Welcome, everyone. I'm gonna give a couple seconds, a little more than that, for people to connect in. They're joining at a high rate. I apologize for being a couple minutes tardy in terms of the start of this, and I look forward very much to our conversation in a moment. Let me give it just another second. I see a lot of people connecting in. Once that slows, we will get started. Okay, excellent. Welcome, everyone. For those who don't know me, I'm Mark Moerdler. I cover global software at Bernstein. I'm really pleased to have the team from Adobe on this call. I have Jonathan Vaas from investor relations, and Scott Belsky, who knows everything we could ever wanna know about the creative side of Adobe's business. Scott, I really appreciate you making time for us.
We've created a pigeonhole, which you should have the link for that. If you have any questions, please put them there. I have some questions to start with, and I will be monitoring the igeonhole and adding those questions. Let me start at a high level, Scott. First of all, Scott, thank you very much for your time today. Scott, thank you. Can you explain DDOM and why this is a differentiator in driving the business?
Sure. Well, DDOM stands for the Data-Driven Operating Model. It's really has been our compass, you could say, as a company, as we've driven the change from the kind of old perpetual model into the subscription model. It's the way that we have become extremely intimate with our funnel understanding where customers start when they discover our products, and then when they come in and when they actually try the products, and how to optimize the trial experience so that they buy. Once they buy, how do we make sure that the usage is really strong and that we're optimizing for discovery of all the capabilities, and then how do we retain.
I would say a newer addition to this over the last few years has really been this product-led growth motion around how we make sure the customers also help us grow the product. We're not just getting new people at the top of the funnel in the, in the traditional way of branded search and non-branded search and paid and whatever else, but that we also have the customers helping drive that flywheel as well. What's interesting, though, about DDOM and Shantanu always loves to talk about what we call Adobe on Adobe. , building Adobe on our own tools and really being our own customer.
When you are your own customer, you have the ultimate level of empathy in how to help customers get value out of your products and how to drive the roadmap going forward. DDOM really drove our transformation as a company over the last 10 years. As we're thinking about other companies and other brands that are going under a digital transformation of their own what an amazing thing to say, "Hey, we were customer zero. , we learned and really built this for our own transformation.
, we're not selling something without empathy because we know exactly what it takes to implement this and to benefit from the DDOM model that is now sold through our products. , they look to, the future. , I think about new things that we're now doing Adobe on adobe like the, what we like to call internally the Content Supply Chain, but helping customers go from end to end in terms of creation to deployment of assets to optimizing and personalization. , it's almost like deja vu. , that's the new conversation of us being customer zero once again.
When you say customer zero, you're talking that basically you built on what became the Marketing Cloud, right? Experience Cloud in terms of the technology. You really optimized to drive from the top of the funnel all the way down to assure that you close the client and make them successful.
That's right. And making sure that we are the first customer, and that we optimize it for ourselves, and therefore, can confidently sell it and market and be great stewards of the product experience. , as you said, like we we had to go through this transformation ourselves.
Beautiful. I'm gonna change gear from the general to the more specific, probably the questions people are most interested in. Can you reiterate the implications of the Figma deal on your financials post-close?
Yeah, sure. Well, I mean, first of all, what I would say about Figma, it's it was, it was quite a process. , certainly my first rodeo in terms of a deal of this size, just being a part of the deal team. , David Wadhwani, my colleague who runs the business obviously drove this deal in particular. It took us 5 months to get really intimate and comfortable with what makes Figma work and their underlying business and where their roadmap is taking them. , so it wasn't a surprise to me that it took more than 5 minutes for the rest of the world to understand why we were so excited about this deal and its potential.
, it's a, it's a remarkable company. , they were bootstrapped, or they were rather $0 in revenue for the first, I think, six years as they were really building an incredible product, and then went from $0 to $400 million in ARR in, like, four years. , something like that. Incredible net revenue retention, just remarkable continued growth, and also really, really impressive gross margins. At the end of the day or once this acquisition closes, it will very much be a driver of top line for us, for sure. Again, like, the margin profile is also pretty strong.
There's just so many low-hanging fruit for us with this deal, both right away, then, of course, there's the synergy model we're super excited about over the long term. Just to start this is a company who just turned on their enterprise business, ? It's relatively new. , this is one of the strengths of Adobe, as an entrepreneur coming into Adobe and being awakened to just world-class enterprise sales and knowing how to drive these enterprise-wide agreements and just the go-to-market motions that Adobe is so great at, looking at a business like Figma that is so new in that regard, but has a world-class product and something that is gonna be extraordinarily relevant over the next few decades.
It's pretty exciting to me to just have some of those near term unlocks that will certainly help us reach far more customers and will of course, be great for investors as well. Then we can think about some of the, some of the longer-term synergies as well. You look at every product experience that any company is building these days, a lot of them, the source of truth of that product experience is in Figma. , this is where designers and developers meet, this is where copywriters jump in, and this is the experience. I mean, more and more of our businesses are only as good as our digital experience that we're delivering on a daily basis and optimizing. All of those experiences have assets.
Those assets, whether they be video or animations or illustrations or whatever those are, they're often made in our desktop products. To wire up all the assets that are used to make world-class experiences with the product design and development platform that so many companies are using, it's a really exciting set of possibilities.
Mark-
I'll just jump in and give a little color on margin. What we said when we announced it in Q3 was from our baseline non-GAAP operating margin, which is around 44%-45% world-class levels. In the first year after closing, the margin would dip between 1% and 2%, start to come back in year two, and be back to baseline by the end of year three and accretive to our non-GAAP EPS thereafter. It just shows you our own efficiency and the scale at which Adobe operates, that we can do a deal of this level with such a small margin impact in the near term and then accretive thereafter. We're proud of that as well.
Thank you, Jonathan. Scott, you talked about all the low-hanging fruit and the rest. Can I get a little color? I know you don't, obviously can't give too much, but a little color on what the vision, what you can do with this.
Well, some of the things we've shared these are all. It's hard to declare, and you shouldn't declare anything before the teams are one team, and we can work on what the future holds together. just a couple of things just were drivers for our excitement across this entire deal to the finish line. One is this just exploding space, product design and development. The strong assertion that it's becoming one. The fact that if you look at Figma's customer base, over 50% of their users are not designers. They are developers, product managers, copywriters, executives. These are folks who want to be stakeholders of the digital experience of the company.
It's actually pretty wild that for most companies, the only real stakeholders of what the digital experience is are the designers and then they pass red lines over to developers, and good luck with whatever ends up being put to deployment matches what was designed in the first place. We see this as a big space. We see it as a space that's important for Adobe. , imagine integrating some of the digital experience capabilities, like, how a website performs back to the source where the designers are developing the website. , I think there's a connectivity there that is a great advantage for us and for our customers.
, certainly the next is to make the future of creativity just more collaborative in general. I mean, Figma has a world-class platform, where multiplayer design happens every day. It's a fundamentally different type of platform than what we have over the decades built for our flagship products. There's just a lot of excitement around reimagining some of our own segments on this new multiplayer platform that Figma brings to the table. The third one is just around productivity being and creativity being the new productivity. What we mean by that is, you look at, you look at organizations over the previous decades, we deployed productivity tools to everyone, like the Excels and PowerPoints and Words of the world.
Now, as a lot of this work becomes automated or done with ChatGPT and all the other AI resources at our disposal, our conviction is that creatives or people will need to stand out through their creativity as opposed to their productivity. , even if you're an investment analyst, you want your incredible infographics to come through. You want presentations that go viral. , you wanna use design skills, and you want to leverage social platforms to spread ideas. With that, I think that the deployment of creative tools will be important. Figma, of course, brings in a product called FigJam, which is a new workplace collaboration tool that's become very successful for them.
We have Adobe Express, which we think that fits very well in, and we can build out our offering of deploying the masses creativity for the rest of us, if you will. that's a big focus for us going forward as well.
Excellent. Following up on that, can you give us some more color on where Adobe is in its journey to the web platform and A, how Figma fits in, and B, 'cause there's questions from the audience, what happens if it doesn't happen, that you close on Figma?
Sure thing. Well, what I'll say about our flagships, Photoshop, Illustrator, Premiere Pro, InDesign these are All products that we firmly believe should be multi-surface experiences. There's no reason why you should have to download a desktop product, which is if you think about our funnel, someone wants to do something in illustration or photography or video, and they have to download a product. , that takes minutes in some cases. Then when they have it on their machine, they have to open it. , that's a first-time experience they have to go through. Then when they land in the product, they need to be able to navigate how to use it.
On the desktop, in a piece of software on the desktop, it's a lot more challenging to personalize the experience for every type of new customer. , fast-forward to a world in which we deliver Photoshop on the web, which we've already announced and is in public beta, or Photoshop or Illustrator on the web, which is now in private beta, and there's no download friction. You land in the product the moment you click Get Started, or someone shares the link with you. Our products inherently become viral when they are on web versus simply only on desktop. Then when you land in the experience, you are able to have a personalized onboarding based on who you are.
If you say, "I'm a beginner," or, "I'm an intermediate or advanced," we can give you a completely different product experience based on who you are. A lot of this came from a deeper understanding of our funnel, back to your DDOM question in the beginning, realizing just how many folks drop off in our funnel because of the complication of our products and the fact that we can't deliver them on the web and whatever else. Years ago, we started this effort of bringing our products to the cloud, not just Creative Cloud as a brand term, but actually delivering all of our products cloud native, if you will. Now we're at a point where you can create Cloud docs in Photoshop, as a default.
You can pick them up on mobile or on web. You can share a link and invite someone in, and they can just jump in with a link. We're seeing some surprisingly good data points that suggest that customers get a lot of value from our products on the web. That's where we are in that journey. I would say that our web apps are now public beta, private beta or coming. We're learning how we can personalize those experiences to make them far more effective for customers and for the business. , Figma is a bit of a different animal. Figma is a product design and development platform. It's.
They have multiplayer capabilities in a way that we frankly wouldn't be able to do and wouldn't really need to do on a Photoshop-like product because customers don't want 50 people in their Photoshop file. , that would be a nightmare for that type of customer who's image editing, and you're dealing with layers. With a product experience that includes hundreds if not thousands of panels and pages and everything else, you actually do want tons of people in. Figma built the platform, purpose-built for that use case, which is why I think it's such a valuable addition to the franchise.
It adds capabilities and depth and breadth but isn't necessary for your web journey for the core creative products.
That's right.
That's a fair statement. Okay, good. Number of questions. We put out a note, in fact, today about ChatGPT, GPT, and in fact, used ChatGPT to write the note. A number of questions coming in from people on asking, can you speak to the competitive landscape may have changed for Adobe and maybe for Figma, given the impact on creation and design productivity from generative AI?
Yeah. No, it's probably one of our hottest topics right now, and we have a ton of work going on in this area. Let me explain to you quickly the framework that we use to apply to the role of generative AI throughout our products. We see every potential customer of ours and current customer on a spectrum of outcome-oriented creativity to process-oriented creativity. Outcome-oriented creativity, the target product for them is Adobe Express. , these are people who come in saying, "I have an idea of what I want, and I just need it now." If you're writing a blog post about about robotics in medicine, and you wanna.
You want an image of a robot doctor, and you can just feed that into a generative AI model, that prompt, "I need a robot doctor," and whatever you get, you're pretty much happy with. , if it looks good, you don't really care if the robot doctor is standing a little to the left or to the right or is wearing a blue lab coat versus a white lab coat. , you don't care. You just need to have an image. That's our prototypical outcome-oriented customer. They're template-driven. They'll use generative AI to get quick images with prompts, and they don't need to have pixel precision and control over their output. You have the process-oriented creative that is quite the opposite. , these are our customers who want control layer by layer of an asset.
If they give that command, they're gonna wanna move the robot doctor a little bit to the left. They're gonna wanna make him a little shorter, a little taller. , they're gonna wanna have control. We have two sets of customers, if you will, that we have to really think through for the role of generative AI. Fortunately, on the Adobe Express side, it's pretty clear. We already demoed at MAX in October, our big conference. We showed how you can make any sort of font you can imagine with a prompt. You can bring out someone in an image or complete an image using Adobe Express, and we have all of those capabilities launching this year on Adobe Express. And I can talk about some of the underlying models and the dynamic there in a minute.
On the process-oriented side, whether it's Photoshop or Premiere Pro, first of all, we support third-party plugins already, many of which use some of the Stable Diffusion or OpenAI models that are out there. We also have our own homegrown models that are being purpose-built for what our customers really need. , if they need to bring in an object on a, on a layer in Photoshop or complete out an asset, an image, because it's missing a little bit they have to fill out a format that's a little bit bigger than what they have we have generative AI capabilities that are coming into our product that will just complete that for them.
You see it as augmenting what you have, not competing against what you have. Is that fair?
Absolutely. , I've never met a customer who would like to take an hour to do something that could be done in a minute or a second. We have to outfit our customers to be able to be as productive as humanly possible. I also have seen through our customers' feedback to us that they need precision control. Even if they prompt an algorithm to spit something out, they need to be able to take it further. The analogy a lot of our customers use is generative AI is like a huge swath of interns that you can staff on something and explore something.
At the end of the day, they bring back to you the proposals, the ideas, and then your job is to synthesize it put it in a story perfect it, and then bring it to the client. I don't think that part will change.
Beautiful. Changing gears, another question. A couple of them came in saying one from the audiences. To the extent you can answer it, Scott or Jonathan, that would be great. How are you evaluating the likelihood and path to regulatory approval for Figma? What's your sense of where this process is going? Obviously, you're not the lawyers, you can't talk about that, but what's the sense you are in terms of it? 'Cause there's a lot of controversy out there as to what's happening from a regulatory point of view in the whole world with every acquisition.
Yeah, Jonathan, you wanna give the, kind of the latest update that we have?
Yeah, sure. Some of these details were shared in the S-4 that we filed as well. We mentioned we are in a Second Request process with the Department of Justice, that was expected. , like you mentioned, in this environment, frankly, in any environment, $20 billion acquisitions usually get a closer look. We're in regular dialogue and producing the documents as well as Figma's producing documents that they've requested for. We're in a process with the regulators in the UK, and we said we also expect the same in Europe. , it's just a matter of getting them the information they're looking for. What we hear is, the process has been very collegial and is progressing as expected.
We believe that the deal will be cleared and closed later this year.
Beautiful. Thank you. Changing gears, let's go, let's maybe go back to the Creative Cloud itself. Can you give us some color on what the demand for creative tools look like today versus pre-COVID and during COVID? Have you reached the top of that S-curve at this point?
well the traffic patterns continue to be very strong. , I think that during COVID, we certainly saw some haywire in the system where certain things like video exploded, and yet things like photography slipped because people weren't buying cameras to go travel anymore. therefore they didn't need the downstream products to support things like travel photography and that sort of thing. It's nice to have that haywire out of the system and kind of be back to the macro trend, which is that creativity's never been more important. , people, anyone on social platforms, they increasingly wanna stand out. How do they stand out? They wanna use creative capabilities that aren't natively available on the social platform that they're using.
Whether it's a TikTok customer starting to use Adobe Express or even Premiere Pro or customers on Instagram using After Effects to make really cool effects in the background, one of the things I'm driving the product teams to do across non-pro and pro products is ensure that we are really natively supporting the formats and the possibilities of the formats of these social products. We also have brought in scheduling to social platforms. Adobe Express now whenever you're done with making an asset, you can choose instead of exporting it as an asset and uploading it yourself to Instagram or TikTok or wherever, you can actually schedule to post it. Which is what we find is driving retention and better growth loops for our products.
So the top of funnel wise to me, there is no shortage of opportunity there. It's all about making sure that we own the non-branded search terms that we wanna compete in, or make a lot of progress in having authority in those terms. We bring those customers in and make our products more collaborative so that people can share them with each other and bring in more customers, more customers that way. Then thinking about the new use cases of creativity. I mentioned something like infographics, social media posting, presentations. , more people are using Adobe Express for presentations now, we're exploring the relevance for that, for that, for that base.
Helping customers get into our products with less friction. , again, like some of the growth levers for us are as simple as making sure that customers can start using Photoshop without even having to download Photoshop. , back to our earlier conversation on web. Top of funnel is strong, and I still find quite a bit of low-hanging fruit in terms of our teams to better convert it.
It's as strong as it was pre-COVID?
I think category by category, I think you'll see variances. There are certainly parts of it that are much stronger than we saw in terms of pre-COVID. there's some segments that have like fluctuated based on what COVID has brought or that sort of thing. I don't know offhand exactly the numbers of traffic apples to apples overall.
Okay. That's fair. Can you explain the difference in what a communicator might need from the creative tool versus a professional or a consumer?
Yeah, sure. , the communicator is very much that outcome-oriented creative I was describing earlier. The communicator comes in wanting to do things very quickly. They care more about getting something fast that looks good than they do about the creative control or the process of getting there. That's really where a template-driven product like Adobe Express, generative AI capabilities allow you to prompt something and just get a bunch of things to choose from. Also, AI-driven assistance for someone to look better. the way I like to describe Express sometimes for this communicator customer you're describing is it's almost like having a marketing department in your pocket. What does the marketing department do? It keeps you on brand. It makes sure you use the right logos and the right font.
It suggests templates based on the season, based on the holidays, whatever the case might be. It might even automatically generate some text for you based on your previous posts. It can suggest stock to you, and it always kind of has very rigid templates, so you don't kind of go off and make something that looks bad. It connects with your designers. If you're actually a social media marketer or communicator in a big company, what I love about the competitive advantage of using Adobe Express versus any of these other competitors out there is that it actually connects with the Adobe Creative Cloud libraries that the designers use.
, if you're at any CPG brand or any other brand in the world that is an Adobe customer on the Creative Cloud side, and you have deployed Adobe Express to your social media marketers and other people throughout your organization, now they can actually work with the latest logo and the latest the latest brand elements for the holiday and whatever the case might be, it all connects. I think that's part of the message. As Adobe Express becomes a product ready for enterprise this year, that's one of the things we're excited about in 2023. That's a key value prop for us.
Excellent. drilling a little bit on that, specifically, what positions Adobe best to capture those communicators because it's a big part of your potential TAM versus the downmarket competitors such as Canva and things like that?
Well, first of all, product, product. We have to have a product that is easy to use, that is powerful, and that has some of that Adobe magic that no one else can bring to the table. The way we are actually building the next generation of the platform for Adobe Express that we've talked about a little publicly is making sure that other teams around the company can easily contribute to it. If there's some breakthrough in Photoshop or Premiere Pro, they can bring that in in a very light and accessible way to Adobe Express for those customers to then be able to use, but in a quick turn. Making us really agile as a company because we built it on a new platform that everyone can contribute to.
I would say it starts with product for sure. On the go-to-market side, I'm really excited about the things that only Adobe can do. I look, for example, at how Microsoft used Teams to start to compete with Slack in market. They used the kind of imprint of Office and the usage of their video conferencing tool to start to make inroads in their team messaging tool, right? What's the analogy for us? I look at Document Cloud. , Document Cloud reaches, gosh, hundreds and hundreds of millions of people, whether it's through our browser plugins or mobile apps or Acrobat installed on probably north of 1 billion machines. Those customers are what? They're communicators. They're those non-Creative Pro customers that are doing things with documents. Our thesis is that those people also want to look good.
They also want to have a nice cover page for their PDF. They also want to have a beautiful infographic that shows rather than tells the message or the story of the data. If you can bring Adobe Express capabilities through that channel, we can have a great advantage in market and in terms of growth. Those are some of those really exciting unlocks that our team feels we are now poised to start tapping now that the product is getting to a point where, again, it's ready for enterprise, and it's on this new platform that we're launching this year, will be more easily deployed elsewhere.
How do you keep the Express product from eating into the Creative Cloud?
well I actually think it would. If anything, my bet is that Express will boost retention for Creative Cloud. The reason I say that is we have a lot of customers who come in 'cause they want Photoshop, or they want Illustrator, or they want Premiere Pro or whatever, but may actually not use it every day. ? They might use photoshop once a week or three times a month or whatever the case may be. It's actually a good number of customers that are in that zone where unless they get more value out of Creative cloud they could be at risk of churning. How do we make sure that we help them find, discover, leverage more value in Creative Cloud?
Adobe Express is a perfect solution for that because Express allows them to do everything else without learning all the other tools in Creative Cloud. You have an Illustrator who starts using Express for video creations for social. You have a Premiere Pro customer who is a YouTuber who's using Express to make their image thumbnails for YouTube. I mean, these are all very popular examples of the cross-utilization we're seeing right now. One of the big drives this year that Shantanu is personally excited about and reminds me every product check-in we've got is how do we make sure that every Creative Cloud member discovers the value of Express? We're seeing a positive correlation there, and we wanna make sure that it's seen as value of Creative Cloud.
I also would say that a lot of customers come in being outcome-oriented, the way I described that side of the spectrum, and then through a natural desire as humans to go a little deeper and get curious, they get a result and they're like, "Ugh, I wish I could just do this. I wish I could just do that." It's a thing that Express doesn't allow them to do. With the new version of our platform, you'll have a little button that says, "Open in Photoshop." It'll open that asset in Photoshop on the web, and you can imagine that kicking off a trial for an upgrade to Creative Cloud.
I think that, in some ways, Adobe Express will become a more finely tuned top of funnel for us that will better guide customers to products that ultimately yield more ARPU for Adobe.
Makes sense. Can you comment at this point on the adoption trends you're seeing for Express?
I think all we've said publicly, I mean, this is a product where we're still in the zone of usage, usage, . I'm really happy as a product leader that I have my executive team on the same page that we're not trying to drive these teams towards finding every little path towards conversion and aggressive paywalls. We are trying to demonstrate real value and usage. Right now, the NPS is high. We are starting to win on a lot of the keywords we set out to start to win on from non-branded search terms like make a logo things like that.
And the both the traffic now as well as the as well as revenue are growing at a fast clip. Again, like we're we're just in the early innings of this product, and I don't think for that reason, we haven't gone into too much depth yet on some of the underlying trends.
One of the questions from the audience, can you give us some color of outside the US? Cause most of the time when we talk about Express and everything else, we're more focused on the US. How is that going outside the US? Is it similar in terms of Express?
Yeah. There are positive trends across all the geographies that Express is in market right now. We are focusing on a few top-tier markets because it's important for the product teams and the go-to-market teams to really, like, get the right gears going in a smaller number of markets, so we can just take the best practices playbook and scale it from that point. We are still in that phase. And I don't have direct numbers for you as it relates to some of the other markets outside the US, but we are... I know we're in dozens of languages, that sort of thing.
Okay. There's concern that Express could have a similar fate as Spark. What do you say to that?
I mean, Adobe Spark was an experiment that only allowed template-driven graphic design. Adobe Express is a mixed media editor that allows video editing, image editing, illustration. It has multiples of not only the templates available, but a full integration into Adobe Stock and it's. We basically, the only similarity is that we leverage the Adobe Spark platform, the underlying platform to get Adobe Express into market faster while we were building the next generation of the Adobe Express platform, which is launching this year, which is what gives us the enterprise readiness, the connection to the rest of the Adobe Creative Cloud, et cetera. So we discontinued Adobe Spark when we launched Adobe Express because all of the functionalities around graphic design in particular were also in Adobe Express, given the fact that we leveraged that platform to build it.
It's curious to me when people kind of compare the two. Maybe it's just the product's curious to me, but they're completely they're apples and oranges. Of course adobe Spark was something that we learned a lot from and applied to Adobe Express. The degree to which the entire company is now aligned around Adobe Express, what it's going to be, and how we're bringing it to market is just entirely different.
Beautiful. Another question on Adobe Express from the audience. Can you explain why Adobe Express, I mean, we answered a little bit why it doesn't eat the Adobe Creative Cloud users, but who do you see as the specific user difference for Adobe Express versus Adobe Creative Cloud? Or is there not a difference?
Yeah. Well, I really describe the Express customer as the outcome-oriented customer. , this is someone who knows exactly... They have something in their mind that they want, and they just want it as quickly as possible. A lot of our customers come in through these non-branded search terms like edit an image, edit a video, merge a video, make an Instagram flyer make a TikTok. These are folks who have those desires. It may be too much for them to learn Premiere Pro and After Effects in order to make a TikTok, but they can come in and be successful very quickly with Adobe Express and then be in the ecosystem, discover all the other things that they can be provisioned to. Then in some cases, those folks become more pro like.
They desire more creative control, and they can upgrade into our more pro products across Creative Cloud. To answer your question, it is the communicator that wants to stand out on social platforms or at work, the students who are being asked, instead of writing a history paper, make a history video make a multimedia presentation. That seems to be the new thing in education these days, which is certainly a positive for us in our deployment of Express throughout education. it's and it's people that have a quick action in mind.
Sorry. Last year we heard from every investor who's focused on the metaverse and the varying opportunities. Are you still having these types of conversations with customer? How well are you positioned in the metaverse?
Yeah. Well, we're in the period of technology I love most, which is when the all the exclamations and the sort of overzealous fanfare subsides and some of the core use cases that are so amazing prevail more clearly because of the removal of all the noise. What are those things? Well, when I think about metaverse, I really think of 2 things. I think of immersive experiences and the whole world of 3D, and then I also think about some of the decentralized blockchain-type technologies as well. Let me speak quickly to both. , on the former, on immersive experiences, it, it's...
I can't tell you what devices will win and which experiences we will go into for our immersive moments of the future. What I do know is that there's a here and now opportunity that a lot of our customers are realizing for 3D as it relates to building, marketing collateral, as well as just doing product R&D. , think about the old world, where you would take a a can of a beverage or any other consumer product. You'd have to put it in sets in photo studios with different backgrounds to culturalize the asset, in order for marketing campaigns across the world. That was an extraordinarily labor-intensive and expensive thing.
Now, a lot of our customers are realizing that they can render this object as opposed to shoot it. They can apply textures and materials using our Substance 3D products. They can put it in a new product we launched, which is growing pretty fast in that space, called Stager, which actually places the object. You can make a different background, a different table setting, a different everything, and then you take synthetic photographs of that asset, and you use that as your marketing collateral. It's one of those rare better, faster, cheaper, value props for our customers because once they kind of realize how this works, it's kind of a no-brainer and no going back. It unleashes more creativity. It's obviously cheaper than photo shoots and that sort of thing.
some of our customers, big footwear companies, are now using this technology also for product R&D. Instead of waiting for a factory somewhere overseas to source a texture or material and make these samples and send them back, they're rendering this stuff, and in days they have it in front of potential customers to see what the feedback is. That's like the here and now opportunity for immersive technology. What these customers are doing by doing these workflows I just described is they're becoming metaverse ready because now they have these 3D assets in their inventory. Whenever there's opportunities with Meta or some future device from who knows who makes it, right? They'll be able to deploy that asset. They'll already have it in their arsenal. They'll be able to start to play with it.
, you can add some behaviors to this can and port it into some new new world that's launched by one of the companies exploring the metaverse. That's, that's the, that's that side of it. As a, as a company, we're very pragmatic about this. We have a very fast-growing business within the digital media franchise, probably one of our highest growth businesses year-over-year for the 3D immersive space. We are hitting the ground running, getting every customer to realize this better, faster, cheaper opportunity now, especially e-commerce driven companies, CPG companies, that sort of thing. On the, just real quickly on the blockchain side, I still am excited about that technology.
I think that the real relevance of NFTs for our customers will be making digital goods that can be portable across different digital experiences. , when I talk to some of our luxury goods customers at adobe they talk to me about "We wanna be able to sell a precious good in whether it's Roblox or whether it's Decentraland or some of these other places." Customers won't pay a lot for it unless it's portable, unless they actually own it and it can follow them wherever they go. The nft technology could enable that. That's where I think it still has legs.
Excellent. Let's flip. There was a news article today talking about how many places the Adobe tools are being used in video. Can you give us a sense of how much in mainstream movies and things like that the Adobe products are fitting in and where they're fitting in?
Yeah, sure thing. Actually, a number of my colleagues are at Sundance or were the last few days, right now. , Adobe has a real presence there because a lot of the up-and-coming filmmakers are using all of our products and have a are pretty vocal stakeholders in what's next for those products. , I would say that the trend I like to see in Hollywood is that there are, I would say, editors that in Hollywood that have been around for a very long time maybe using Avid still. A lot of the next generation editors I find coming to Premiere Pro in droves. I think part of that is because of the strength of our collaboration capabilities, especially enabled by the Frame acquisition.
We've really integrated Frame into Premiere Pro, and so it's far easier now to share edits and get feedback from all sorts of stakeholders in real time without any friction. The Hollywood space is actually quite a small space of the video business overall. i every company is now in video production. Every company needs to produce real-time content to connect with customers. , you have product leaders at Facebook and other places like that doing weekly video series about their products. The widespread growth of video continues. , Premiere Pro and our whole digital video and audio bundle is really in a great place for that, especially with the Frame acquisition.
maybe give us the two-second quick update on Frame.io.
Yeah, sure.
If that's okay. Mm-hmm. Sure.
Sure thing. The first year was really about some of the low-hanging fruit integrations that add value to customers, making sure that in Premiere Pro, when you click Share, you are prompted to just generate instantaneously an instance in Frame.io and be able to get feedback.What was exciting to me about this acquisition was that there were so many customers who still did it the old way. I mean, sending around a video and then waiting for timestamped, time-coded email responses. As a video editor, reconciling seven different people getting back to you, telling you what to do at minute 3:42 versus 4:28. I mean, it was extraordinarily noisy, and the cognitive load unbearable for our editors. Yet when people use frame.io it all went away.
When we looked at the Premiere Pro base, we realized 90% plus of that base was still doing it the old way. The low-hanging fruit for us is just getting people to discover this and use it. In fact, across the whole franchise, we have a share button now in all of our products video, of course, share drives to Frame.io. In our other products, it now brings people into a web-supported workflow to get feedback as opposed to the pdf or exporting as a JPEG. I like to joke with my teams that we're competing against the PDF, which is, I guess, an internal sense of competition, but it's, we're trying to help these collaboration flows become more effective.
If you look at Frame going forward, we are bringing all kinds of integrations, like being able to see the timestamped feedback actually within the Premiere Pro interface, making it far easier to share with groups and making it a far better presentation of a video because you're sharing it with all sorts of stakeholders. Customers want more customization as it relates to that.
Collaboration seems to flow through improving collaborations with a lot of what you're doing in next generation. It's part of the Figma. One of the questions here is, if for some crazy reason the Figma deal can't go through, can Adobe develop the same type of or valuable enough collaborative technology in-house?
I mean, our collaboration journey, we are well along it right now, and we also have major pickup of our collaboration tools already, whether it's Frame, whether it's Share for Review that we've now launched already in Photoshop and Illustrator. Obviously the web expressions of those flagships are already entering market. I actually just this morning spent time with, the CIOs of one of the largest agency conglomerates in the world, and we were talking all about this notion of content velocity and how they're they have hundreds of agencies in their holding group that are dealing with insatiable demands amongst their customers for more content across more formats with more personalization and more stakeholders, being a part of that process.
We had a a full hour or two dialogue around our collaboration offerings and how they integrate. , especially Workfront. I mean, Workfront is also a collaboration tool that we acquired and now have integrated into the digital experience products and are also thinking about how it integrates with Frame and our Creative Cloud products. Collaboration is just a native part of creativity these days. That was the story. We didn't really talk at all about Figma yet, obviously, which is collaboration on the product design and development space. It's very clear to me that collaboration is across every segment of creativity, and we've made tremendous inroads across all of them that we're playing in today.
going to, I guess, the heart of the question.
Yep.
the audience is asking, you don't need Figma in order to be able to build the level of collaboration. I don't want to put words in your mouth.
Yeah.
Figma brings you into new markets.
Figma brings us into the product design and development market, which is a new market for us. We don't have a market-leading product in that market at all. It also helps sort of find connection points between the asset creation tools and all the assets people make with our tools and the digital experiences that people are prototyping and handing off to developers. Of course, there are benefits to making the product and design and development space more collaborative by connecting with some of our other products that would serve customers. Like, that synergy value is one of the things we're most excited about.
Excellent. Going back to one of the things we talked about quickly. We talked about GPT-3 and things like that. Do you see Microsoft adding that capability to or their image creation capability that OpenAI has created? Do you see that as competitive to what Adobe does or just adjacent?
I mean, I think that, first of all, we have a great relationship with Microsoft. We're working on a number of integrations that are, that bring, I would say, the best of both of our companies to the surface for our customers. I have no doubt that that will continue. I do think that there's a, there's a whole part of the world that looks for an image on Google Search and just drags that image over and uses it. Are they allowed to use it? Is it the right images? Is it the best image? I mean, those sorts of things they just happen. I'm sure that many corporate PowerPoint presentations have all sorts of images in them from unauthorized sources.
, we're focused on people that use creativity for commercial creative production. People who need to conjure up images or templates that they're authorized to use. People that need to buy stock they're authorized to use. Also in the Pro Products, people that wanna have control and precision over the quality of their outcome, that sort of thing. If anything, I think that space grows as people become more creatively inclined.
, when you get a PowerPoint presentation that comes with an image in it, in the template, you might actually be more inclined to find the right image for you because you see images in front of you, and you're like, "Oh, I wanna make more images." The way I sort of generalize my take on all this is, as we make the world more creatively confident with tools like DALL-E 3 and integrated into various places or all these generative AI tools. As we make people feel more confident creatively, then people are gonna wanna use creative tools to stand out more.
It's, it's pretty sad actually that our peak creative confidence for most of us is in kindergarten when we drew and showed things to our parents and teachers, and they nodded gracefully. It kind of went down from there as we realized that we weren't all that good, and we didn't have the skills. Creative confidence going up is good for, good for Adobe and good for the world.
Changing gears, another question from the audience. The Creative Cloud is an amazing brand with some great functionality. Why has Adobe been so slow not to raise pricing there? Why is it looks like it's only been they say a 10% increase in over a long period of time?
Well, I think that we've just seen great demand for our products and part of our mission, our literal mission of Creative Cloud is creativity for all. We wanna make sure that we fulfill that mission by making our products more accessible. Now, we also have become much better at upgrading customers, and also, we call it internally fries with that. , the notion of upselling additional packages. Think about Stock is an add-on. The 3D immersive package is an add-on to Creative Cloud All Apps. As we get customers into our funnel, we are quite confident that we have an opportunity to drive ARPU through these add-ons and enhancements and that sort of thing.
If you forecast into the future, what are some of the new most exciting technologies? Generative AI. , additional capabilities with the immersive stuff. , being able to better track analytics for your assets as you deploy them. I mean, there's all sorts of things that I think we can extract value from by adding value to our customers and that's been the playbook.
You're figuring that those, the ones you just mentioned plus others are more likely to be an upsell or with fries type of approach, rather than bundled in and increase the general price?
That would be a much more mission consistent approach to growing our business. It's one that's working. , it's really healthy my goal is to get hundreds of millions, if not billions of people that are using Adobe products for their creativity. With that, I'm pretty confident that we will have people wanna upgrade to Teams. We will have enterprises deploy creative tools far more broadly. , they will start using our immersive and 3D creation products and Adobe Express and Stock and all those sorts of things, generative AI capabilities that might be add-ons as well.
Following that up, do you really think the TAM for creative is in the hundreds of millions or billions of users at based on what you have today, or is there still lots of work to get there?
Well, any single person that expresses themselves on social platforms is seeking to do so creatively. No one wants to not stand out. Let's just put it that way. Like, everyone wants great content. otherwise unless you're copying and pasting someone else's content, I suppose some folks do that. , that's I look at this, and I say, "gosh if people, if creativity is truly the new productivity, given all these algorithms and generative AI capabilities, everything else that's replacing human labor in so many instances, we have to outfit creatives to do what only humans can do, which is to be creative." And we believe that that should integrate into any place where they wanna express themselves.
Whenever you're making a PDF, you should have a cover page, you should have better graphs beautiful things to post on social platforms, et cetera. If you look at the world through that lens, which we firmly do, because we see the data, . We see people starting to flirt with making something for their business on Instagram, and before it, they're producing video. , with that thesis, absolutely.
Excellent. Last minute or two we have left, what do you think the world, both from an end user point of view and from an investor point of view, may be missing about the opportunity and the positioning of Creative Cloud?
Well, I think that these are probably things that we know can be tackled to the benefit of customers and to the business that we haven't haven't fully exploited yet. , I mentioned a few just in this conversation, leveraging Document Cloud as a as a channel that we can use to bring Adobe Express and some of our more accessible creative capabilities to everyone. , and certainly the web, . The web is an inherently more viral platform that's more collaborative. The breakthrough of us bringing Photoshop to the cloud, to enable mobile and web extensions of that flagship, that's profound.
I mean, Photoshop is, of course, an amazing brand for us and we have a lot of unlocks in my view, forward, for that funnel as a result of that breakthrough. Have we proven that through the business yet? No. I mean, we're in early days. , we are in early days of our flagships being available on the web. We're in early days of every creative sharing with 2.3 stakeholders through a share button, and what that could actually mean for individuals to become teams, Creative Cloud team accounts, or for CC team accounts to become enterprise accounts. , there are some of these early days opportunities that, . You're talking to the product guy here, so this is always my bias.
This is the healthy tension, I think. , whereas, my colleague David, who drives the business there's a lot of, like, near term quarter-over-quarter things we can do to continue to drive business for Adobe as it today. I am, of course, excited about those things, but also even more excited about some of these unlocks as you make these platform shifts, because those are the, those are the leapfrogs that really drive growth in the business, as we all know. , and we're full throttle on those right now, which is great. It's been years in the making to deliver on the promise of Creative Cloud truly in the cloud.
Excellent. I really do appreciate. Thank you very much, Scott, Jonathan. Scott, the depth and breadth of knowledge is obvious there, and we appreciate you sharing what you can in terms of a lot of this and futures, et cetera. Looking forward to some great new products and capabilities relatively quickly.
Sounds like a plan, Mark. Thank you.
Thank you so much.
All right.
All the best.