Economics & Research Blog
Was Adobe's Action an Attempt to Monetize Free Content?
By Dr. Joe Webb
Published: July 29, 2007
We're a couple of days away from the announced August 1 deadline of a statement from Adobe about its contract with FedExKinko's.
How did it come about? Adobe gets no direct cash flow from Acrobat Reader, though it does create demand for Adobe's PDF creation products. Looking at the millions of downloads and finding a way to monetize it is something that one would expect to receive accolades and a big pat on the back for such grand insight.
This issue, however, is not so different than the publishing industry. Having made the mistake of putting their content on the Internet for “free,” publishers are now in the situation where paid print advertising and subscription revenue is declining, while the same content appears on the Internet. Like Acrobat Reader, it does not deliver any meaningful direct revenue.
In this sense, Adobe is in the same boat as its publishing users: free content (Acrobat Reader) seeking a way to be monetized. One can easily see why the company would think that getting a revenue stream from Reader would be considered a good idea, especially when Adobe's products have always commanded a premium price in its markets.
Implementing monetization plans often create consequences that are unintended and unforeseen. For example, publishers hate Google News. They even hate Google News Alerts. Their sense is that Google is “stealing” content from them. Yet they love the traffic that a Google, or any major search engine, can deliver to them, and should be very concerned about limiting that access.
The only major publisher to have gotten the Internet right has been Dow Jones, with the Wall Street Journal, with paid content right from the outset. Of course, it helps to have a niche audience used to paying for content, and used to getting the latest news on computer monitors.
And that brings us back to Adobe. Why would such a highly profitable software company be looking to monetize Acrobat Reader downloads? Solely because someone kept looking at those millions of downloads and seeing no money from it?
The suppliers to an industry, in this case, publishing, often find themselves with the same kinds of problems that their customers have. The monetization of free content is a problem that is giving Adobe more headaches than solutions.
Perhaps it is important to go back to the reason why Acrobat Reader was free to begin with: to stimulate sales of PDF creation tools. Making it easy for the target audience for a document's audience to have access to content removed an economic barrier to PDF adoption. It is easy to forget that Adobe's strategy was aggressive at the time. It basically pushed competitors like Common Ground and Novell Envoy out of the market. Free distribution of Acrobat Reader established it as a de facto industry standard.
This is a change in strategy, and it's easy to imagine it extended to other markets. What if Adobe signed contracts with logo development companies? There are many advertising the Internet, promising to give you a company logo for just $250. That would certainly get the attention of graphic designers using the program in a way similar to the undesired attention that printers have given it.
What Adobe will announce on August 1 is still a mystery. There is a good case for them to stick to their FedExKinko's agreement. With their incredible, and well-earned, market shares in designer, publisher, and agency markets, they know that printers will have to continue using their software in the short run. Competitors to Illustrator and Photoshop are very weak. InDesign is basically “free” when part of the CS3 software. There is every reason to believe, from a strategic perspective, that digging in their heels would actually work. Not that it would be the right thing to do in the long run, but they could probably do it, betting that by the time any significant negative monetary effect could be detected, there would be other market and technological changes that would be greater. Anyone with a quarter-to-quarter management perspective, worried about impressing “the Street” with their earnings, may certainly take this approach, leaving some future executive to clean up the debris.
I recently spoke at an industry event, and it was clear that print business owners don't even know what their software alternatives are. Adobe's products are such an unquestioned standard in their minds, and so taken for granted, that they haven't even looked.
There are numerous PDF readers and makers, and most of them are free or much lower cost than Adobe's offering. There are also many other programs that can be used for page creation and image manipulation, some of them being impressive open source products that are free to users (two are publishing program Scribus and image editor The Gimp). The choices in paid software are wider for Windows users than Mac.
Whether or not Adobe decides to walk away from its FedExKinko's agreement (and if they do, they may have to buy themselves out of it in some way), this is the kind of lesson that changes market behavior. If the industry decides that such an Adobe decision kisses the wound and makes it all better, then does little or nothing to evaluate alternatives and diversify its production tools, then we deserve for it to happen to us again.
Getting our industry's clients to use non-Adobe products would be quite difficult. Changing brands of software is not easy when designers and other content creators have deep loyalty to their products because they make money with them. For them, there is no “Adobe problem.” There are no compelling reasons to change.
The printing business has two avenues open to it. First, standardizing on PDFs and using software that allows editing to PDFs is essential. That is one common point in moving a job from one place to another. The second is smart implementation of Web-to-Print. Not all print jobs can be built in templates that we specify, such as Vistaprint does, but many can. The more our industry can move clients into creating jobs using web-based software, the more likely it can avoid this kind of issue in the future. This, however, for many products that our industry produces, is not possible.
Abobe is one of the most successful software companies in history. When it makes mistakes, they are usually small, caught, and turned into springboards rather than death spiral debilitations. No matter what they decide, there are forces and trends in other parts of the imaging and media markets that will maintain their reputation for wise decisions. Print media has been quite a cash cow for them, funding many initiatives into other media. It's good to feed the cow and keep it healthy. Perhaps someone will recognize that. Adobe has never really been one of those companies that is preoccupied with “making the quarter look good.” They've always had their eyes focused two, three, and five years out, and sometimes further.
Whatever their decision, this will probably become an important case study in business-to-business marketing for years to come.