Good afternoon, and welcome to the Wolfe Research Webcast with Adobe, hosted by Wolfe analyst Alex Zukin. All attendees will remain on listen only mode throughout the call. If you'd like to ask a question, please find the Q&A icon on your screen. Now I hand the call over to Alex.
Thank you so much, Julia. I am absolutely thrilled to be joined by senior management from Adobe's Creative Cloud, the dynamic duo, David Wadhwani and Scott Belsky, and obviously, Jonathan. Guys, thank you for joining us today. Before we go into the traditional fireside, I just want to remind everybody, please submit questions in the chat. I will see them, I will ask them. Number two, we will send you a survey at the end of this, because otherwise this would definitely not be a Zukin fireside to ask you how it went. Number three, I wanna give an extra special intro to Scott. Scott wants to show. I'll hand it over to you, Scott.
S ure. Well, I thought that the topic of Creative Cloud Express might come up during this conversation, and so I went into the archive. A few years ago, when the team was, you know, really starting to make the case, you know, to the company and in this case to our board about the opportunity, well beyond the core franchise and the customers that we, you know, typically were really focused in building products for, we decided to put together a little fun, quirky way of showing rather than telling, you know, the scope of this opportunity. I figured we would share a version of that now.
Let's do it.
The future of creativity in three parts. Part one: How big is it? It turns out there are 8.1 billion people in the world. 3.4 of them are employed. 1.9 have broadband. Over half a billion of these are Creative Pros and knowledge workers. Out of these, just over half of them are using legal software. This is our current potential market. As you dig in, you can see that even though most of the world's professional creatives are using our tools, there is still a ton of room for growth. In fact, we know there are a lot of aspiring creatives out there in education and enterprise. For now, we are down here. While we are here, let's do a little thought experiment. Let's think about the makers of the first word processing software.
Let's imagine that they managed, a bit like us, to get a majority of the world's novelists, short story writers, and professional essayists using their product. Would they stop there? What about all the people who wanna write a report, a resume, a recipe? Basically anyone who needs to write. Today, more than 1 billion people around the world use word processing software. What if we served all the people who wanna make a flyer, a social post, a poster, or a short video? This is what it would look like if we could capture all the aspiring creatives out there. But for now, we are here. Part two. How did we get here? In 1987, Adobe Illustrator became the first of a series of apps that went on to redefine the design industry. Each one has grown up to find a different set of audiences.
Today's designers have a collection of creative tools at their disposal that would be unimaginable to a designer of 30 years ago. Today's tools are infinitely more powerful, expressive, and complex. If you didn't grow up with us as our tools evolved, you now have a steep learning curve to climb. The next generation of aspiring creatives need us to step back and reimagine our apps for the problems they face today. Part three. Where are we going? Creativity is the new productivity. As the revolution of artificial intelligence and machine learning transforms the work landscape, creativity becomes the most important skill to have. It is our opportunity and responsibility to bring creativity to all. This next generation of knowledge workers are digital natives. They're tech savvy, but not tech patient. Today, most of our trialists drop off before they successfully complete their first creation.
We need a new playbook for this new breed of creators. These creators search for the quickest solution to their problem, work predominantly on web and mobile apps, expect to be able to share and collaborate anywhere, learn by watching others create, and get inspired or remix others' creations. That's why we have built Creative Cloud Express, a light and accessible creativity platform for this new breed of creators. Now, when we step back and look at the opportunity in front of us, it becomes clear that we are only at the beginning of a classic adoption curve, where the Creative Pros are the innovators of creativity tools, and we are just at the start of the next phase of our mission to bring creativity to all. We are here, but this is just the start line.
Well, now I have to match that voice for the rest of this activity. I'm gonna be honest, that's gonna be hard. Thank you. I mean, I think actually, Scott and David, that was a wonderfully, beautifully simple explanation of the opportunity that lays ahead. I guess, you know, my first question was gonna be for David, and it's connected to this somewhat, I'm assuming. Which is why did you decide to come back to Adobe? What did you see in the market that excited you about Adobe's position? Why not go be the CEO of a hot startup?
Yeah. You know what? First of all, you know, I think the video was a great tee up, and, you know, Scott and team have done a nice job sort of orienting the vision around that. It is one of the core reasons I came back, actually. For those of you who I haven't had a chance to meet, I spent the last few years investing and running a company. I've been at Adobe for, I think, about 14 years. I left six years ago to run a company in the enterprise software space and then did some investing. As I was investigating, you know, three things kept coming back as sort of really interesting thesis areas.
One is the explosion of the need for content, whether it's video content, whether it's design content around how you know the entire industry has to engage with their customers over digital. With that, we were seeing this explosion in terms of Creative Professionals entering the market. We were seeing you know large enterprises and small businesses and everything in between, investing more in terms of how they want to engage over digital and create the type of content they wanna create and stand out. I just looked at this, and I said, the creative business for professionals is at the early stages you know despite how long Adobe's been at it.
The second thing that was clearly happening or is clearly happening is this incredible rise of the creator economy. Today, there are 100 million small businesses in the world, and the majority of them say that their digital presence is more important than their physical presence. When you think about that, and this is really the point of that video, this creator economy, these non-creative professionals need to have ways to engage their base, and they need to do it through creative content that helps them stand out from everything else.
that was another thing I kept looking at and saying, "Well, Adobe's incredibly well-positioned for that." The third one was looking around at you know all of the work that was going on in enterprises and mid-market and small businesses even around automating processes predominantly focused around you know PDF or many of them just kept noticing were around PDF. PDF has become the de facto standard for unstructured data. PDF has become this, the de facto standard for how companies interact with each other, principally through e-signatures, but more and more in terms of the transactions between people.
Again, you know, it kept coming back to, you know, my humble beginnings at Adobe from the years prior. You know, all those things, it was these were the areas I was interested in. All three of these markets were exploding. In talking to Shantanu and Scott and everyone else at Adobe, it was just clear that this is really where I wanted to be. Plus, it's just as you know, it's just a remarkable culture and a focused and competitive company, but also one of the, you know, incredible companies that have survived with a strong culture over decades.
Super, super clear. I'm gonna butter you guys up before I get into the hard questions. This is a buttering up question. Now the buttering up question for Scott is, you know, I guess similar to David, you were the CEO of a hot startup. You were bought by Adobe, and you're still here and running product for, you know, what is the largest product of the company in Creative Cloud. Same question, right? Also maybe for you, tailored into what we talked about before, which is, you know, what is. I asked you what's your favorite food, you know, from your children, what's your favorite, most exciting product? You changed it around a little bit, so feel free to do that again.
What is the most exciting element to you that you're seeing inside the company right now that may not be obvious to the rest of us?
Yeah. Well, I mean, first of all, the footnote in my entry into Adobe is, of course, that David is the person who brought us into Adobe. I got the opportunity to work with David on his staff for three years, you know, before David moved on and it was just, you know. It's always been about team for me as well, you know, team and customers. I also, you know, I love moments in your career when there is a clear short-term, medium, and long-term opportunity that gets you equally fired up. For us where we are right now, you know, I'll just start with the long-term first.
I mean, there's another next new medium that's going to define the way we work and live, and it's gonna be immersive. You know, some people call this the metaverse, but what it really is is it's just a virtual experience that we can cohabitate, and anything's possible in that world. Whether it's through VR or augmented reality, you know, there's a number of contenders. But we as a company have a history of transitioning our customers to the next new medium, graphic designers to web to mobile, et cetera. To be, you know, at the center of the business that's going to help the world's creatives adopt this new medium that will fall completely flat unless it's rich with interactive, personalized, engaging experiences is really cool.
We've built an incredible team around this, and we can, of course, talk about that, you know, later in the chat if people want to. In terms of the medium term opportunity, you know, it's really to bring Creative Cloud to the web and make Creative Cloud as much about collaboration as it is about creativity, right? You know, we've always focused our core customer as the one who's pushing the pixels, the actual creator. It turns out that on average, they have 8-10 people that are stakeholders of their work. It could be clients and people that their clients work with. It could be a whole team at an agency.
It could be the, you know, the CEO who wants to understand where her product is or the Chief Legal Officer that wants to, you know, approve the copy before it goes to production. You know, everyone has stakeholders. For us to embrace stakeholders as part of the creative experience, you know, is just a huge opportunity for our core business. You know, Frame.io, of course, was an acquisition that made us best in class on the video side of this.
I've shared in some of our other meetings that really only 1% or so of Premiere Pro customers are using Frame.io, yeah, you know, before the acquisition, and yet so many of Frame.io customers, of course, Premiere Pro customers. It was just astonishing to us that 99% of people who are editing video in our products, and I assume others as well, are still collaborating the old-fashioned way, which is extraordinarily painful and time-consuming. That still goes for all the other segments of creativity as well. You know, the near term or second, you know, the medium-term opportunity is to just absolutely nail collaboration across all of the, you know, the whole franchise, which would have, you know, a great impact on the business of course as well.
Then on the near term, the very near term opportunity, which is, you know, we're making inroads every day, really around bringing creativity to all and making creativity more accessible. You know, we can make our core customers, our pros in their first mile experience of our products more successful by teaching them, by giving them things to start using from the onset. You know, those move the needle. You know, it helps obviously retain customers, but it also helps customers feel successful, which, you know, leads to them telling other people to join the franchise. The opportunity around Creative Cloud Express, you know, making sure that every other person that either comes into our funnel or should but doesn't yet, you know, is able to succeed using our products.
Creative Cloud Express is the rallying cry of the company right now to take some of the very best around and really package it for this web and mobile customer that is really more focused on outcomes than process. That's a near-term opportunity. Those three vertical, you know, those three horizons, get me really excited every day.
Perfect. Well, let's take it up a notch and let's go with where the video kind of ended, which is Creative Cloud Express, creativity for everyone. You know, you threw out a little bit of if we wanted people to create flyers and invites and, you know. The number one question I get, and I'm sure Jonathan Vaas gets, from most investors right now, particularly in light of the last quarter, really the second half of last year, what about the competition? What about, you know, Canva and Figma and aren't they taking, you know, for the first time in recent memory, Adobe has real competition, and they're taking share. Let's talk about the key elements.
Both of you, VC backgrounds, not that, you know, long ago, saw these companies in the markets. What is the competitive environment? What is the answer if it's an answer or if it's an opportunity? I want both of you individually to address this topic because I think it's one that is near and dear to investor hearts.
Got it. Yeah. Maybe I'll go. I'll kick it off and then Scott, please feel free to add and jump in. So at a high level, I think you have to look at, you know, first of all, look at just the fundamentals of Adobe's business. I mean, we ended last year with adding almost $2 billion of net new ARR. So clearly the foundation and the tailwind that's been driving us is there and has been consistently there for a long time. Secondly, you know, we guided our highest guide ever for FY 2022 in the Digital Media business, and that's, you know, the foundation of how we think about where we're going.
It's very consistent with the kinds of guides we've given historically, and it gives you a sense of where we're going. Now, some of this, you know, I think it's worth just sort of addressing directly, you know, comes from questions that we've had in the second half of the year and, you know, there is some episodic activity that is harder to predict with the pandemic. We've talked a bunch about in the past things associated with summer travel. We've talked about sort of some changes in terms of holiday season buying behavior.
Those are two episodic events that when you look at it in the context of the performance last year, and you look at it in the context of the guide, really underscores how confident we are about the market opportunity ahead, right? We also talked about recently how we're thinking about the market, which is different than what we thought about before. We really look at the Creative Professional market as one that's accelerating and growing very quickly. We see this new creator economy for communicators coming out. We said that's about a $34 billion market, I believe we said. We have a Document Cloud business that's also playing into this big TAM. You add all that together, you have a $100 billion TAM that we're going after.
Now, as a company like Adobe historically was playing in a smaller TAM and had a very large presence in that TAM, as this TAM explodes, you should expect to see some competition, you know, participating in parts of that TAM. The surface area is so significant, we should expect to see other entrants playing in and around similar areas. I'm gonna go back to where, you know, Scott was leaving off. If you think about it in the context of the professional base, when you look at, you know, the fact that there are more Creative Pros needed in companies than ever before, that's obviously a big tailwind for us.
When you look at it in the context of video and the explosion of video, we have this long tail of video production now happening. If you look at any of the streaming companies, they've got this massive base of people creating long-tail content. But you also see this incredible rise in terms of people that are creating content for YouTube. You see this incredible growth in terms of corporate marketing videos that are being created, and we see an enormous opportunity there. 3D and immersive and the rising metaverse, that also is, as Scott mentioned, this is a new format that's coming up. A huge opportunity for us there as well in addition to the collaboration capabilities.
If you think about where we sit and how our file formats create a differentiated position for us in the Creative Pro base, we feel really good about it. If you look at that second foundation in terms of how we're approaching creative, the creator economy and communicators in particular, a lot of the work that we've done over the last few years has led us to this moment. We've generated over 400 million Adobe IDs through our mobile apps. Our mobile apps last year grew over 55% year-over-year.
Creative Cloud Express and the launch of that really represents the aggregation point of all that learning and that technology, in addition to the work that Scott and team have been doing around bringing some of the core capabilities in our flagship apps to web and mobile so that they can participate and be part of this really easy onboarding into this frictionless creation process for that. We don't talk a lot about Document Cloud. It's the secret sort of thing that keeps going. But if you look at Document Cloud, that grew about 30% last year. We have nearly $2 billion of ARR there.
We talked about how PDF has become the de facto standard, but the reason that's so important is that we have 2.5 billion devices out there with Acrobat or Reader installed. We've proven over the last few years the ability to actually use that footprint to drive more usage of services. We grew Adobe Sign utilization through Acrobat about 85% last year from a you know usage perspective through Acrobat. You see that we have all of the levers. That's really what gives rise, is you've got this massive TAM. You've got these tailwinds that have been helping us you know over the last decade and are getting stronger because of the TAM over the next decade.
We have all these sort of differentiated layers that we can sort of keep pounding on going forward, which is what gave rise to the guide we have for this year.
Yeah. I think the only couple of things I would just add, you know, as I think about competition from the, excuse me, with the product lens, you know, is first of all, you know, it is exciting that VCs see the same thing we're seeing. You know, 5+ years ago, you didn't see any material dollars going into creative tools. I think now everyone, you know, sees that everyone wants to stand out creatively, you know. And so there's so many different approaches that that entrepreneurs will take there. And it's exciting. I mean, first of all, a lot of these are technologies that we can play with. You know, a lot of these tools we're developing plugins for interoperability with, and we imagine, you know, the future stacks of creativity, you know, being inclusive of that.
You know, I think that the fact that we have lots of customers using competitive video editors like, you know, Final Cut, you know, leveraging Creative Cloud and Frame.io, especially for collaboration, you know, is just an example of that. Best to market, better than first to market also. I really want to make sure that we're learning from all the signals as well as our own experiments that we've done over the years that led up to Creative Cloud Express, to make sure that we can really win verb by verb, you know, all the creative tasks that people want to accomplish. Finally, you know, this is the unique view I get as the person leading product, is just the ecosystem that we're building underneath all this stuff.
It's a shared foundation of services across Creative Cloud Express, Creative Cloud, all the web apps that we're building, and the collaborative capabilities. When you start to see what can be done on top of that, whether it's Creative Pros developing stuff in our Pro Tools that then become purchasable or leverageable templates by the non-pros, you know, in Creative Cloud Express. Whether it be our unrivaled stock collection of 250 million-plus images in Adobe Stock and all the different asset types that we're making available to some of the Express customers. You know, our unrivaled font collection. You know, as you see the future of immersive and all of the core components that allow someone to be successful in that space, you know, there's a lot of, like, core technology that Adobe has that we're making accessible.
I think that, you know, part of our strategy going forward is gonna be to make this ecosystem really sing and differentiate what we can bring to customers. That's another comment on the competition front.
Jonathan didn't like when I asked this question this way, but have they awoken a sleeping bear? In the sense of, like, how fired up is the company to kind of finally have someone to fight against and someone to challenge, to galvanize both internal champions, product teams, dollars, investments? You know, how is that a thing?
Well, listen, I mean, I'm sure David has a view on this as well, but I think legacy is a blessing and a curse, right? I mean, we have an incredible legacy. We have, you know, these ubiquitous file formats, et cetera. There's always a risk that a company can rest, you know, on laurels, right? You know, for the last few years, we've seen the TAM explosion. We've been very awakened to the opportunity. But all of this helps. I mean, the company, I feel like our strategy is more sound than it's ever been. You know, people are galvanized.
The types of new talent that are coming in and the reasons they say they're coming and joining us, you know, that's, you know, what really gets me, you know, gets me jazzed every morning. David, I'm sure you have a view as well.
Yeah. You know, it's an interesting question. One of the things that, I think we talked about this yesterday, Alex, is that I always described working at Adobe, and I get to come back to this situation, as being a kid in a candy store. Literally, you know, every meeting you go to with a demo, you just, you kind of walk out and say, "Is that possible?" Like, "Did someone just mock that up, or is that really what's happening?" If you think about what's happening with, you know, the work we're doing around AI, the work we've been doing around bringing the capabilities with, like, decades of investment in the desktop so that it can work natively in the web and mobile.
You know, what we see is that, you know, we have now with Creative Cloud Express, and we have now as Scott's been working with web and mobile for, you know, like, Photoshop web and Illustrator web and the collaboration vehicles. We have this new place that we can sort of take that technology, atomize it, reconstitute it for user journey experience and onboarding of a very different class of customers, both in terms of pros, but also in terms of non-pros. That foundation is what jazzes us every day. To Scott's point, the TAM is just so big. The question is, like, how are we gonna, you know, build this new muscle that really gives us the opportunity to go after that?
That has been incredibly, I think, vital, like, you know, vital to sort of just getting everyone excited. Yes, we wake up every day jazzed about this fact that there are these new directions we can go that were never possible a few years ago.
Perfect. Well, before I ask you the question that another 17 people are asking me to ask you, I want to ask the second big negative question that I think you could. The first one was competition, and clearly, that was the reason for the D&A around last quarter. The second one was, oh, my God, the pull forward. It's all about the pull forward and how much there was pulled forward in front office spend into last year. I want you guys to directly address that. That was the thesis coming out from some of our competitors. What have you seen?
Because I do, by the way, I do subscribe to the fact that there may have been some pull forward for individuals that became digitally savvy and wanted to change direction, whether it was, you know, resign from their boring jobs and become TikTok superstars and influencers. I grant that there may have been some pull forward on the individual side for Adobe, but I'm curious. I want you guys to just address the pull forward dynamic, yay or nay, head-on on both individual SMBs and maybe even outside of digital media and digital experience, if there was any. Just hit that topic, if you will.
First of all, you know, the advantage position we're in at Adobe is that we're a diversified company with diversified sort of sources of opportunity, right? If you look at sort of the impact of COVID two years ago, you know, what we saw was this you know this great awakening and you know from an individual or digital channel perspective, and we saw some weight from our you know if you think of it from the context of a small medium business, right? Where in that first year there was you know that dynamic played out.
This last year in FY 2021, we saw the, you know, that SMB business and our reseller business and our business around Creative Cloud teams start to come back in a very strong way because businesses were starting to open and revitalize and grow. You see these sort of the fact that we're diversified gives us a bit of the balance there. Now, if you then look at it and you take a step back, the big question and the thesis you all need to deliver, I know what my position is, I know what Adobe's position is that were those changes that happened over the last two years, are they durable or not, right? I look at the market and I say there's enormous durability to it.
I you know talked to many other executives and CEOs in companies small startups and large enterprises and no one's going to go back to the way they worked right? There's gonna be some people that go back into the office some people that stay remote but we are gonna be in a very different position. Even if we do go back into the office this work that we've done around automation around different kinds of engagement around employee flexibility that's going to be around and persistent. There's so much sort of context that's created there. People have also realized as they've rushed to engage their consumers or their customers digitally it's a more effective and more efficient way to do business.
I believe very strongly in the durability of what came out of there. Now, the question then is that if that's durable and we have this balance, what were some of the effects that, you know, we felt? It comes back to what I really refer to as these episodic events, right? We had an episodic event with summer travel. I don't know about you guys, but I hit the road with my family, and I'm assuming and hoping you guys got a chance to go out there as well and spend a bunch of time, more so than I have ever done in the summer. Right? You know, I think we see that in multiple ways.
You can look at it through the context of hotel bookings and travel in the past year. If you look at it from a holiday buying season, we said this on the last call we did. We have this, you know, a very good model that we triangulate with our DDOM and Adobe Digital Index, and we talk to a bunch of other sources to get the sources of data, all of which implied that the holiday buying season, those two weeks in particular that were, you know, Black Friday and Cyber Monday, were gonna have a traditional spike.
Some people don't realize, but we have always run campaigns, run promotions, increased spend for those two weeks, and we have a very significant business in those two weeks. It didn't materialize the way it has historically, right? Those are the two episodic differences we've seen. Are there more episodic differences? Perhaps. I look at the data and I say the durability of what changed two years ago is a durable tailwind that I think we're gonna benefit for quite a while.
Scott, anything to add to that?
Nothing to add. I think you covered it.
Okay. The next question, which I've had a number of questions posted in the forum about, and I can ask some of them specifically, but it's. We've talked about this. We actually, both of you talked about this independently, individually on both days, but the phrase that really resonated with me was this notion that, and it sounds like you guys talked about this a little bit, but you've had a price point that's been doing double duty to some extent with the customers, and with the introduction of Creative Cloud Express, there's this notion that you're liberated from that dimension of a kind of one-size-fits-all pricing umbrella. So this is gonna be a multi-part, long-tier discussion, I feel like.
I wanna start it off with, as one of the architects of the original Adobe Creative Cloud pricing model, David, just take us back a little bit and let's talk about what was the design of the original pricing packaging, and where do you see the ability to effectively increase that value umbrella and therefore price umbrella today over the course of the next few years?
Yeah. Great question. It is really, if you go back to, you know, 11 years ago, when we were in the midst of having the discussions around moving to Creative Cloud, we looked at a lot of, you know, pros and cons, as you can imagine. We did a lot of pricing modeling work. The core conviction we had then was that, you know, our pricing was fundamentally preventing us from being able to broaden the market. You know, at that time, you know, remember, there was a very high perpetual number. We decided to move to subscription and bring the price down on a monthly basis.
In doing that, we then had a secondary decision to make, is that we knew that the core product innovation was gonna be targeted at professional users. That's our core market. We're gonna keep with our flagship applications, keep going and driving that because we see incredible opportunity there. But we also always had a halo effect of users that were coming in around that, right? Fundamentally, this gave us the opportunity to ask the question about how big could that halo be. As we've now invested more substantially, and as we had thought more deeply about that, we decided that our conviction was that halo could be a lot larger.
We priced it in a way that while we were building it for professionals, we've priced it in a way for individuals that fit in that halo. Many of those individuals that fit in that halo really are effectively people that we consider part of the creator economy or sort of the high end of consumer. Fundamentally, that has worked incredibly well, as you see, because it's not only increased the lifetime value of a Creative Professional, but it's also brought in a whole host of more people. You know, we've never given out a precise number, but we have been pretty clear that more and more of our user base are non-professionals, right? Fundamentally, that worked.
However, you know, now we have, as to your point, we have offerings in the market that are doing double duty. They're providing the value to a professional, but they're priced for a broader base. As we bring in things like Creative Cloud Express, as we develop things like Scott's been developing with 3D and our Substance 3D line, we're looking at things a little bit differently. The 3D products are not baked into our Creative Cloud product. With Creative Cloud Express, we have a free and a $10 tier that's lower priced, and that lets us start to really think about how we optimize pricing and connect it to the value people are getting from the product set itself.
I wanna be clear, this is not, you know, in our mind, this is not open season to just sort of start, you know, willy-nilly raising prices, but it is an opportunity to optimize the business. When we say optimize the business, there are two things we balance. One is maximizing revenue and ARR to the company by connecting to value, but the other one is also maximizing users, right? And engagement from a broad set of users. We're constantly looking at how we balance those things as we grow our offerings and as we, you know, broaden our market opportunity.
Scott, let's talk. I want you to chime in on pricing and the value delivery and this equation as well, and what the levers are to the point. I think David mentioned the 3D Substance product, but you also have collaboration.
Yeah.
We also have, you know, talked about both Sign and Acrobat also in the construct of that Creative Cloud pricing.
Scott , it might be useful also to just touch on the free base that you've been building too.
Yeah, no, absolutely. I think, you know, first of all, it's been exciting to see the Adobe Substance 3D collection in market. I mean, this was the first. I mean, I guess other than Stock, which is also an add-on, but this was a bit of a departure. Let's make a totally different price point with a different type of customer, where they were delivering a lot more value that's a lot more scarce in the market. You know, this is a business that grew a little over 100% last year, I believe. You know, this is. From a product perspective, I mean, I want every customer to be successful. You know, that's my goal.
For the customers that are more on the light and accessible side, very outcome-driven customers, you know, these are customers that oftentimes need to have a freemium experience. I'm focused on getting as many people into that funnel as possible, making sure as many of them feel successful as quickly as possible. Then I want them to realize value and retain and, you know, there's all sorts of things we can do to make sure that that ultimately yields conversion and even further than that, you know, retention and then maybe even conversion to Creative Cloud. You know, one of the visions of building this on the same platform is allowing someone who comes in and wants to just edit a photo, you know, and searches Google to do that, into someone who says, "You know, I wanna take this further.
I wanna learn a product like Photoshop. I wanna start using Lightroom and, you know, take my photography seriously now that I'm a parent," or whatever the case may be. Yeah, that's certainly part of the mass equation here. You know, the fact that the whole company now does in fact value a number of users and the data that they are successful as opposed to just ARR, you know, is important, right? We have to make sure that we're thinking that way, you know, given the market expansion opportunity that we're facing. I think that the flexibility on pricing that David talked about also allows us to think about the SMB business opportunity for Creative Cloud.
You know, there are a lot of people that are gonna wanna be constituents or stakeholders of content, whether it's someone sharing something. You know, Frame.io is already a standalone business with an add-on, you can call it. There's all sorts of ways that we can bring review and approval capabilities into all of our products. You know, and I'm sure that's going to be something that's additive, right, to our offering. It's a different type of value for a different type of customer, and we should monetize that.
How do you make sure that you don't have people going in the other direction? With people dropping from a tier where they're being monetized at more than their usage, and they drop to an Express tier where they're paying less. Some of that you mentioned, we talked a little bit about on the previous call about it actually might even drive retention higher because you have all these umbrellas. How do you think about that? Then, for David, if you think about strategically pricing, packaging, bundling, who do you think like, who's a good model for investors to think about or look at? Is it Microsoft with kind of E1, E3, E5? Is it one of the security vendors?
Like where do you wanna model off of or take an example from?
Scott, do you wanna kick off?
Sure. Yeah, I'll kick off, you know, and just say that, you know, first of all, you know, customers that cancel, you know, they do so because they didn't feel like they could be successful, right? They didn't recognize or weren't able to realize the value, right, that they were paying for. You know, we have a number of data points to suggest that, Creative Cloud Express capabilities, Quick Actions, that sort of thing, really increases the value of Creative Cloud. I mean, if you think about a video editor who makes a video and then wants to put that video on YouTube, they need a thumbnail. How are they gonna make a thumbnail? Well, they could learn Illustrator. You know, they could hire someone to do it.
They can now jump into Creative Cloud Express and just, you know, do that. That could be why they retain, you know, for us versus going to a competitor or whatever else. I mean, that obviously is just one of many, many examples, but I do think that, Creative Cloud Express adds value to Creative Cloud, number one. You know, number two is that we're being very thoughtful about how we're, you know, thinking about the non-branded search traffic for people who wanna get something done quickly versus the people that want to just get Photoshop. Of course, we are not gonna do anything to get in the way of people who are coming and want to just get Photoshop or Illustrator or any of our name brands.
You know, they're gonna do so with as little friction as possible and as little distraction as possible. I'm really interested in all the people that are doing these non-branded searches for things they wanna just accomplish quickly that we can accomplish with Creative Cloud Express for them, and also maybe awaken them to, you know, the broader possibilities of their own creativity as a human. You know, I think that we have to make sure that we, you know, bring these capabilities into the right funnels in the right places. You know, David's team, you know, leveraging that evolved version of DDOM, our data-driven operating model, you know, they're laser focused on every little signal for every verb, branded and non-branded search term to ensure that we do that.
Yeah. Just adding to that before getting to the pricing packaging sort of modeling. Exactly as Scott talked about, you know, we're now in a position where we have a certain set of, you know, assets that are so different than what we had in the past, right? That let us think about the onboarding in a very different way. One of the things that Scott and I are driving internally in a significant way is around the evolution from, you know, what we've been doing and probably best articulated, which is marketing-led growth. Where we, you know, we drive awareness and brand. People will go do a search for Photoshop. We bring them over to Adobe.
We show them the different kinds of ways they can engage with Photoshop, and we sell them Photoshop, and they download it. To a very different model, Scott's saying they'll go and they'll type create a flyer or remove background and express their intent. But it's a very broad set of engagement vehicles where they're expressing their intent. We're grabbing them, bringing them directly into the product, and having them, you know, have success in the web or mobile product in a matter of a few minutes. We look at converting them to paid, you know, after they've used the free product for a while. That product-led growth motion is enormously. It's a new burner for us that we can really turn on and focus.
Again, also on the Document Cloud side, where we have frictionless Acrobat web now that has already proven with our strategy around buying Acrobat verbs or PDF verbs, has been very supportive for us. Specifically to who we look at. We certainly look at, you know, every pricing move that happens in the market. You know, Microsoft has made some. Netflix has made some. We look at it for every subscription business that's oriented at consumer. We look at businesses that are more sort of, you know, broad-based products to large enterprises and everything in between.
At the end of the day, you know, pricing always comes down to price to value and the ability to sort of create clear separations in terms of what that value is, and then optimize the pricing for that value. So yeah, I think you can, you know, you can read from what we're saying is that we want to, you know, optimize the lines of offerings that we have in market. By the way, we talked about it in the context of Creative Cloud, but it's also important to talk about in the context of Document Cloud. You know, I touched on this earlier, but we have been as a strategy, bringing Adobe Sign closer and closer to Acrobat and Reader over the last few years.
We have this incredible surface area in terms of Acrobat now, where we've got, you know, Adobe Scan and Acrobat on mobile. We've got Reader and Acrobat on desktop. We've got Reader and Acrobat now in Chrome as an extension and Edge as an extension. We have our collaboration services, we have our signature services, and that entire surface area as we bring those closer and closer together and apply the same sort of Product-Led Growth motions to drive utilization of the services, really lets us think differently about the lineup for Acrobat as well. Because the amount of value that we've been adding, I think can be streamlined for the right buyer in the right way too.
Yeah, we're excited and it is about tiering and figuring out where on that tier it makes sense for buyers.
Very clear. I'm gonna go now switch gears a little bit to two product-focused questions in completely different segments of your product portfolio. Scott, we reminisce the way that we originally set up this NDR almost now a year ago was a chance to chat about NFTs and the metaverse. We sometimes start getting these questions a little bit, you know, maybe a decade, maybe two, before they become relevant. I want it's a small task. Can you help us understand what the hell the metaverse means in the context of an investor in an enterprise software company even consumer software company like Adobe? Why and how you're well positioned? Connect it, if you can, to products. You know, take it out of the buzzword and into the meaning stage, and tie it also into the NFT realm, if you will.
Yeah, absolutely. It's a tall order. I'm gonna try really quickly. Well, first of all, what is the metaverse? I mean, the metaverse is a descriptor for an immersive experience that we're gonna cohabitate with co-presence for work or living, you know, fun purposes. So whether it be us together in a game, us together in some virtual work environment with a VR headset or some sort of experience that you know have through augmented reality, or some you know immersive web experience. I mean, these are all immersive experiences that you know some people would frame as the metaverse, right? Let's take a step back, and let's talk about the here and now.
I mean, it's an interesting thing to think also about how do I get into the metaverse? Like, how do I become metaverse-ready as a company? In fact, more so than ever in recent memory, I am getting requests from our sales teams to talk to our customers in the enterprise who are asking this question. They're like, "What do we do?" Like, "What is this, and what do we do?" I always start with this here and now question around how they develop marketing collateral and how they develop products, you know, in the product development pipeline, whether you make, you know, something bottled or shoes or whatever the case may be. You know, in both instances, it's you know, there's a lot of friction, it's cumbersome, it's expensive and time-consuming workflows.
Whether it's marketing collateral, where you've got to go into a photo studio and shoot the product, and you have like a food person, like, who actually styles food, believe it or not. That's actually a thing, right? You have all these other expensive people, you know, in a COVID unsafe world, right? It's like, it's kinda crazy. You know, in this collateral, once it's shot, you know, it has to be shot on different scenes for different regions and different, you know, cultures and whatever the case may be. When you're actually using it in market, if you wanna change it, oh, you've got to go all the way back again.
You know, fast-forward to now, some of the most, you know, early adopting companies of this tech realize that they can actually render these objects as opposed to shoot them, and then they can place them in a product like we have called Stager. You know, they can make the materials and textures as photorealistic as you can imagine using products like the Substance products. Then you can take actual synthetic photographs in all these different scenes with perfect lighting, et cetera, and that's your marketing collateral. That's your e-commerce collateral. You know, that's what you're putting on your Amazon product page. It's faster, it's cheaper, and it's more creative 'cause you can actually do more things and expand possibilities. A lot of customers were forced to realize this during the pandemic.
Those who did, you know, it's transformed the way that they work. I'm sitting in the middle of this digital transformation. I'm realizing, wow, I mean, every company is gonna be doing this someday. You know, probably someday soon because it's just a win-win-win. When you think about the actual product development pipeline, you know, these, you know, sneaker companies or whatever the case may be, they make mock-ups. They send them overseas in order to just get something to hold to see what it's really gonna look like. You know, now they can all do this synthetically. They can even test with customers and Instagram ads with something that's completely synthetic and doesn't even exist in the physical world yet. Suffice to say, like, we're in the early innings here.
Now, this is important because it not only helps companies be more creative with less cost, which everyone's gonna say yes for. Why not? It also makes the metaverse ready because all these 3D rendered objects are now ready to export into experiences. If you're, you know, Hermès or Gucci or Pepsi, you know, you have your objects ready to go. If you have the opportunity to do a promotion in Fortnite or a promotion in some other game in Oculus, you can just have those objects ready to be ported into these immersive experiences that we're all gonna have. When we're in these experiences, we're still gonna wanna have fashion. We're still gonna wanna culturally flex ourselves and our taste in the sneakers we wear.
I mean, Nike just paid a lot of money to acquire an NFT sneaker company, that's entirely virtual. That's great. You know, all these objects will be into these immersive experiences, but there's one problem, they're digital. How do we actually have the notion of scarcity and provenance for these objects? How does LVMH ensure that their objects are actually their objects as they're being encountered in these digital experiences that people have? The answer to that, of course, is the blockchain. It's perfect, you know? It's, you know, making all of these objects a non-fungible token that can be, you know, registered and tracked in a public ledger, and it's clear who the owner is and whether it's legitimate.
In fact, Adobe's already developing a lot of blockchain technology to ensure that these are viewed as legitimate or, you know, and help artists get the credit for their work and help brands get the credit for their IP. It's all gonna connect, you know, and actually it's exciting to see the early adoption for the reasons I cited in the beginning and recognize where it's actually gonna all go.
That it's very clear and you've talked about this in one of our other meetings, so I got the sneak preview, but it's extremely exciting because again, now tie into how Adobe sits at the center of both of these trends over the course of the next 5 to 10 years.
Yeah. Well, I mean, if you look at any AAA gaming company, they definitely have our Adobe Substance 3D tools in their stack. You know, whether they're using Unity or whatever the case may be for the runtime, they are using our products to make objects look, you know, 3D objects look amazing. We're building out the entire Adobe Substance 3D collection to add more value there. Of course, this is the new price point that David, you know, talked about earlier. We're also starting to say, okay, what parts of the blockchain technology we're building. We have something called the Content Authenticity Initiative. You know, we have a number of, you know, partners like Twitter, New York Times, others that are a part of this.
It's all about ensuring that an NFT has the provenance of who actually created it, how to leverage that technology in the actual tools. We have it in Photoshop now. We announced that the end of last year. How do we bring it into these 3D tools? And then how do we interoperate with a lot of the partners in the hardware and OS manufacturers out there? You know, whether it's Meta or any of these other companies that are developing these immersive experiences, they recognize that these experiences will fall completely flat unless they are filled with rich, interactive, personalized, and engaging experiences. The only way to get there is to get the millions of creatives using Creative Cloud to start to create for those experiences.
You know, they're coming to us, right? Of course, we also wanna work with them. You know, I'm optimistic about how all that will unfold.
The next product question, David, is for you, and it is around Scott for you as well. The holy grail of Adobe has always been you sit at the creator of the content is using the same technology as the person that distributes that content in the marketing department to their stakeholders, as the person that understands what that content, how it was consumed, distributed, analyzed, and then even what they bought from that content. The entire life cycle of content sits within the Adobe ecosystem. It always seems that you've kind of underachieved the possible of that kind of holy virtuous cycle between digital media and digital experience. Now, it does seem like Workfront is a bridge, a connector there. It's a thread that you're pulling.
Again, for both of you, how do we supersize that, the possible there? What does that mean ultimately for Adobe?
Yeah. Happy to start, and Scott, please feel free to jump in. You hit the nail on the head, which is that, you know, we've got, you know, clearly we're creating the content, and we've always been streamlining the positioning of that content into AEM Assets, right? That's something that we have. We've worked with many of our enterprise customers to make sure that end-to-end workflow works well. The missing piece really has been around the workflow and sort of all of the pieces that sort of come together to give you that end-to-end experience where multiple stakeholders, to Scott's point earlier, as we were talking about Frame.io, can really participate in the life cycle of that content and make, you know, rich decisions in that front.
The combination of what we've been doing around with Creative Cloud and AEM Assets now with Workfront sitting in there as well makes a big difference. We already talked about Frame.io and how that is really for specific workflows associated with video. The other thing we haven't really talked about also is that the teams have been hard at work developing just raw APIs that can be accessed and exposed, both, you know, on the document side with sign-based APIs and document APIs for PDF, but also on the creative side around video and imaging and photography-based APIs.
What this also does in the context of how larger enterprises in particular are moving with custom development of low-code, no-code tools is allow them to, you know, leverage Creative Cloud for the creation of the content, leverage AEM for the residency of the content, leverage Frame.io and Workfront for the interactions and the workflows around that event, and leverage the APIs for integrating batch processes and things into custom experiences in enterprise too. The mix of all of those things matter. The other part that, you know, Anil and I have been talking quite a bit about is that we do need to align our go-to-market around more solutioning in these areas.
You can expect to see us developing, you know, a very focused go-to-market motions around how all of these pieces can come together in different verticals, you know, as you go through. Because, you know, someone like a media and entertainment company may have very different needs from, you know, a traditional corporate marketing department as well, and how you sort of streamline that process of onboarding into this is gonna be key.
Yeah. A couple of quick things I would add is, you know, as our products are becoming more web applications, you know, Creative Cloud Express, now Photoshop on the web and Illustrator on the web, it you know it makes it a lot easier for my colleague, Anil, who runs product on the digital experience side, and I to start to think about how to bring something to the surface for our customer. You know, a lot of his DX customers are using web apps. You know, if you're a marketer doing a campaign, and you hover over an image, and you click Edit, and suddenly you can actually edit in Photoshop on the web quickly, you know, that's just one of those unlocks, I think, for bringing the digital experience, digital media products together.
You know, we also. I think in years past, we've sort of tried to have this big grand vision of the clouds coming together and everything, you know, Kumbaya and harmony and peace in the world. You know, the reality is that creatives think differently. Marketers, you know, oftentimes work through other people to work with creatives. People use different project names and different folder names and whatever else. What Anil Chakravarthy and I have started to do is really start to anchor on the customer problem. For example, you know, in Workfront, someone in Workfront who is managing a marketing campaign, you know, wants to be able to assign tasks directly to a creative who's delivering assets for that campaign.
Now we have something called Creative Cloud Spaces coming to market, which is how Creative Cloud teams will come together around all the resources that they need, the external web links, the files, why not the tasks? We have the Spaces team and the Workfront team thinking about how to bring these, you know, tasks, these needs of the marketing colleagues to the surface using the infrastructure of Spaces. We're really doing it piece by piece, and which is why, you know, I always believe, you know, if you're gonna build a bridge between two businesses, you have to first start with threads that build up to be a bridge. You also have to start from one side or the other side.
We're doing that based on where the customer need is, and I'm a lot more optimistic about, you know, some really cool functionalities we'll bring to the market as a result.
Guys, this has been incredible. I wanna give the last kinda question. What didn't we cover that you know you're passionate about or you feel like is important to leave the audience with? We have a large audience here, and I wanna make sure, A, to be respectful of your time, but also, B, to give you a chance to talk about anything that you think is very important that you either saw the questions in the forum that you wanna make sure you hit or any message that you wanna make sure you get across.
Yeah.
Yeah, I'll jump in. We touched on this a little bit. You know, one of the really interesting inflection points that we're at is really fundamentally how does product and business work together at Adobe? You know, Scott and team have been, and on the Document Cloud side too, doing an amazing amount of work over the last few years that is just starting to see the light of day, right? You know, we touched on the fact, you know, Scott mentioned Quick Actions. Quick Actions are basically, "Hey, I wanna come in, I wanna remove background, then I wanna leave," right? Really fast web native and mobile native.
That's the foundation of years of work to take things like Photoshop or Premiere or After Effects or InDesign and make them web and mobile native so that we can really reshape and re-atomize. You know, we talked about the collaboration capabilities and Photoshop on the web and Illustrator on the web. We talked about Acrobat on the web being present. We talked about, you know, this, the connection of the user journeys across our mobile and web capabilities. This fundamentally changes how we can think about our go-to-market motion, again, from that original marketing-led motion that we've really perfected over the last decade to a marketing- and product-led motion going forward. One of the things that I think I'm most excited about is working closely with Scott and his team around sort of this cultural evolution.
You know, I've gotten questions about sort of how do you think about, and evolve Adobe's culture for the next decade? We feel like we're in this massive opportunity ahead, and we feel like there's this incredible opportunity to operate differently as a company going forward, much like we operated differently as we transitioned to Creative Cloud, you know, 10 years ago. You know, there's a lot of energy in this company about taking all of these pieces and doing business on them in extending into this zero- friction premium Product-Led Growth motion going forward. Probably worth hitting on that a little bit harder than we did.
Yeah, that's a good point. I mean, that cultural transformation is, I mean, it's a big one 'cause, you know, you have teams who are used to having to just ship an updated version of their software, and the rest takes care of itself. I mean, it's a totally different culture now, different tools at work, different types of meetings, different types of processes and measures, and it's, you know, that's been a few years in the making. It's, you know, it's great when it starts to feel, you know, like it's the muscle memory of the organization.
I mean, the one thing that we didn't talk about that, you know, I think will always be underestimated, you know, until people really start to see, you know, the impact is AI. You know, we've brought some of the most killer features that have received the most fanfare from customers, you know, in recent years, Neural Filters in Photoshop, speech-to-text in Premiere Pro, so people can just literally type in and find things in a film that they're editing and just edit from there. You know, these are major unlocks, and I think we're very much in the beginning. Now, we've had hundreds of people in the company focused on AI, and we've been collecting data, right?
How things are made, how creatives are operating and, you know, that are feeding algorithms for masking and removing imagery and removing something from a moving video, removing an object or a person from moving video. I mean, some of these AI breakthroughs save our customers days, you know, hours or sometimes days, you know, or longer or just enable the impossible. But this AI, you know what it also really does is it allows people to make something amazing with less time. You know, seeing the AI is really as useful for our pros as it is for the non-pros in Creative Cloud Express. You're bringing some of those things to the market.
We have a few things under production that actually suggest to you know, how to make something look better. Imagine, you know, predictive text when you're typing, and it tells you sort of what you're likely to wanna say or even the sentence you're likely to wanna write. Imagine that, but for creativity. You know, that becomes a real moat for us. I mean, it becomes a real strength of the company that, you know, no one's really in a better position than us to deliver within the product experience. I hope that, you know, in not too long from now, we'll say, "Wow, that's a major differentiator of anywhere in market where we're really competitive.
Guys, this has been an absolutely scintillating conversation. I want to let you go back to your day jobs, or early Thursday drinks. With that, honestly, thank you very much. This has been unbelievably informative. I think both of you did a fantastic job. Jonathan, thank you so much for helping set it up. To the investors whose questions I didn't ask, I apologize. It was just so much kind of goodness back and forth, and so rare to have both of these guys at one time. I tried as best I could to group some of the questions together and ask some of the harder-hitting ones. Thank you, everybody. Have a great rest of the day, and look forward to all the follow and all the great success.
Thanks for hosting, Alex.
Thanks, Alex.
See you all soon.
Thank you, guys.