platforms offering end‑to‑end workflow.
It's not just about the ad tech workflow. A lot of people ask me about social. We have five solutions and Adobe Social is one of those. We've combined the engagement with the analytics to work in one product. But we also have the Efficient Frontier business that has $2.5 billion dollars of ad spend. More and more of that's going to Facebook. From a paid media standpoint, we're already the leader in the engagement and analytics. That's great and I think social's transforming how people think about marketing, but it's not sufficient. Is there a CMO in the world that says, "All I do is social marketing?" No.
Are people buying the end-to-end stack today?
This is coming together in the last 12 to 18 months, so we're still early days. Is there pent‑up demand? Absolutely. The predominant way that people -- whether it's an agency, marketer or an advertiser -- are building their stack today is they're still taking a bunch of point solutions and trying to squeeze one together.
The interesting thing Adobe has that nobody else has -- and people really underestimate -- is advertising workflow. The message still matters. Today people are chasing the dollar. Advertisers put a dollar in, and it goes to the publisher. Where's the content in that? What are you actually showing?
This comes back to Adobe's heritage. The Creative Cloud that we're now rolling out is a full subscription service. All the assets are stored in the cloud, roughly the same cloud as the Marketing Cloud. The vision is to drop [creative assets] through the marketing cloud. Then it's ready for display ads, landing page optimization, shopping cart optimization, mobile apps, the whole thing. We're really focused on not only the advertising workflow but the content workflow, and how that comes together within the marketing platform.
Every customer I talk to -- whether it's Viacom, REI, Nike -- they're like, "Well, we use the Creative Cloud. How do we tie that together? What does that mean from a metadata standpoint?" It really does tie that together. We already have all the behavioral data that we're getting through the analytics. You match that with the metadata of the creative, it becomes a rich set of information that markers can use.
Facebook is distancing itself from clicks, throwing its support behind GRPs and point of sale conversion tracking. Thoughts?
Facebook has to do that. They never wanted to be a direct response medium. Facebook is not set up to be a direct response medium. It really is an advertising medium much like TV, radio, and other types of branding experiences. If Facebook is held to the same measure [as search and IAB standard banners], it doesn't stack up well.
I actually believe Facebook as an advertising medium is a home run, but you have to measure it differently. We've got an entire team that basically does offline to online attribution. These are the PhDs in econometric modeling. There are standalone companies just trying to do that. We think it needs to be done in the context with the execution platforms, because if you break it away from execution and the analytics, all you are is an outsourced modeling partner, and it doesn't tie back.
Forrester rated attribution pure plays like Visual IQ and Adometry at the top of the pack in the attribution space. Would you consider buying one of them?
This space will evolve like other spaces. It's going to be a mix [of integrated platforms and pure plays]. Adobe over the last three years has spent $2.5 to $3 billion dollars on acquisition in spaces that we thought made sense, to consolidate to where there was a clear leader.
Are you done acquiring for now?
We haven't publicly said that we're done. The last acquisition that we did was earlier this year with Efficient Frontier. It's going to continue to be a strategy for us, because if we think that we can develop every piece of what's going to be required five years from now, that's probably not likely.
Are we going to acquire everything? No.
What solutions can Adobe reasonably hope to build in-house?
Look at the resources we're applying against research and development, compare that to…any of the point solutions that sit within the advertising and marketing tech landscape. We can apply a lot to where you see huge innovation coming out of startup companies with 15 engineers. I don't view us as a big company. I'm the plucky upstart.
To see a top software company like Adobe really get aligned and focused on this opportunity -- that's why we've been successful. Adobe last year did about $4 billion in revenue. Three billion of that is Photoshop, Acrobat, that kind of stuff. I'm about a billion. But a billion dollars in marketing and advertising tech, that's big, and we have committed to grow this business 20% more every year. This is now the growth engine of Adobe, and that scale is going to help us innovate. Let's innovate internally where we want to be. If there's something that we think is critical to furthering the platform, then certainly we'll look at [building it].
There's an art to integrating acquisitions. Has Adobe learned it?
As an industry, more M&A goes wrong than goes right. Three years into the Omniture acquisition, two years into the Demdex acquisition, a year into the Efficient Frontier acquisition, have those gone well? Yeah. And why? Because Adobe has invested like crazy.
Where you get in trouble with acquisitions is when there's a mismatch in culture, a mismatch in strategic alignment in terms of what are we going to do, and then if you buy it and then start cutting costs. As soon as you do that, it's the death knell, to where if you're not committed to it, then the talent starts to say, "Hey, look, we're not committed." There's a mismatch in culture or vision and things start to unravel and customers start to see that.
Now, there's integration of the people and then there's integration of the technology. I think you were asking about both, but with the integration of the people, you get the culture, you get the vision. You get a long way there, because I still think of acquisitions as mass hires.
You're hiring a lot of people on one day, so you've got to win hearts and minds. They've got to subscribe to the vision and they've got to bleed Adobe red. Omniture was green, very green. We've got to turn that red, and they've got to believe.
On the second part, we've completed the integration of the data sets between what Efficient Frontier is optimizing on from an advertising standpoint with Site Catalyst, which is the web analytics product. Clients basically have one common set of data that's powering both the site optimization and reporting and the advertising.
We're going to win. We will win in the industry because we have the broadest end-to-end platform. But we've got to compete and make sure that we're best in class in each of the sectors. I can't just focus on integration. I've got to focus on the innovation. If you're not doing both I think the overall strategy is a waste.
A lot of companies feel competitive with Google – telcos, travel companies, Internet companies. Does that send them rushing into your arms?
This space and the broader industry is such that there is "coopetition" going on everywhere. In one part people are cooperating and they've got a great partnership, and then they're competing in other parts of the business. That's the nature of where we are as an industry.
I would say that, not even related to Google, what is powering our business is the desire for independence. Marketers and advertisers are asking, "Who's on my side? Who's 100 percent aligned with my interests?" I'm spending dollars with you to buy the advertisement that you're monetizing. How likely are you to tell me how effective that advertising actually is? There does become a conflict of interest…whether it's Google or others. Independence, for us, is critical. It's propelling the business.
What's your assessment of the Data Management Platform (DMP) category and Adobe's offering?
The word DMP is defunct. The idea of what it is, absolutely critical.
The problem with a lot of these acronyms is, they mean something initially, and then they get diluted. We've been doing big data for over a decade. I mean analytics, taking a trillion clicks and transactions into my data. But the problem now is that [the term] means everything. It's like, "Oh, your knee aches today? Just rub some big data on it." It doesn't mean anything, so DMPs may be approaching that.
We've got a fully featured operational DMP today, Demdex. We've combined that with the analytics platform. We call that solution AudienceManager. It's a way for a publisher…to manage your audiences. Because at the end of the day, that's what you monetize.