Well, thanks again everybody for joining us here at MAX. And also thank you to those on the live webcast here today.
My name is Mike Savage. I head up Investor Relations here at Adobe. And our goal today is to really give you an update on our strategy to talk about our business opportunities and the markets and the size of those markets. And and of course to save some time for Q and A later on. For those participating here and also on the webcast, we posted slides on our Investor Relations webpage.
So you can access those now or later at your convenience. We're also going to have an archive of the webcast available. So you can watch that and we'll keep that up to the end of the quarter. So with our agenda today, we'll have several presentations by Shantanu, David, Brad and Mark and then I mentioned we'll have Q and A. Before we start, I just need to go through our financial disclaimer.
Some of the information we discuss today contains forward looking statements that involve risks and uncertainty. And we ask that you please review our SEC filings for a complete understanding of those risks and uncertainties. With that, I'll hand it over to Shantanu to start the meeting.
Thanks, Mike, and I'd like to extend my welcome as well. It was an exciting day today to be able to talk about what we were doing on the creative side. And our mission, as all of you are aware, hasn't changed, which is it continues to be to change the world through digital experiences. But where these digital are created where they're consumed and how they are monetized as we all know is going through very dramatic change and we see all of that tailwind associated with content creation and content management and content measurement as well as content mobilization. Max really for us is a celebration of our creative heritage.
As a company, we focused on 2 growth themes as you're aware, the Creative Cloud as well as the Marketing Cloud and I'll spend some time on it as well as David and Brad. But what we're also increasingly focused on is making sure that we provide increased value as a result of the combination of what we can do between the creative process as well as the marketing process through the entire content lifecycle. And what that means really is that in addition to actually effectively Serving our customers with the creative products, we've been able to do a lot more with companies and become mission critical and help them with the return of investment and high impact in terms of what they are trying to do, whether it's visitor acquisition, visitor conversion or increasingly monetizing all of their assets. As I take a step back and reflect on the Creative Cloud journey and what we've accomplished over the last 4 years, As you know, when we embarked on this creative cloud journey, we had a couple of key goals associated with that. The first goal was to make sure that we innovated at a more rapid pace.
We saw what was happening with technology, the move towards mobile, the move towards the cloud, as well as the significant advances that we saw on the desktop. And it was really important for us to think about reimagining the entire creative process to take advantage of all of those technology trends that we saw. The second key goal that we really had for ourselves was to make sure that we were attracting new customers to the platform, the next generation. And as David will talk about, We continue to see approximately 20% of the people who are using Creative Cloud as being first time users of a product from Adobe. So it's great that we're attracting that next generation of consumers.
We've also talked about the fact that one of the things we really wanted to address was combating piracy because of a lot of our software is pirated around the world. And if we deliver all of this technology as a combination of desktop as well as What happens in mobile apps and creative services, it's going to become increasingly hard for people to take advantage of our product without paying for it. And as this morning's announcements hopefully showed you, the rapid pace by which we are innovating is actually faster than what we used to do when we had the 12 or 18 month traditional product cycles. And what that means honestly is that it's much harder for smaller companies who have point products to compete with us. And we have effectively provided the significant technology moat with the pace of innovation in order to serve the entire creative community.
And the updates are not just incremental updates. I mean, we had a release in June of this year. But if you look at what we did with the release just now, It's very significant updates as well as a brand new customer creative profile, which enables us to really tie together what people are doing in a location independent way and David is going to talk a lot about that as well. The other thing I'm particularly pleased about this week is We've always mentioned that video is an area of focus for us as well as an area of growth and we had targeted competing with companies like Avid as well as Apple at the high end. So we continue to make sure that we're going to get traction, not just at the creative community, but even at the high end with video.
And so we've really expanded the value proposition. The whole value proposition when we started was desktop software. We feel so good about what we've done with mobile today, that we've actually taken the traditional desktop product names because the bar is so high, products like Illustrator and Photoshop and Premiere and now we're delivering them on mobile devices. And it was also really nice for those of you who are here to see what we did with touch. We think touch is a brand new paradigm that will enable us to engage more effectively with our current customers as well as to attract a brand new set of customers.
And in conjunction with Microsoft, we showed a version of Illustrator that's actually available for download today for our creative customers That completely redefines what the user experience can be for somebody who's working on a touch device and honestly far more intuitive because the ability for them to actually use touch and a stylus is far more natural than the ability to use a mouse. The other thing we continue to do is in addition to desktop and mobile apps, we recognize that the entire world is social and it's networked and the ability to have this entire community, the creative professionals that are not just exchanging their projects, they're not just collaborating, but really enabling a whole new era of commerce among this creative community. And again, with what we announced around the talent search, David's going to touch on that. The other thing we're doing is while we've been embarking on this journey of innovation with the creative, we've also had to radically change our go to market. And I'm pleased to let you know that all of the heavy lifting is now behind us because Whether it's the channel partners, whether it's the affiliate marketers, we now have one go to market that's all focused on the Creative Cloud, whether that's The individual offering, whether that's the team offering or whether that's the enterprise and execution around all of that, marketing around all of that is across one offering.
So we feel good about how we've effectively managed that particular transition. But I think the key message that I will say as you look at this journey is that we really believe that the best days of us are still ahead. We think we're incredibly well positioned with all of the heavy lifting we've done on the product side, on the go to market side and the messaging side, and we're going to continue to redefine and reimagine how creative works, how we can advance the state of the art, what's happening with hardware and software is particularly exciting for us, new input devices, what we can do with audio, what we can do with motion. And the partnership again today that we showed with Microsoft actually shows the power of how you can use cameras as well as audio input in the entire creative process. And so I think the message for you as investors is We have really created a very, very significant creative platform that includes the best of desktop, the best of mobile, as well as services and really leverages the cloud to solidify our leadership in the community.
And the goal here is to continue to attract new customers to the platform to ensure that the customers who are on our platform continue to be retained at a high rate as well as to provide as David will talk about new value expansion services as well as market expansion services. So feel really good about what we've done. The other thing we talked about today that I'll briefly touch on is In addition to what we can do on the innovation side, we want to make sure that we embrace the entire capability of the ecosystem to innovate. And so we introduced a new SDK as part of the platform that enables hopefully 100 and 1000 of developers to now develop on top of our
platform and all of that
benefits again accrue to Creative Cloud members. And all of that benefits again accrue to Creative Cloud members. And last, but certainly not the least, I think the thing that gives us a lot of confidence about this business is that customer satisfaction associated with the Creative Cloud continues to be higher than what we were able to achieve with the desktop products, which was significantly higher than most other companies. So we believe that that augurs well for driving new customers, ensuring that we retain the customers as well as driving growth in that business. As all of you know, we also have a really great franchise with PDF And what's really happened is PDF and Acrobat continues to be de facto standards for collaboration and workflows.
I like to say that PDF is 1, Even with mobile devices, the amount of content creation that's happening on mobile, the amount of content sharing is happening. And I think we have a unique opportunity take all of the assets that we have, what we've done with reader mobile, what we've done with acrobat.com and deliver a really integrated offering around everything that we have to do with document workflows. We have a major product release expected in FY 2015 And what that does is bring together all of our desktop product, all of our mobile products, things that we've done with Mobile Link that enable you to share your Acrobat file seamlessly across devices as well as to make sure that we integrate new services, not just create PDF, but also all of our signing services. And I think the message here is we have real permission right now and a franchise to expand our footprint and extend our brand. And again, We're pretty excited about what we are doing with our release in fiscal 2015.
The Marketing Cloud journey has been a really interesting one. As all of you know, this was a business that didn't exist within Adobe a few years ago. And we just saw this unique opportunity to bring data together with content to create value for our customers. And we're pleased with the fact that we've built over $1,000,000,000 business in this and become leader in what I think all of you would acknowledge is an explosive category, namely that of digital marketing. What we've done I think is through a combination of both strategic acquisitions as well as organic innovation, we've provided the most comprehensive offering right now in marketing that exists through the Adobe Marketing Cloud.
The newest acquisition in our portfolio Adobe campaign is off to a really Great start. And what we are now doing much like we did with the Creative businesses, in addition to having best of breed with each of the solutions, solutions like Adobe Experience Manager, Adobe Analytics, Adobe Media Optimizer, we're really investing in these core services and Brad will touch on this as well as a platform that we believe will provide unique differentiation and opportunity. And there are 2 things in this space that I'm particularly excited about. The first is product that we're working on, which allows us to do marketing mix optimization. The key challenge that I think most marketers still have is while they are investing marketing across multiple different media types, how do you aggregate all of that data and really truly understand the return of investment in that particular space.
And the second thing we're certainly investing in a large way in the Marketing Cloud is to make sure that all of this data, The fact that we process over 20,000,000,000,000 transactions that we're really investing in data as well as algorithms as well as visualization to enable this all to be actionable by our constituency, which is the marketers. What's happening in the space that's really interesting is while CMOs were really the pioneers in using this content and data to drive these personalized and targeted experiences. We're clear that this opportunity is no longer just about marketing because every consumer, whether you're working with a retail outfit, whether you're working with travel, The expectation that customers have is that they get this single unified experience across all channels. And I think what we have a unique opportunity to do is for any customer engagement that enterprises are trying to achieve that we become central and indispensable to the technology stack that they implement in a particular enterprise. We believe that we have tremendous momentum in this space.
We've been organizing events all around the world and virtually every one of them, the ones that we do in Utah, we've done one in London, in Singapore, In Sydney, they've all been sold out, which actually I think just demonstrates the enthusiasm among our customers for a solution and the need for such a solution in the marketplace. The other thing we've been working on, which I'm pleased about is we recognize this as an ecosystem. And in order for us to be successful in this space, while we focused on the market here, if we think about what's going to happen in the real time enterprise, Other software vendors, systems integrators, as well as digital agencies are going to be natural partners in our strategy to make sure that this becomes even more central to what is running in the enterprise. And maybe I'll just talk on 3 partnerships. The partnership with SAP was all about making sure that our technology works with to provide that unified interface.
The partnership with Publicis is as a leading digital agency, they are standardizing on our stack and making sure that our stack is the stack that they use to sell. And then the partnership with Wipro, who is a leading systems integrator. And what's exciting about that one is they've actually established like I think everybody else is doing a brand new digital practice to focus on implementing Adobe solutions. So It's not just Adobe that's focused on this, it's an entire ecosystem now that's working on this. While we like to talk about Adobe as Creative Cloud, Marketing Cloud and what we are doing with Document Services, I think the reality is to our customers, we're rapidly becoming 1 Adobe.
We're becoming mission critical. What Matt has done with the field organization and Anne has done in terms of marketing is to make sure that we represent this as one comprehensive solution to our customers. And I think the key challenge that they all face is how do they fundamentally use digital to transform their business. What you see on the slide in front of you is a little bit of 4 examples in different verticals of how customers are using our solution. Certainly, the one that you're probably most familiar with on the reimagine creative side is every single media company is being transformed and we're helping them transform their businesses Because from creating content just for print, they're now creating content for print and for web and for mobile.
They're all investing in video and they all want to monetize all of these assets across all of these media types. And while Conde Nast is the customer that we're highlighting here, this has been true of every single publishing company. We're becoming more mission critical. They use Adobe Analytics to understand who's actually consuming that data and they're increasingly using an enterprise term license agreement of Creative Cloud in order to be able to deploy that across their particular enterprise. Transforming commerce, There isn't a single retail, there isn't a single company, and especially that in retail that isn't thinking about how they move their commerce online.
And I think we all know that the Adobe Marketing Cloud is an essential ingredient or a critical engine for all of these commerce websites, whether it's acquiring visitors through our Adobe Media Optimizer, whether it's actually providing the compelling user experience through the Adobe Experience Manager, or whether it's actually converting them to paying customers through Adobe Target, what we are really helping them do is increase their conversion and lower their cost of customer acquisition and the ROI is evident. And again, Brad will talk about that. The customer that we talk about here is Under Armour. What Under Armour is doing, which is very interesting, is they're using us not just to create this personalized commerce experience on the website, But they really have this vision to move upstream the entire design to build process. And again, that's true for what Under Armour is doing, but I think it will be true across many, many industries as well as Nike.
In transforming customer engagement, I think a good example of what you see here in the multi channel space is how the expectation from all of these enterprises is they provide a unified customer experience across multiple channels. And Delta Airlines as well as other travel agencies and travel airlines Recognize that if you're trying to create your reservation on a website, if you're trying to look at it and check-in on a mobile device, If you're looking at it in a kiosk on a terminal or in fact in the screen in front of you when you're sitting on the seat, you want that experience to be exactly the same. And that's where a company like Delta is using our entire set of products to enable that multi channel experience. And last but certainly not least, we highlight ESPN here. But again, every company is thinking about video because the expectation is that With the explosion of what's happening with video and all of video moving to IP networks with products like Primetime, I think we're uniquely positioned to deliver that video content, to help them understand who's actually using it, to segment their users so they can in effect drive higher advertising and higher ROI.
And so I think early days in the video space with TV Anywhere, but we really have all the capabilities from creation to monetization. And I think this story gets played out with every single enterprise. Everybody is thinking about what their digital transformation story is, How do they move online? How does mobile impact it? And again, we're in a very unique position to deal with this.
I think this slide just shows a number of the marquee customers that we have, again across virtually every vertical, you've asked us in the past, which verticals are you focused on, retail, automotive, media and entertainment, telecommunications. You'd be surprised even in government as government is increasingly moving towards providing all their citizen facing services online, We're seeing a fair amount of traction with our Adobe Experience Manager solutions and certainly every single consumer brand. And I think the message for all of you is our level of engagement with all of these is becoming even more strategic than ever before. So as we think about where this goes, we have 3 really successful businesses with what we've with the Creative Cloud, what we've done with Document Services, as well as what we've done with the Marketing Cloud. And I think our growth platform continues to be really focused on this core area of the confluence of content and data.
Now we think that whenever content and data come together to drive this targeted personalized experience. Again, as I said, whether it's for a website, whether it's for conversion, whether it's for what media audience is consuming content, I think that's our sweet spot. And mobile is driving a real sea change in this and that's why we call out on its own. What's happening is we've just delivered the tip of the iceberg today. We're using mobile in the creative process as you saw with Max.
We're creating increasingly all of these mobile apps that people are doing. We're analyzing what's happening with mobile marketing, as well as the mobile business for every enterprise. And I think this is just going to be a continued tailwind for us in terms of where our business goes with the creative as well as the marketing business. And last but not least, a robust ecosystem. And we think that's really essential to our strategy and I touched already on what we are doing on the go to market side, on the Creative Cloud, whether it's with our channel partners or the affiliate marketing and on the marketing cloud with what we're doing with digital agencies, systems integrators as well as software companies.
And all these broad ecosystems as we continue to build it, we just think it leads to further penetration within the enterprise. So as I reflect on what we've done over the last few years, I really think we've done a great job of transforming our business and more important, the nature of our relationship with customers. With Creative Cloud, we've spearheaded a revolution to subscription, where frankly we're now being copied by every single company in that particular space. We've expanded our strategy to look at adjacencies and white spaces with offerings like the Marketing Cloud. And what that means for us is we're becoming more mission critical.
We're increasing the available market And the available TAM for Creative Business has doubled and the available TAM for the Marketing Cloud has probably grown tenfold. And again, Brad and David and Mark will show you some of those numbers. I feel really pleased about our execution. What we've done in the past few years and the focus on execution, We continue to be on track with the long term goals that we've set for ourselves and that we've outlined to you as a company and our markets are big and growing. And I just continue to believe that our opportunities as long as we execute against these strategic objectives that we've talked about, they have never been greater.
And what I'd like to
do now is have David give you a little bit more insight into what we
are doing with the Creative Cloud. Thanks, Shantanu. All right. So what I'm going to do is I'm going to spend a little bit of time Giving you some data based on what we're seeing as the business has been transforming. I'm going to do a recap of some of the announcements from this morning.
I think there were Many of you were at the event this morning, but there are a number of folks that weren't, so I'll do another recap of that. And then I'll end with talking about how that work is starting to have business impact and why that's driving the core elements of the business that we've been talking about. The thing that I always everyone marks time differently. If you're in the creative business, you mark time based on the number of MAXs you've been at. And if I think back to the last MAX, I don't know if someone can turn down the mic or maybe I need to move it a little bit further away.
I don't know if that helps. Can you guys still hear me? If you think back to the last MAX, we had a very different creative business than we do today. If you think about the launches we had at that MAX, it was almost entirely business it was almost entirely desktop focused set of announcements. We had a number of promises for services.
There were very few or no mobile apps that were part of the story. And you fast forward to now and we have such a rich ecosystem that we're talking about. If you look back at last MAX, CS6 was still a very It was still very front of mind for a lot of people, both our customers and our partners that were reselling everything that we're doing. And now really the number of times you hear CS6 even mentioned or you As Shantanu mentioned, in our partner ecosystem, we've pulled CS6 out of that ecosystem as a whole. We really feel like we've moved on as a company and it's really bearing out in the numbers.
If you look at 2012, 2013, 2014 estimates, we're talking about effectively 10x growth in these businesses. We expect to end this year at 3,300,000 roughly 3,300,000 subscribers, paid subscribers. We've talked about our $19,000,000 in terms of our expectations for ARR. And the really the payoff of all this is obviously the flow through to recognized revenue. And this is a flow through for the entire business.
So now at the end of this Here, we expect to see roughly 60% of the revenue that we report coming from recurring sources. So we feel really good about that migration, how it's going. Now if you double click and you look at the creative business alone, it's a much more advanced story. We have 2,800,000 subscribers. Now, we talked about this in the past.
The majority of them, vast majority of them have been Signing up for the annual plan, well, that's still the case. We still have 97% of the members on the annual plan. This next number is one I look at very closely, which is The amount of the subscribers that are transacting business on adobe.com directly, and that is 76% of all the subscribers are now doing business with us directly. That gives us a much richer engagement with folks. Recognized revenue, if you look at the Creative business, That's now up to almost 90% of the revenue we report coming from these recurring sources.
And the other health of the business stat that I look at is How many people are buying because of the subscription model and they wouldn't have bought in the old world with perpetual and we have a very consistent number here for the last couple of years, 37%. What that tells me is that the model is working. It's attracting new customers. It's helping people migrate over. And one of the leading indicators of the success of the business that we've talked about in the past is to look at the number of units we're transacting in any given year.
And if you look at 2014, it's going to be significantly by a significant percentage the highest number of units we've transacted in the year. So we feel really good about the progress we're making there. Now of course, that progress is predicated on a rich set of offerings and businesses. So let me take you through The announcements we made today and also in the June event. As Shantanu pointed out earlier, today was a big deal
for us.
We had a lot of big announcements. But if you tracked and you saw the announcements we made in the June event, just 3.5 months ago, it was an equally big set of announcements. And what that should sort of indicate is that we're fulfilling the promise that we've made to our customers around this idea of continuous innovation. When we made the move to the cloud, that was probably the single largest commitment we made was that we were going to accelerate the innovation, not just in our desktop applications, which we've done, but we were going to start to look at a much broader canvas that we could do that we could work on to help our customers. And this was really, in my mind, one of the watershed set of announcements today.
There was a marked difference in terms of the keynote and how we walked through the day compared to previous years. You'll notice that the number of times The amount of time we spent on the desktop app section was much shorter because the desktop apps were just part of that broader story. They were in the mobile apps. Were part of the creative profile. They were part of every aspect that we talked about.
So let's walk through and I'll just update everyone on the core announcements that we had. So the first thing, obviously, the CC Desktop applications. Now over 1,000 features have been added since CS6 across device formats, lots of work in performance because the new hardware coming that's coming out is giving us an opportunity to accelerate the work that we're doing in these the heavy lifting and the algorithms and the processing, tons of productivity work and always, always have a little bit of that Adobe magic that suddenly makes something that was previously impossible, possible. Those are really important drivers for migrating customers, of course. Touch support, this is a big deal for us too because you saw as you saw the work we're doing with Microsoft.
Touch was something that was always on a disparate device. It was on the mobile device. But the fact that we can now bring touch and all of that richness of interaction to our core desktop applications means we can open up a whole new frontier in terms of innovation. And the teams are really going through this quickly. We showed Illustrator, but we also have touch we've also touch enabled Photoshop, Premiere and After Effects.
And you can expect to see much more coming down the path in the next few months years. In service integration, Shantanu touched on this, but this is a big deal because first of all, it helps the customer and it makes a big difference in terms of how everything connects up. All the services connect up and it makes the whole workflow much more rich. But the other thing is services that are integrated in the desktop apps cannot be pirated. And as we integrate Creative Cloud Libraries, as we integrate Creative Market, as we integrate Typekit, as we integrate all the service offerings more deeply into the fabric of the desktop applications, it certainly helps with that story.
Moving on, the next set of announcements we made was around our mobile applications. 14 Creative Cloud enabled mobile apps across imaging, illustration, video, taking on the names of their desktop counterparts. This is a big deal because what it says is that These are the mobile apps that we're betting on for the future. And the technology in here, this is the point I made earlier this morning, is this is the same technology that's running on our desktop applications. It's not an approximation.
So that was a big deal. We launched some of these at our June event. And in that rough period of time, we've already received 6,600,000 downloads of these applications. So clearly an opportunity to go and reach a much broader audience than we've had. And really we haven't done a rich amount of marketing around these.
We're just ramping this stuff up. Mobile SDK and our Aviary acquisition are really big deal because Now we can start to leverage the thousands of developers that Aviary had and the tens of thousands of developers that we can bring into the ecosystem based on our network of connections. And what that's going to do is it's going to allow us to work with the developer community to build niche applications that reach audiences that we wouldn't have reached otherwise. And then every now and then benefit from some of those hits that happen on mobile every now and then. The key value driver for us here is are they signing up with an Adobe ID and bringing more users into the ecosystem that we can work And that's the foundation of the creative SDK.
Next up is community. We announced that we've now gone to 4 we have over 4,000,000 members in Behance, up from what was $1,000,000 at the acquisition, which was just over a year and a half ago. 400,000 projects are published every month. And this is a big deal because as we talked about earlier, when recruiters or creative directors come looking for talent or you look at a measure of the vibrancy of the ecosystem, It's these portfolios that speak volumes, right. It's about the work of the community and to see the increasing pace of publishing of these portfolios makes a huge difference in terms of the ongoing engagement of the community.
And speaking of that, while we have 4,000,000 registered users, We have 25,000,000 users coming on a monthly basis. So this is another pool of people that we can start to pull in and draw into the broader ecosystem that we're working with. Part of what's driving this growth is that while Behance was founded on the idea of a creative individual, we've been adding more capabilities to it around teams. And so we see teams from large organizations like Adobe and Google and others that are creating team profiles on Behance and sharing work and attribution. But we also see more and more small startups coming on board to showcase their work.
So that's creating a much stronger, richer viral loop and pulling more people into the Behance community as well. Next up, assets. With assets, we talked about the fact that we're moving beyond file storage. One of the areas that we've always had or we've had since for about a year is the ability to do basic file synchronization, something you'd find in Dropbox or G Drive or any of these other file synchronization technologies. The thing is that for creatives, the real power comes when you go beyond the file because there are lots of elemental creative elements that need to flow throughout the creative process, whether it's your files, your fonts, your photos, your brushes, your shapes.
And as a result of all of that being part of the ecosystem that we manage with assets, We're effectively creating an asset management system in the cloud that integrates deeply with the apps, both the mobile apps and the desktop applications. And that makes the whole system much more seamless and the frictionless creation really can take hold. Obviously, these work across devices. This is a really important point. This is the same infrastructure that we work with on the digital marketing side of the business, the AEM foundational aspects there.
So that makes it much easier as we bring these 2 clouds together and we'll talk about that in a minute. As we bring these 2 clouds together, we start to see the potential for these assets to flow not just more seamlessly within the confines of the creative users, but also migrate over and work with marketers. And that's a big deal as we see the marketing departments and the creative and last but not least is the market. Now we've talked about this in the past, but we've talked about it really in a little bit of a passing way. We took another big step forward in the last couple of months here.
First around asset marketplace. So we've gone to the Behance community. We've attracted tens of thousands of assets from that community. We put it in something we call the asset marketplace and we started to offer that to our Creative Cloud members. We also have training content that we've been starting to aggregate more and more.
And we, of course, have thousands of fonts that we put into this asset when you put all of that together, it's great to see that the impact it's having is great to see the usage and clearly an indicator that the creative community is interested more from us in this space, not just in terms of the creation of the content of the assets, But the more we can actually harness the rest of the community to give them assets that jump start a project makes a big difference. App Marketplace, this is something we've been in quite a while, we have thousands or tens of thousands of plug ins to our desktop applications. But the cool thing now with the Creative SDK is we're going to start to see 100 or thousands of applications developed by 3rd parties that are adding value to the system. So, the ability to help merchandise those 3rd party applications that add value to the Creative Cloud ecosystem and work with the content stored in the ecosystem or put more content into Creative Cloud, those are the areas that we're focused in terms of the app market. And of course, the latest Announcement today was around creative talent.
Again, 100 of 1,000,000,000 of dollars being spent on creative talent. It's a highly inefficient market today. Hard to find if anyone has actually tried to hire a creative, it's they're in amazing demand and it's really hard to find creatives that are available to work on your projects. So the focus of this is really to drive a much richer, a much more streamlined approach to hiring and onboarding creatives. And the last thing we introduced is possibly the most important thing, which is this idea of a creative profile.
It's your Adobe ID. And it gives you access to everything I just talked about so that it's your login and utilization model for your desktop applications. It's how you access your mobile applications. How you access the market and the assets. And what this does is it connects all of those things together so that you can now start to work more seamlessly across these as an individual, but you can actually work across these as teams as well, both private teams or part of the broader community.
So that's a lot of value that we're giving to the user. What it also does is it starts to create an audience segmentation that we can use to both personalize opportunities to users. So in other words, give them training. If we see them using a certain feature, give them training or other sort of messaging that gets them to use other features to drive active use. It's also useful for messaging and marketing to upsell and retain users.
So we'll talk more about this in a minute. But the creative profile really unlocks a lot for the users and the value that they get, but it really unlocks a lot for the business that we're driving as well. As a quick reminder, all of this stuff is available to our individuals, our teams and our enterprises. Individuals get all of this, including 20 gigs of storage. As you step up to the team offering, you start to get centralized deployment tools, You get admin console and more ongoing support.
As you step up beyond that to enterprises, we're working to give enterprises federated ID, more secure assets so that assets aren't necessarily solely stored in the public cloud, Working on private cloud and on premise solutions and we're integrating with AEM assets, so that AEM assets that are stored as part of the Marketing Cloud can be accessed, leveraged, updated directly from the Creative Cloud products themselves. All right. So that's an overview of the offering and the progress that we've made on the product side. If you remember back to the FA meeting in March, I think it was, We talked about how we think about framing up the business drivers for the ecosystem. We talked about migration, taking that installed base that we have and moving them over.
We talked about value expansion, which is as we move them over, that core base, we can do a lot we can provide a lot more value, So providing more value and increasing the ARPU for that base. And the third is market expansion. Everyone is creative. And as a result, we believe that there's an opportunity to reach a much broader audience than we've ever reached before through some of the actions. And let's walk through each of these.
And I'll give you a few examples of how the product work that we're doing ties off to the business opportunities here. So the first step is migration. The first one is the most obvious one, which is that this continuous innovation cycle that we're in, the more we're updating with these big releases that people are able to see significant innovation, the more we wake up the base. Every one of these releases that we have reaches back into our CS3 customer base, CS4 customer base and says maybe this is the time I should pay attention, I should try this out and buy. And that ongoing innovation is increasing our engagement with older members of the installed base as well.
The second thing is that what we are starting to see as we start to be able to track and understand how people are using the software for the first time in an end to end solution, we're able to start to see what drives conversion and what drives retention. And if you look at things like community, if you look at things like stock content and you look at things like training, those services that I was talking about earlier, we're seeing a nice correlated response between what is utilization of those services and increasing conversion or retention. And you connect that back to your creative profile, it lets us personalize and really target people to drive conversion and retention. Next up obviously is the channel partners. As we've been working with our channel partners and affiliate programs, We're seeing an increased focus now on Creative Cloud as we've removed CS6, but it's also opening up the door for us to reach customers through new ways.
So whether it's someone like Canon or Lenovo or Wacom, the opportunity for them to refer people to Adobe and do an affiliate relationship is driving a new set of partner ecosystem conversations that are driving more traffic an opportunity for us to convert users. And the last thing is the pricing model alone, just the move to subscriptions. We continue to see more people from the installed base saying, actually because of this, I am willing to migrate whereas otherwise, the cost of an upfront upgrade payment would have been too much. So all of that is driving migration. When you look at value expansion, The key element here is that we don't we are planning on making the right content and service and value available at the right level.
We're starting to create more separation between the tiers. If you look at what we're doing with stock content, for example, it's available at the higher full priced tiers of Creative Cloud, it's not available, for example, in Creative Cloud Photography. So as people are coming on board and they're using Creative Cloud Photography, if they start to access some of the market assets that we merchandise as part of the natural flow, it's an opportunity for us to say, would you like to upgrade and would you like to upsell? Really start to get tune into this idea of a data driven marketing organization. That's how we are evolving and that's where we're going.
Creative Talent Search, That's a great example and probably the most direct and obvious example of ARPU expansion. The cost of that is $1500 per month. So a significant increase in terms of the other price points that we have in market. And it's very similar to the LinkedIn model. I mean, the way we about this and talk about this internally is it's LinkedIn for creatives.
So what we have is the ability for someone to come as a creative director or a recruiter, join self serve at $1500 a month and start hiring people. There are some rate limits like you can run at maximum researches. Can have only a certain number of communications with people you're trying to hire during that period of time. If you trip over those, it trips over to a higher touch sales opportunity that we work with Matt and team on. And then of course, Creative Cloud and Marketing Cloud Integration, in particular around AEM assets.
As we integrate these clouds more and some of the work we've done recently with AEM asset infrastructure connecting to the Creative Cloud, that represents more direct upsell opportunities in the enterprise too. So all of these is how we think about the idea of taking and actually providing more value and bringing more ARPU and or revenue to Adobe. And last and but certainly not least is market expansion. As Shantanu mentioned, we continue to see about 20%. Just over 20% of our user base is new to Adobe, which is nice to see because that's been consistent.
If you recall, I think it was probably 2 years ago that we first shared this stat with you. That's roughly where the number was. It could have been the exuberance of this offer for the first time being available at such a low onboarding price. The good news is that this seems to be a renewable resource and we are able to pull this consistent number in from new places. But I think we can do better.
As we look at Creative Cloud Photography Plan, at that price point and that value for the first time, we can start to go after the installed base of Elements users and our installed base of Lightroom customers and pull them in to the franchise also. And we can start to merchandise to people that are coming in from some of our mobile apps because at that price point and that value, It's a really reasonable step function for those. And so speaking of mobile apps, as I mentioned, we had We launched some of these apps a few months ago in June. We've already generated about 600,000 new Adobe IDs. Those IDs are now top of funnel conversion marketing mindset for us and we can go after them with messaging and value that is going to dial into the right model for converting them to paid users.
And of course, we think that that can be even further expanded by utilizing the ecosystem of Creative SDK. Okay. So you put all of that together and probably the single most important thing to take away from this is how we are evolving our go to market. The creative profile is at the center of how everyone's engaging with these applications. It allows us to create a really thoughtful audience segmentation of all of our users that we can drive more value to them, but we can also do much more data driven marketing as a result, focusing on how we get them to engage better, meaning how do we get them to retain better, focusing on making sure that the value drivers that they used during a 3 year trial period helps convert them and therefore getting a higher lifetime value from these customers.
We're obviously heavily dependent on and using our own marketing cloud. Brad has given me a special price on that and so we're leveraging that every chance we get and driving active use. And that funnel and that motion is really starting to take hold. Now it's obvious how this works in the individual segment, This is how we think about in terms of Marketing Cloud, but we've also been really happy to see how this is happening, how this is making a difference in our SMB segment. Over 30% of team units now are trending up are transacted on adobe.com.
So even in the team business, we're bringing that business direct to Adobe. And again, that gives us a much stronger relationship and opportunity continue to merchandise and drive. And even in the enterprise business, we're finding that a lot of enterprises as they're considering the move over, we see you can very easily see pockets of people coming in and trying the product. So it's become a really good lead generation source for us as well. And all of this beta driven stuff, I think, is going to get even more fuel thrown on the fire with the mobile apps and the creative SDK that we just talked about.
Okay. So continuous innovation across desktop, mobile and web, that's the engine that lets us stay connected with our existing installed base. New services are both extending the value and driving higher retention and conversion, things like talent search and market assets as an example, Becoming a true world class data driven business and becoming a much more efficient business in the process, Strong migration of the installed base and new customers, we continue to see that continue and really good growth in all segments, individual, SMB and marketing, heavily dependent on using our own marketing cloud to drive the growth of this business. So with that, I think we should talk about our marketing cloud. Great.
Thanks, Steven. So I feel like a
little bit that I'm coming into Adobe MAX and I'm about to interrupt your regularly scheduled to talk about Adobe's other $1,000,000,000 business. So, brief commercial break here as we talk about this. I thought The discussion this morning on the reimagination of creativity was fantastic. And for those of you who were at the Adobe Marketing Summit in March, You remember that the theme of that conference was around the re imagination of marketing. And I was struck last week, I was in New York at a Fortune brainstorm dinner that we had jointly hosted with Fortune and the theme of the dinner was marketing reimagine.
This reimagination theme has really caught hold. And We did a survey, what Anne, a couple of months ago, digital distress, where we went on and we surveyed senior marketers and we asked them a few questions. First question we asked was, hey, do you think that marketing is going to change in the next in the coming years? 80% of marketers said, yes, we're going to see massive change in the next few years in marketing, how we do our job. The next question was, Do you feel like you have the skills that you need in order to kind of drive that change?
Less than about 40%, 45% said, yes, I feel appropriately skilled. And the question really was around reinvention. Do you think you need to reinvent yourself? So roughly 40%, 45% of people thought that they needed to reinvent. But less than it was about 14% of the marketers came out and said, I have a clear path to reinvention, that I know what I need to go do.
And so this is really the opportunity. The other interesting note, think about this as a profession. Less than half of the marketers in that survey actually said they feel proficient in their job. So think about any other profession. You go see your doctor, Hey, are you actually good at your job?
And less than half are saying, yes, actually I'm not that good. So, let's see what's your probability of getting the good Whether it's doctors, architects, you go across the board, I mean, these are professionals and they're saying, I'm actually not good at my job. And this is the opportunity I think that we see for Adobe is to really insert ourselves not as just a technology provider, but it's bringing the community together to engage, to train, to learn and to really drive that reimagination. Because what's happened is The digital lifestyle has become all encompassing. We see this.
You guys are living this as you're here with multiple devices. No matter where you look, If you're wearing your consumer hat or you're wearing your business hat, your digital lifestyle is there. Brands are now interacting with you in a completely different way. The mix between, hey, I'm in my digital world today and now I'm in my offline world, it's gone away. You've seen a complete merge of those two lines.
So the opportunity for marketers has never been greater, but it certainly has been a challenge and I think our marketing customers are seeing this. This is the opportunity that we're executing on. This is what's powering our business. So if you look at where we are this year, our bookings growth is up over 30%. Year over year, we're continuing to see strong business.
I'll talk about the offering and where we're seeing particular strength, but it's we've been very, very pleased with the engagements. Now A couple of things. I would say over the past few years, the level at which companies are committing to Adobe in the marketing space has elevated significantly. So you see on the slide a few data points that we wanted to share around that around these big commitments. 84% of 84% growth in contracts over $1,000,000 24% of those contracts include multiple solutions, And you've got 40% growth in the segment over 500 ks.
So really large customers making significant commitments to Adobe in the space, which we feel great about. And I want to get into in a minute, I'll get into the product categories that I think are driving some of this. So I wanted to do a little bit of a retrospective. Adobe has been in this business since 2009. We acquired Omiture.
We've kind of gone through this. But this business even in the last 3 years has changed. And for me where we are today where things are starting to come together in a platform, It was almost a decade ago that I was in a room all by myself writing an S-one document saying, Hey, there's this thing called an online marketing suite and it's going to come together. It's going to start with data. It's going to include content.
That was a decade ago. And that's how long it's really taken, I think, the industry to get to the point where there's recognition that, hey, a platform needs to exist and what should that look like. And that's where we are today. But in our business, it was $600,000,000 3 years ago. We doubled the business.
Transactions, really big numbers here as you go from $6,000,000,000,000 to over $25,000,000,000,000 transactions. Now $25,000,000,000,000 it's hard to even get your head around what does that mean. But in terms of scale, this is if you look at Twitter and you take all of their posts, all of their searches, all the tweets on the platform, This is about 20 times bigger than what Twitter will probably do this year. You take all of the times that each of us, everyone in the world swipes a credit card transaction. Anywhere you are, anytime you buy anything whether it's a buck or whether it's much more than that, the number of transactions you add that up over the world, this is 100 times bigger than that.
So this is you start to think about the level at which we're playing and the scale at which we're playing, that's what you're seeing happening inside the Marketing Cloud. Mobile. Mobile has exploded in our business. The mobile app analytics traffic, so this is only one part of our business where we're specifically calling out mobile here. But we've seen dramatic growth and you're starting to see the changed from a desktop marketing business to a mobile business, much like David talked about this morning in the creative space.
We used our customers almost to the point where they didn't know what to buy or how to buy it. They'd say, hey, I want to run a marketing campaign. What do I need? And we would say, you need these 75 SKUs and you can only buy it on Tuesday after 4 o'clock and it was really hard to transact business with us. So we went through a massive simplification and that's where we ended up with our 6 solutions with 12 SKUs.
And that you go back to the metrics we showed you on the first page with the large deals and how big they are and the size of those transactions, that is a Direct, it's basically direct result of this simplification effort because it's driven clarity of how I should interact with Adobe, a focus in terms of what do I need to accomplish and it's shown that we are serious about integration. Adobe Marketing Cloud is not going to be a collection of products that are on one page and that's sold by one company. We are pursuing an integrated philosophy to bring these together so you can run integrated marketing campaigns. That's the strategy and that's what we're doing. So really, really fun to be a part of this over the last 3 years.
And it's just it's been a really a journey of a lifetime for me and my team to experience this and I think be at a unique inflection point at this time in the market. We're also very pleased that from a product standpoint, we are called out as leaders really in many, many high growth categories. I get asked by many of you, hey Brad, who are you competing with in the marketing cloud? The fact of the matter is over the last 3 years there have been very few RFPs that have been issued saying, hey, I want to buy a marketing cloud. The fact of the matter is the nature of competition has still been in individual product segments.
And so it's very important to us that we're not only best in class at this overall platform, but that we're best in class at the individual product level. And we've had a very, very good run over the past 2 years. Really, Whether it's you look at analytics, content management, which have certainly been areas of strength for us, and those are called out. But one specific call out, look across channel campaign management. This is the acquisition that we did with Neil Lane.
This is a new basically a new ranking that had come out and looked at what we were planning to do with that product and what role it's going to play. And the exciting thing is we're called out as a leader and we have just in the last quarter started to see multimillion dollar replacements of ExactTarget, Responsys, Eloqua really across the board from an automation segment. And so we're a leader in cross channel, so we can do email plus, plus, plus all the way to you want to still send an offline catalog, we can help you do that. But even in email only transactions, we're being very, very successful competitively. So excited about where that business is headed.
We've also talked about this our installed base, this land and expand strategy. And so we wanted to show you a slice of one of our customer segments, our top 100 accounts and how they're transacting business with us. So A full 2 thirds of these accounts now use more than 3 solutions. And in the Marketing Cloud, we've got 6 solutions, they're using more than 3, which has been massive growth year over year. And on average, those people are committing to pay us from a revenue about $2,750,000 per year.
And that's grown dramatically. So really for us, a couple of things that I would take away from that is We've been successful in penetrating well beyond a single point solution. We've gotten these multiple of these solutions orchestrating together, But we still have a lot of opportunity to still go grow in those top accounts and we can now that we can replicate this, we can now start to do this every vertical where we're leaders. So, you look at industry verticals, 9 of the top 10 retailers are standardized on the Adobe cloud. They might be using one solution, they might be using 6, but we have an opportunity to not only drive usage of the products they're already using, but we can go cross sell all these other solutions.
And no matter what vertical you look at, it's the same position. 5 of the top 5 car manufacturers, 5 of the top 5 media companies, Financial services companies. No matter where you look, the Adobe Marketing Cloud is already well augured into that media or that vertical. So let's keep moving on here. Okay.
So in terms of market opportunity, This is roughly the same numbers that we showed you in March, dollars 21,000,000,000 market opportunity, fast growing market. I think the takeaway for me is every time I think the market is maturing, something new comes up to where, hey, Another growth opportunity, another adjacency, another opportunity for us to integrate these things better and attack the market. And This is a macro growth trend. It's not going to be it's not going to play out over the next 1 to 2 years. It's really a 10 year growth cycle that I think that we're in.
And Where we are today is our approach is differentiated. So I wanted to spend a minute and because another question I often get from you is Why are we winning? What's our approach? What's the belief system that's behind the Adobe Marketing Cloud that's driving differentiation? And I wanted to call a few of these out.
Number 1, brands have now figured out that the customer, the consumer is at the center of everything that they do. It wasn't long ago that brands could say, I'm going to impose my product, even my internal organizational structure on customers. And I'm going to basically talk to them, not expect them to talk back. Those days are over. The customer is now at the center.
They will tell you what their expectations are. They will tell you what they want to see from you and they have to be put at the center. So that means their profile. We just talked about the creative profile similar to that across any industry you look at, the profile of the customer is at the center. And also the context of the user, are they on a mobile device?
Are they on a desktop? Are they on the move? Are they on their mobile device on Wi Fi? All of these things in context are important in terms of what that experience is going to be. And that brings me to the second one that where we focus and where we're differentiated is, It is about the experience.
Brands today, your entire brand experience may be a mobile app. You think about companies like Uber, Nest, Fitbit, how many times have you ever gone to the Uber website or the Fitbit website? The entire brand is an app. And so you start to think about how am I representing my brand in a digital experience. This is Experience needs to be at the top strategic priority for any brand in the world and this is where with our product set we're uniquely set to deliver on that multichannel experience that Shantanu had laid out when we talked about Delta.
Delta, you check-in on your app on your way to your flight, You walk in, you talk to the you drop off your bag, they know who you are, it's in context, it's based on the same data. You walk to the kiosk, when you're there wondering if you got your upgrade when you're standing at the gate, that display is all being done with Adobe technology. The next phase is you get on the flight, they know which feature in, you basically put the screen because you want to watch TV while you're on the flight. They know, hey, Brad, it's great to see you. Here's your next flight.
Oh, it's delayed. You're not going to make your or you're going to be able to make your connection. All of this multi channel engagement is all about the experience and that's where the brand is going to win. And the last one, everything that we do when we interact with clients, we make sure that we are 100% tied to their KPIs. Business results are what matter, whether it's driving incremental revenue, more profit.
This is where certainly Our tie back to that data orientation is critical for us. And it's where the CMO and the CFO, we've talked about the marriage between the CMO and the CIO being a shotgun marriage. The CFO is starting to poke their head into the room and start to ask questions around some of these things. And marketing ROI has come to the top. And so that's something we're very comfortable with and we want to arm our clients with.
So, one quick just note in terms of what the approach here. You think about the problem that's facing all of our clients. On one side, you have consumers, they do something, they hit your website, they open an app, it's an action and you have to deliver them an experience. We've talked about this before. You've probably heard me talk about this.
We talk about this as the last millisecond. And the things that you have to do In the 300 milliseconds sorry, can we go back one slide? I'm ahead, right there. Let's stay here for a second. The thing that you have to do from the time that an action happens to where you deliver the experience, you have about 300 milliseconds to say, okay, who is the person, listen, Basically have all that data and that profile in context and then you have to predict using decisioning algorithms what is the experience or the offer or the message or, David, as you start to think about it at a Creative Cloud standpoint, what is the training that a Creative Cloud user may want to see?
These are the predictions and the decision that take place. But then you have to be able to take that content in its elemental form and deliver an experience. This is the last millisecond. This is that real time infrastructure that marketers are building. And that brings us to this notion of the real time enterprise.
We are winning today by targeting the marketing organization. Okay. In the marketing organization, many CMOs have raised their hand and said, I can go build this real time infrastructure. I can do this for the organization. But what's happened is exactly what you heard this morning and this afternoon from David.
It's not just about marketing, it's not just about getting more creative cloud users, it's about providing them a better end product experience. Many times, I'm in meetings now and it's not just the CMO that's in the room. It's R and D. It's the core product people. Under Armour, the product people, the product that they're building, their shirts, their shoes, this is taking place within Adobe technology all integrated all the way through the experience.
So marketers are leading, but it's leading into other parts of the organization including product, sales, service, support And it's this infrastructure that can deliver on the last millisecond that's going to be required. Because you think about what is marketing? Like many of you, I've got an Amex credit card. I use the Amex credit card all over the world. When a new If I fly overseas and a new card or a new charge gets posted, I often get a text message saying, hey, we flagged this as a potential fraudulent transaction.
Is this kind of approve or deny. So the question is, is that marketing? It's probably not marketing. That's customer engagement, but it's the same infrastructure that Amex is using to drive their marketing. It's the Adobe infrastructure.
So this is what we're talking about around the real time enterprise that we're starting to see additional opportunities to not only drive that engagement, but also partner with companies like SAP, as Shantanu mentioned upfront. So our platform and how we're winning. If you think about it at the bottom, it's data and content, the massive scale that spending a lot of time when we pursue this integrated approach because the core services is what's removing the drag from marketing. There are many things that marketers do today that's slowing them down. Because as a technology ecosystem, I actually think we've completely let the marketers down.
As an industry, if you look at any of the Loom escapes or the things that are out there with all the logos of people who are doing marketing technology, what ends up happening is you have In many marketing organizations, you have a tool that's used by 1 person in a marketing organization. And that tool may not integrate or it's not meant to integrate with anything else. And you don't log in the same way, it doesn't have the same data hierarchy. Marketers are starting to think about things like data governance, where does the data sit, collaboration across the 6 solutions. And so the big thing that we're looking to drive with the Marketing Cloud platform is to really get marketers out of their silos.
So, if you during the Q and A, I'll try to head off one of the questions in terms of Brad, what are you doing that's really differentiated? Where are the investments going and what is that going to be like? This is I call this the triangle of differentiation, how are we investing? First, it's around data. It's around 1st party data, 3rd party data, data management platform, real time profile sitting at the edge to where you can drive experiences no matter where someone in the world.
And it's all managed through that infrastructure. Big investments there. You heard us talk about it at Summit. We've also continued to roll out some best in class data management capabilities in our audience manager product that is sitting at Core, if you look at the Publicis announcement, that's the that data model and that data infrastructure is what's sitting at the core of their always on platform that was part of that release, Okay. Then on the content piece, David talked about this, the integration all the way through the Creative Cloud.
Just to turn a mirror on what we had talked about this morning, Marketers are looking to optimize it sounds so boring. They're almost looking to optimize the supply chain. It's how do I get more content and how do I get that ready when I need it. And so how do I go all the way to the source of where the content is coming from, the creatives, so I don't get stuck in the middle. And that's really as you think about the investments we're making in content and experience, that's where it is.
And then delivery, how do you deliver that multi channel engagement? And that was at the core of that was why we acquired NeoLane. It's why we've continued to move our Adobe Experience Manager capabilities forward. So Really excited about those 3 pillars. And then in the middle is where research happens.
It's where how can I use algorithms, machines to do the things that marketers with our simple human minds aren't equipped to do in real time and at that massive scale? So this is where we're invested. This is where a lot of our R and D folks are how they think about it. Outside of the solution area, this is a horizontal look at what we're building. So, this Shantanu talked about this on partnerships.
He mentioned SAP and Publicis, so I won't dwell on those. What's most exciting to me about this slide are the number of large global agencies and systems integrators who are creating practices solely based on Adobe and they're building huge, huge numbers and they're becoming meaningful to companies like Accenture, Deloitte, PwC, WPP, Publicis, I mean, these are big companies and they're coming and saying, hey, Matt, how do I get more support? How do I continue to grow? What are the things that you're doing next? They have practices built around that.
That's we're becoming important to the broader ecosystem and that, back to that 2011 to 2014 slide is really rewarding to be there. So, in summary, Three ways that I think about the business. We have got momentum. It's significant. We're excited about where we are, but we are not standing still.
Next quarter, next year are going to be bigger, they're going to be better, and we've got the wind at our back. And I think that's coming from our market leadership, the product leadership, And the integrated approach, again, these aren't going to be a bunch of logos on slides that have basically a holding company in common. This is we're building a platform that marketers can use to run integrated marketing campaigns and a market opportunity $21,000,000,000 and continuing to grow. Couldn't be more excited. Mark is going to come I think and wrap it up.
So thanks for your time. Back to our regular scheduled programming.
Okay. Thanks, Brad. So I'd just like to do 2 things with you today. One is walk you through from my perspective why I firmly believe Adobe's business has never been healthier than it is right now. And 2, talk about why I think the opportunity in front of us has never been bigger than it has been in the past.
And then we will open it up for questions. I don't have slides down here, guys, for some reason. So our strategy, as you know, has been consistent since November of 2011. We, In November of 2011 announced, as you know, that Creative Cloud was going to go subscription and that we were going to double down our efforts in digital marketing and create this business around a marketing cloud. Since that time, we've completely reimagined Adobe's Creative Business.
So it's completely moved to a subscription model now and it's created a much larger total available market for us And it's created a much larger growth opportunity for us than we ever had under the perpetual model. From a marketing cloud perspective, as you know, It's an explosive growth opportunity. It's a very big market. We're the leader in the space and we're differentiated as Brad just said. Nobody has the end to end offering that we have in digital marketing.
Our business model transition is behind us now. It's been an interesting 3 years, but a very well executed 3 years from my perspective. That's behind us and I'm really confident about where the business is going forward right now. So from a financial health perspective, I'll walk through each of these in a second. But I want to really show you from my perspective why I firmly believe the business has never been healthier than it is right now.
So first, if you look at the Creative business, as I said, we moved to a subscription model. We're driving new users, as David said, as a result of that. 20% of the people coming to the creative subscription model are new to Adobe. We're driving more revenue per user than we ever did under the perpetual model. And from my perspective, as importantly as anything else, we're driving There you go.
We're driving more recurring revenue. By the end of 'fourteen, as David said and as we've talked to you about in our conference calls will have 3,300,000 individual and team users signed up on the Creative subscription. We'll have $1,925,000,000 in digital media ARR, which includes enterprise term license agreements. And of course, included in that ARR number is document services. Document services continues to perform exceptionally well.
And in document services, we've had a really strong move to enterprise ETLAs as well. In digital marketing, As Brad said, we now have a $1,200,000,000 revenue business by the end of this year that didn't exist 5 years ago. We've gone from $0,000,000 to $1,200,000,000 in 5 years. We're growing bookings in that business over 30% on a year over year basis. Customers are adopting multiple solutions from Adobe Now.
So we continue to sell back into the installed base, driving more and more solutions into individual customers. That's driving larger deal sizes. And clearly, without a doubt, we're the leader in a very fast growing market in this space. Recurring revenue has been one of my major personal focuses since 2011, since we kind of went on this mission. And with all our businesses, our percent of recurring revenue has only increased every single quarter since 2011.
In fact, if you go back to 2,007, 2008, we were at about 5%. We're now up to 63%. That's being driven by Creative Cloud for individual and Team, it's being driven by Creative Cloud for Enterprise, it's being driven by Acrobat ETLAs and of course it's being driven by digital marketing bookings, including the fact that AEM is now pretty much moved from a perpetual model to a ratable model. This trend is only going to continue, which is from my perspective a really solid measure of the health of our business. That was the P and L.
As important and it's really important, we're improving the balance sheet dramatically as well. We've got healthy increases in deferred revenue, again driven by growth in digital media, Creative Cloud for individuals and teams, Creative Cloud and Acrobat ETLAs and digital marketing bookings. We've reached a milestone in Q3 with $1,000,000,000 in deferred revenue. As you know, deferred revenue is billed, but yet unrecognized revenue. So there's one more additive view to this that want to show you, which is unbilled backlog.
So another element that's outside of both the P and L and the balance sheet is unbilled backlog. This unbilled backlog represents future billings under contract. It's essentially years 23 of enterprise ETLAs that are not yet invoiced. If it was invoiced, it would be in deferred. This is both Digital Media and Digital Marketing, unbilled backlog.
And we've got now through the 3rd quarter approximately $1,500,000,000 of unbilled backlog. So with both deferred and unbilled because they are additive, We have $2,500,000,000 of revenue that's under contract and will be recognized over time. These numbers are only going to get bigger going forward. This is tremendous progress from my perspective since 2011. So that's kind of the health of the business.
Let me shift gears and talk about how you should think about Adobe's model moving forward and why the opportunity from my perspective has never been larger. Some people, from my perspective have been a little overly focused on the Creative Cloud subscription number, just this individual and team subscription number. And while it's important, it does understate the full opportunity that David outlined that he went through this morning and that he just went through with you this afternoon. It doesn't take into account the growth that we're going to see in ARPU. It doesn't take into account the marketplace that he talked about, the talent search that he talked about, the creative STK that he talked about.
We had temporary metrics over this 3 year transition that we could be transparent with you about what was happening in the business. And ARR, that was the right measure for us to articulate to you what was happening during the transition. It was the more complete measure of the true health of the business during the transition because it included enterprise and it netted out churn. And while ARR is important and is still important, subscription revenue, So the ability for us to take the stacking effect of all of those subscribers now start to flow it back into the P and L in the form of revenue is going to start to grow rapidly. And as revenue starts to grow back into the model, ARR starts to converge with revenue, actually crosses over revenue and converges with revenue and starts to consistently grow with revenue.
So what happens is they both start to go together, right, because revenue has now come back into the P and L. So you'll see us therefore shift our focus a bit more back to traditional measures, which are bookings, revenue and earnings leverage going forward. And I would suggest that your focus obviously return back to the P and L as well as you start to see this happen. And you'll obviously see this as revenue starts to come back into
the P and L.
So let me spend a minute about the opportunity for the 3 businesses and summarize a little bit what David and Brad And Shantanu talked about both this morning and this afternoon. And I want to do it in the form of what the strategy is for each of the businesses as well as what the key initiatives are from my perspective. So the strategy of course for creative is migrate the base and at the same time acquire new customers with market expansion is going to come through new services that drive additional ARPU. Initiatives, of course, are innovation. That's number 1.
Innovation in the creative space is what's going to retain members. It's also what's going to attract new members. And we want to address the multi device content creation challenges that exist to help our customers and redefine the creative desktop beyond redefine the creative process beyond the desktop as we just showed you, and add value through any device that you want to create on. In Document Services, we've already done a lot of this, but the first strategy is to migrate the enterprise over to ETLAs and Matt's team has done a tremendous job of doing just that. So you've seen a lot of that in the numbers that will continue.
We're also going to attract new users with low entry price point of subscriptions in this space. We're going to focus on mobile. We want to extend the PDF franchise and our leadership in collaboration and document workflows. Our initiatives there are going to be to drive growth in document creation, sharing and signing services around our EchoSign offering. And then as Shantanu mentioned, we have a major release in this space coming in FY 2015, which we think will just keep the growth in document services moving forward.
And then lastly in Brad's space, we're the leader in the space, fast growing space. We want to build upon our industry leadership in space and increase the multi solution marketing cloud usage in our installed base. Our initiatives here, we talked about building out the our ecosystem, there's more opportunity to do that and leverage the partners that we've announced and focus on our competitive differentiation. Without a doubt, we have a competitive differentiation from everyone else in this space. It has to do with content plus data.
It has to do with decisioning and algorithms. And It has to do with personalization and engaging digital experiences across devices, which nobody else can do. So with those three businesses, we've got huge market opportunities that David and Brad both touched on. Our strategies are focused on capturing these large market opportunities. In digital media, our total available market has grown from 6 on this, a $21,000,000,000 market and these markets just keep getting bigger.
So huge opportunity in front of us. So from a financial target perspective and a summary perspective, these targets are the same targets we've shown you Since December of last year, we firmly believe with the pace of innovation we've got in digital media and digital marketing, With the growth that we have in both of these cloud businesses and expanding our go to market opportunities, we can capture Tremendous growth opportunity and drive leverage in our P and L both from a revenue perspective and an earnings perspective. So you're going to see us start to really grow the top line now in the P and L and drive earnings leverage. I'm not going to touch on 15 today. We typically do that in the Q4, so we'll give you some more color around 15.
I know you're anxious to model 15 and we'll help you with that to some extent when we get to earnings in the Q4. But I think it's important to understand that these goals for the next few years have been in place for a while, We still firmly believe that these are both doable and something that we're excited about executing on. So with that, I'm going to bring Mike up and we're going to take some Q and A.
So we're going to set up for Q and A just a minute. They're going to bring out some chairs. So maybe just Stretch for 30 seconds and we'll start in a minute. So with the Q and A process, if you could Raise your hand. There are mics that are going to be going around.
And just perhaps identify yourself and your firm just so The people on stage can understand who's
asking.
Thank you.
Thanks, Jeff Lice, Howard Griffin Securities. Two things, I promise. First on the digital media side, one of the things that during the dark ages of package software that you did effectively was to segment the product line, which had the practical effect of inducing customers towards more of the premium versions of your software or what we would now call more ARPU. And David intimated that you're going to see more tiering of the offerings. And so the question is, are you going to be as explicitly segmenting the offerings as you had been?
Was it going to be more circumstantial and upselling oriented, but you're not going to necessarily label it as such? Secondly, for Mark, A little surprise that among the metrics you highlighted that you would be focusing more on, you didn't mention cash flow, Which when you consider what's going on with the deferred and ARR, that would probably be one of your Fastest growing or best performing metrics. So if you could share your thoughts on that?
Yes. You can go into that. Yes, for sure.
So Segmentation is definitely something you can expect to see more of in the product line. It's going to be different than the segmentation we had in the past, of course. In the past, in fact, we made a big point about this, this morning. We were segmenting based on creative type, whether they were videographer, whether they were a graphic designer or whether they were a photographer, we see those lines going away and we see more people working across those lines, which actually works and I think ultimately creates a tailwind for us. But we will you can expect to see more segmentation occur with some of the additional value services.
One good example of that Right now to think about where we're heading is something like the introduction of the stock content at the higher ARPU prices. So we will include more of those kinds of segmentations. Hopefully those segmentations are of value to a broader part of the base. And so we hope that those are incremental value as opposed to segmentation in
a sense, tiering. But Jay also to be explicit, I think we feel really good about the individual product as well as the Creative Cloud Complete And team and enterprise as being the core segmentation. So in terms of design collection or video collection, We don't think that serves us as well in the cloud, so to be explicit about that one.
Yes. And in terms of cash flow, I mean, it's a great point Jay. Obviously, we're very, very focused on Cash flow, it happens to track pretty closely with non GAAP earnings. So I kind of take it for granted maybe as I talk to you guys that with the earnings coming back into the model, the cash flow comes back into the model. From a cash perspective, we've continued to, as I've talked to you guys about for a long time now use excess U.
S. Cash to buy back stock. That continues to be our strategy and excess meaning after we've done whatever we need to do from an M and A point of view. But yes, obviously, we're really excited about our cash flow model moving forward.
Hi. Steve Ashley, Robert Baird. I have a question to follow-up. My first one is on the Creative SDK, I mean, David, you mentioned it just several times today. And I just want to make sure I understand kind of the strategic importance and how you see it playing out going forward?
Okay. Highest level as we were talking about is that we see we look at the business now If you look at the business much beyond what we're seeing happen on the desktop applications and we're looking to expand value value proposition beyond that. And with the introduction of the creative profile, the new mobile apps and what we expect to be a very rich ecosystem of third party mobile apps built On the SDK, a few things happen. The first is it drives migration, right, because you start to see the value of the desktop apps now sending into the mobile workflows because everything you do on mobile works on desktop, everything you do on desktop works on mobile. So it opens up a new front of value addition that you simply can't get an older versions of the product.
The second is around retention. As you're using the mobile apps, The mobile apps are available for standalone use for free. But keep in mind that they don't integrate with your desktop apps unless you're a paid Creative Cloud member you need the latest version of the desktop apps that are available only as Creative Cloud desktop applications to do the work across the desktop and the mobile. And then the third is, of course, customer attracting new customers because as we create more Adobe IDs, That effectively goes and fuels the top of the funnel that allows us to then upsell them to some of the new paid plans that we have.
Steve, we're in an enviable position where all of the technology that we've built over the last few decades, they're, as David mentioned, thousands of developers who want to take advantage of it. If we can have them take advantage of it by being part of the creative platform, I think there's benefit for them because they're not reinventing the wheel. There's significant benefit for us because they're now part of our new customer base. And that's the strategic importance that we have to extending our platform.
Great. And just quickly, in terms of the creative profile, it seems like you introduced some collaborative capability with it, but it just seems it lays the platform to really drive a lot more collaboration in the future. Does that sound right?
That's definitely yes. Definitely part of the plan and increasingly also part of the plan to integrate deeper with the marketing cloud. The creative profile that we have, the profiles and the identities that Brad has, You put those together with the asset infrastructure that I was talking about and it opens up a whole set of collaborative capabilities within creatives and between creatives and marketers.
Hi, Brendan Barnicle from Pacific Crest. Brad, salesforce.com recently announced expanded relationship with Omnicom. Does that change in any way your relationship with them, what you've been doing or threaten that in any way?
No. I think our relationship with Omnicom, I think it continues to be strong. I think the It comes down to where the areas of strength are. I think that the Omnicom and Salesforce announcement Was around particularly around CRM and how you're doing that. I think where we work with Omnicom and really work well is around The experience delivery and around those data management capabilities that I think are core to our platform.
So I think you'll see Lots of activity in the market. I think parsing that in between what's the kind of relative areas of strength And where people approach the market, I think is going to be important. But I think from a partner ecosystem standpoint, We've overachieved what we've wanted to do from a booking standpoint this year. And I think from the practice standpoint, I think Shantanu mentioned and I mentioned it in my remarks, We feel really good about our position.
I think all digital agencies are now recognizing that they have to partner with software vendors because their business is transforming, right? From the creative strategy that they're providing, that continues to be a big opportunity for them. The buying of media is becoming far more transparent and technology is just going to play a bigger role in marketers. So just I think it all goes well for us.
Thanks. Hi. Over here.
Hi.
Brad Zelnick with Jefferies. Mark, I appreciate all the logical reasons why You're deemphasizing subs when looking at the digital media business. Can you just remind us what are the leading metrics that you use internally to monitor the health of the business? And what exactly are you going to share with us on a quarterly basis going forward? And I have one follow-up too.
Yes. I Don't take what I said too far. I don't want to deemphasize subs. I mean, I think subs, like I said, it's important. But You're not getting the whole picture just by looking on that sub number because it doesn't include enterprise as you know.
So we've said for years, the true health of the business in the transition was measured by ARR. And I think that still holds that ARR is the most comprehensive measure of the health of the business. Moving forward, what I'm trying to suggest is that ARR will still be there, but you're going to start to see that the P and L is going to make more sense again, right? For the last 3 years, it just didn't make a whole lot of sense to focus on the P and L because of what we were going through. As we've now come out of the transition, the P and L from a pure traditional measure perspective is going to start to make a lot more sense again.
That makes sense that things would reconnect. My follow-up question is just If we think about some of these exciting metrics 20% of users that are new to the franchise, the increasing importance of ETLAs. As you think about routes to market for the entire business, can you maybe just comment a little bit about how you think about customer acquisition cost As well as the cost of renewal relative to what it's been in the past? Thank you.
Well, maybe I'll jump into that one as well Brad. I mean from a Routes to market, David showed the funnel. Adobe.com is the number one way in which people are going to continue to hear about our product how they participate in the community. And whether you're an individual customer, whether you're a team customer, whether you're an enterprise, you're coming to adobe.com for that. So I mean from the point of view of where people learn about us, where they want to interact, reducing the friction associated with acquisition, we're going to put more and more and more emphasis on adobe.com.
I think on the team side, what we find with the channel partners and the affiliate marketing is that increasingly where people want to aggregate purchases and they have already a purchase order with some of these customers, that's where we go. And the whole idea behind the enterprise is that we want that direct relationship with that customer. So what's happening in the business is The customer retention, I think, will be driven more by active usage than by anything else. Because what we have to do to retain these customers is to make sure we really understand what features they're using, how we equip them with getting the best out of our products. And in terms of customer acquisition, I think what you've seen is we've had a fairly positive approach about getting the existing installed base and migrating it.
We're certainly attracting new customers. I think you'll continue to see us narrow down the ways in which people can get to Creative Cloud as it moves so that we're distancing ourselves from CS6 6 more and more. In other words, we've always talked about sort of what are the incentives that we use to allow people to do and how do we reduce the old mechanisms by which they can upgrade and we'll continue to do that. And so we just look at it, there's significant headroom. The emphasis on adobe.com is the largest one for us in terms of customer acquisition and customer retention, I think, is all about usage.
The more value we can provide. We found that our customers say this bite sized chunks, even though David might argue with me and says it's a lot more than bite sized chunks in terms of the innovation we're delivering every few months, they're actually finding more value in that because it's easier to train themselves on the new products. So I think that also is a good sign for retention.
Thanks. Walter, Pritchard, Citi. Mark, on the margin side, so I think we're pretty clear to model your business pre digital marketing when you're just a creative company and a document services company and We saw your margins approach 40%. And I'm wondering, as we get into this point where the model starts to look more normal without all the changes from The transition, how should we be thinking about creative margins? And then just sort of a follow on related to digital marketing, you've done a lot of M and A there.
That seems like it's been probably Oppressive force on the margins in the digital marketing space. So maybe a question for Brad is, are we sort of in the 7th inning on the M and A in terms of building out the portfolio? I mean, you have a lot of the pieces you have 8 or 9 Magic Quadrants up there that you highlighted, but just curious how far along we are and what may still be to come there?
So, yes, Walter, on the margin side, we've given you guys enough to model 2015 2016 with top line and bottom line. So Inherent in there is a margin number, right? That gets you in the 30s probably. And it clearly gets better beyond that. In terms of digital media, those margins are going to come back to at least where they were, Right.
So we've always said that there's no reason to believe that the digital media margin shouldn't get back to at least where they were. And you could argue with us maybe they should get better than they were. But for now, let's assume that they get back to where they were. Brad's business is a whole different story. I mean, right now, that's a land grab.
We're growing that business huge numbers with 30% a year bookings growth and that requires a significant investment in sales and marketing And that's the right answer right now. So very, very different margin profiles. I mean, I'm not going to guide beyond 2016 right now, But the margin does start to come back into the model this year, next year and 2016 and you see that in the guidance that we provided.
And maybe Walter, directionally I'll talk about digital marketing and then you can talk about M and A Brad, which is directionally the way you should think about digital marketing is that, as you all know, assuming high retention rates and we have really high retention rates with our digital marketing, The upfront cost, while it's a little less about the M and A and it's a little bit more about the customer acquisition that's having upfront, Correct. And I think most people will say traditional SaaS based models you can hope to get 25%, 30% margin once you get to steady state, if you're not growing. We're in the growth phase, I think, as Mark said. So the margins in digital marketing have more to do with the investment we're making in sales and marketing and the growth rather than the acquisitions per se. And I'll let Brad talk about sort of how he looks at M and A landscape.
Yeah, I mean, I think back to the kind of the market texture that I showed you, we feel really good about our offering right now. I mean, the broadest, most integrated, all those things. But from an M and A standpoint, we see really a lot of interesting adjacencies, probably More tuck in type acquisitions. You guys know this as well as we do. There's probably very few standalone large transactions that make sense in marketing, but we continue to be super active in the buy build partner funnel.
And one interesting thing that I did mention, one core service that's highlighted there is our Marketing Cloud Exchange. This is our open APIs where other marketing applications can tie into the underlying data infrastructure, which is a big benefit for them. And the interesting thing that it provides us is a bird's eye view in terms of how different marketing applications are being used and the impact on the end client. So it gives us a nice kind of way to think about M and A pipeline.
She'll just give the second one in the meantime.
Thanks. Ross MacMillan from RBC. Just David, just so I'm clear about the ARPU evolution, you've got 2 things going on. 1 is segmentation, which maybe drives more users to individual or teams, so the higher SKUs. And then you've got other things like talent, which is actually a sort of new pricing model for parts of the base.
How when we think about the evolution, what's going to be the biggest driver of ARPU in your mind? Is it going to be the SKU mix or is it going to be some more of these Separate services. And then I had a follow-up for Mark.
Yes. I mean, I think the most important thing that we have to look at is as we look at ARPU is We've talked about this on previous earnings calls also is that we have to look at it by segment. And I think trying to mix it into a single ARPU number So maybe a little bit of the wrong way of looking at it. So I look at it and I say for the Creative Cloud photography plan, It's a land grab to get to that point. There's a really broad rich opportunity for us to go after more customers in that segment.
Leveraging everything we're doing with mobile, but it's also one of these segments that I think just has a lot of runway ahead of it. The more successful we are with that, the more drag there is on the overall ARPU number. So I think I would just urge everyone as they're thinking about ARPU to not think about it as one number, But really recognize that we're looking at it at these different segment levels. And as we've talked about in the past, if you start looking at it
at those segment
levels, The ARPUs remain healthy. Now, as you point out, there are a number of ways that we're going to drive increasing value and revenue per user or per customer. And that is going to be a mix of things within the individual segment to drive people up into the higher ranges. The second one is to, as we add these more collaborative capabilities, make sure that the small, medium businesses are buying up to team. And as we add more capabilities for private cloud and public cloud for the direct sales start to drive higher ARPU even in the enterprise segments.
So all of those are going to play out in addition to what we're doing with TalentSearch, which as you just point out is also a much higher level. We have not given any guidance in terms of how that's going to break out into a single ARPU number.
And then just for Mark, just on the margin question, this year has been pretty amazing because your OpEx growth is I think 4% or something. So it's pretty low in a period when you're investing aggressively into the digital marketing business. And I guess I'm trying to understand what would be the dynamics that would create a big acceleration in that OpEx growth because We're already through the model transition on creative. You're investing aggressively in marketing. Why would it go much more faster?
The single investment Still going to be in Brad's business. The single biggest investment is still going to be in Brad's business. I mean, you can't grow bookings 30% a year, year after year and not add something close to 30% sales capacity every year, right? You'll get some productivity improvement, but he's beaten me over the head every year to add more and more salespeople, which makes sense because it's got to support 30% bookings growth. So it may not be as much this year because you don't have to invest maybe as much every single year, but it does catch up with you.
And as you look out, we just can't keep growing at 30% and not add the sales and marketing capacity. That's where you'll see most of it.
And Ross, don't underestimate the work that we're doing beneath the covers On improving things like our COGS or the server costs, so the infrastructure that's happening. And so while you look at it at the top line OpEx, The amount of scrutiny and work that we're doing as these businesses become larger scale to make sure that we can squeeze cost out of it, That continues to be an ongoing focus for us as a company because that's important whether that's through the channel or whether that's direct on adobe.com.
Thank you. Or said another way, this year, we've been able to save money in other areas to help fund what we need to do to drive sales and marketing capacity, but at some point you just can't do it that way every year. You have to incrementally add.
Charlie Gal from Nidell Capital. I have two questions. So one on the Creative Cloud side. So you mentioned that 20% of your subs are new users. Can you talk a little bit about what percent of those new users are on point solutions versus the full suite?
How that's kind of trended, Call it last four quarters. And then the second question is on the marketing cloud side. So can you elaborate a little bit about your sales strategy in terms of Attracting new customers, do you have several sales teams for different industry verticals, whether it's airlines, retailers, elaborate on strategy there? Thanks.
Maybe I'll touch on those and then you guys can add. I mean on the marketing cloud side, For the most part, we have a fairly traditional go to market with respect to we have the strategic accounts, the accounts on the top of the pyramid. Then we have named accounts, which is a little bit below that, which is the accounts where they're buying multiple solutions. And then we have territory accounts as well as what we're getting through partners. So a fairly traditional route to market from the direct sales force.
In terms of the verticals, Verticalization, if there's such a word, of those sales forces. We focus more on financial services. We focused on retail and we focused on government as sort of the first key verticals. But we're seeing so much success in that being able to talk the language of the customer, you will expect to see further vertical of our direct sales force. And again, that depends on whether you do it in the strategic or the named more so than where you do it in the territory account because they are calling on specific targets.
With respect to the Creative Cloud, we haven't broken it out. I think the question that we had said in 2011 was to reflect that We believe that the Creative Cloud offering will enable us to get attract new customers and we had given you a number at that. I think this just shows that the continued momentum It's not just migrating the existing installed base, but it's attracting customers. That's why we give you the 20%, but we haven't broken that up by individual and full product.
And maybe just one thing on from a go to market standpoint. So same organization selling both new customers and existing customers. A couple of unique things that I would tell you that I feel like we're we've really cracked the code on from a SaaS selling standpoint is to actually drive the book of business number into the sales team themselves. You have the account managers who not only are interested in signing new business, but also care about the book of business as well. And that's an innovation that I think we should package up and go sell somehow because I think it's innovation that Matt and his team have driven in terms of how we go to market.
The other thing that we hear from partners like SAP and from the SIs is that The Adobe's go to market team is being now being recognized as the best and the biggest go to market team who actually know how to speak to marketers. You think about all the enterprise selling teams that are out there, most of those are kind of targeted in a different way. But the fact that we're now being called out in the industry as The best and most focused team that can talk about marketing and advertising is one that we're very proud
This is Owen Crean with Sanford Bernstein. First, congratulations on your continued success.
I was very I was really
impressed with the speed of innovation and pace of development that the Creative Cloud has enabled. I was just wondering if you could talk about how that may impact or reduce if any R and D cost going forward? Thank you.
Well, I'll start. And I mean, from our point of view, as long as we are continuing to grow the business, We want to distance ourselves from the competition. I mean, we just think it's such a large opportunity that's available for us. We have a global R and D force. But at this point, I think our high order bits honestly are driving further growth.
I mean, what's happening with touch? What's happening with mobile? What's happening with social and the community. Now is not the time to really put more of a focus on that just because of the tremendous That's how we think about it.
Yes. The only thing I'd add to that is, I focus more right now obviously within the margin that we set internally, I focus more on the mix of what those engineers are working on. And so, you can expect to see Continued innovation in desktop, you can definitely expect to see more services and mobile work coming down the path.
Gloria, Amanda, feel free to give the mic to the next person who's raised their hand, so we can also speed this up. I doubt if they're going to retract their question.
Derek Wood at Susquehanna. In digital media, the or I guess in the creative business, the VAR channel has been an important channel historically, Maybe a little less important now with adobe.com, but clearly as we saw last quarter an important channel. But as we shift from kind of box distribution to Digital distribution, I think that business becomes a little less transactional, a little more solutions oriented. So what are you doing To help some of those VAR channel partners get more solutions oriented? And then maybe on the heels of last which was a little weaker out of that channel.
Any update to what developments have happened since?
Yes. I mean, actually in conjunction with Max, Matt actually has a complete partner track where educating the partners about what the offering is, educating them on what's happening so that they can differentiate between the individual team and other offers is also happening in parallel. I think again going back to Q3 and what happened in Q3. I think it's really important to remember that CS6, there was such a big push with our channel partners on CS6 that while Q3 continued to do well, that was just as they transitioned from selling solely perpetual to selling solely cloud. That was just we think a temporary blip.
If anything, actually all existing CS customers continue to be a huge part of the migration that we will do moving forward. And so I think they're all here this week. I met with them yesterday. I know Matt's been meeting with them to continue to make sure. I think they add value in a couple of different areas.
First is there are a lot of customers who at the time of the purchase of new hardware or when they're buying other software, They want to aggregate all of this stuff and make sure that they package it up in a single PO. And that's a tremendous value that they fulfill. The other thing that we find they are capable of doing a lot, which doesn't happen as much on adobe.com is the upsell. So somebody calls one of these channel partners And they are finding a very effective way to upsell from just a single product or individual product to the entire offering and a complete small and medium business sale. So these channel partners continue to be important.
I think you did see the amount of transactions that's happening on adobe.com, it's certainly becoming a larger part because it's the way customers want to transact business with us. But we're really focused on that.
So maybe 2 more questions, please.
It's Jen Lowe, Morgan Stanley. Want to ask a little bit more about the Creative SDK and in particular two areas. 1, given that consumers is also a big opportunity for you to monetize directly by upsell. How do you sort of balance what your opportunity is versus the opportunity that you're laying out there for your Creative SDK partners to build their own successful businesses around the Adobe product set. Related to that, is that something that you see as a potential M and A channel for you going forward to the extent that you do have SDK partners that succeed?
Yes, great question. I think in terms of the delineation in terms of Adobe opportunity versus 3rd party opportunity. The core element here and the core approach we take is that with Creative Cloud, the ecosystem, We can see and we know the more that the ecosystem is driving content and assets into Creative Cloud, the higher the conversion, the higher the retention of our customer base. So, the top level focus here is to drive the creation of creative profiles for both the base we're trying to migrate and for the broader base of customers we're trying to attract. So that's If you think about it, that's kind of the cornerstone of what we're doing.
As we see apps being built in the ecosystem, It certainly also gives us a very good insight track as to which of those apps are having a disproportionate impact in conversion and retention. And as a result, we can determine whether those apps are better served by being 3rd party partners or coming in half. So we certainly will be looking at that. Keep in mind also though that some of the processing that happens as part of the creative SDK is going to be on the server. So as that processing is happening and we saw a couple of examples today of things that we're going to do on the server that's more efficient to do that way than necessarily run on the device, That opens up other kinds of more direct revenue opportunities as well.
It's early in the process, so we haven't made any declarations There yet, but it's certainly there are multiple levels of monetization.
Well, I just want to say thank you again for coming. I hope you found Max worthwhile. I mean, we certainly appreciate coming, attending so that you get insight into what's happening on the innovation front as well as getting updates from us as to the business. And I think we'll We'll be talking with all of you on our Q4 earnings call, which is on, Mike? December 12, I think, yes.
December Thanks everybody. Okay. Thank you.