Thank you all again for joining us today. I hope all of you were also able to be at the keynote today, where you saw a tremendous amount of innovation that the company has delivered in terms of all of the advancements that we were making with Creative Cloud. What I thought I'd do is just again, set a little bit of the bigger picture context of the company, talk about the two big growth opportunities that we see, and then I'll hand it over to David, who will talk a little bit more specifically about what's happening with Creative Cloud and the creative community. Mark is going to go a little bit into the potential targets, and how you should be thinking about this as a financial community.
I think it's clear that the same trends that we've been talking about, namely the move online, the move for all marketing to go digital, for every device to be connected to the internet, those are the trends that in the macro point of view are really driving our business. We continue to see consumers expect this immersive digital experience, both in terms of creation of content as well as in terms of the consumption of content. We continue to think that there's a tremendous opportunity, honestly, for Adobe to innovate around continuing to change the world through digital experiences. One of the fun things about my job is I actually get to meet a lot of customers and talk about some of the customer challenges that they're all facing.
They're customers like National Geographic, who for many, many decades have been focusing on delivering the best compelling magazines, who are now focused on what they do digitally and how they reinvent their business to take advantage of what's happening in the digital realm. Customers like Chanel, who are thinking about what kind of multichannel experience they deliver to their customers, whether that be in physical stores or whether that be online. Home Depot, who are thinking about how mobile devices are going to change how people transact business with Home Depot, whether it's physically within the store or whether it's offline with them. As well as companies like Fairfax Media, who are thinking about how they move from a print-first approach to a digital-first approach.
What's common, I think, in all of these customer challenges when we talk to them is they're all struggling with what they do with this content life cycle that's increasingly moving digital. I think as all of you are aware, Adobe focused its strategy primarily on the make part of this business. While there are challenges there, we think the larger opportunity for Adobe is really around solving the problems associated with the entire workflow in the content life cycle, namely making, managing, measuring and monetizing. In the make aspect, people are clearly thinking about how they build more mobile applications right now, as well as what they are doing with respect to taking all of their print content and not just having that be content for print editions, but also have that be content for the web, and increasingly, as I said, for mobile devices.
On the management side, we continue to see this explosive growth opportunity as everybody who has a website is increasingly thinking about how they move their business online and specifically re-platform their website, to make sure that they're delivering a great personalized, customized experience to people on smartphones as well as on tablet devices. The entire asset management space and collaboration for this content life cycle, we think is also a big opportunity for us between what we do on the making of that content and what we do on the managing. I think you're all aware of the fact that measurement and the ability to take data and action it or get insights out of it is where there's a lot of excitement within our customer segment.
When you talk about big data for marketers, I think Adobe has clearly positioned itself as one of the leading providers of analytic solutions. Our thought process with respect to measurement is quite simple. If you don't know what your customers are doing on your website, you're probably operating blind. It's more and more critical to understand exactly what customers are doing, to measure that across all of the different channels, and to be able, therefore, to use that data in providing in real-time a real experience for them. Finally, in monetization, whether it's video that's going to increasingly move to IP networks, whether it's physical retailers who are increasingly moving their business online. I think the more we can transact business and close the loop with respect to monetization, we think that that's a big opportunity available for us as Adobe.
Our strategy that we outlined over a couple of years ago is really through the combination of what we call the Creative Cloud and the Marketing Cloud to really have a complete solution that provides this integrated platform across the entire content life cycle. With Creative Cloud, our focus was really on reinventing the entire creative process, reimagining it so that we attract the next generation of customers, being able to have a broader canvas on which we can innovate at a far more rapid pace on building a more sticky business, and on using that as a franchise to really develop our solutions within the Marketing Cloud.
In the Marketing Cloud, what we announced a little while ago was really an industry-leading marketing platform right now that not only does content management, but also does a lot of predictive algorithms in order to allow people to optimize the services that they are providing to their customers. I think a unique opportunity for Adobe that you saw some of today is really in integrating what we do with the Creative Cloud and all of that content creation with the Marketing Cloud and all of the content delivery. Since today's focus is primarily on the Creative Cloud, I'll touch on that a little bit later, but let me briefly give you an update on what's happening with the Adobe Marketing Cloud.
As you see on the slide, our vision there is really to put everything that the digital marketers need in one spot, whether it's analytics, whether it's social, whether it's advertising, whether it's targeting, as well as web experience management in a single platform that is easy to both deploy as well as to administer, so that individuals can go from data to insights to actions faster and smarter than ever before. We announced 5 solutions, so we took the over 30 products that we had and combined them into 5 solutions. The reason for the solution focus was really to up-level the value proposition that Adobe delivered to marketers, to digital advertising agencies, as well as to online retailers. It's really a unique opportunity for Adobe to take the pain and complexity out of having to deal with these 30 solutions out for each of our customers.
We also think that by delivering on these solutions, we're able to provide a more integrated go-to market with our sales force, as well as increase the average selling price that we can deliver for our customers. If individuals have bought into one of our solutions, to cross-sell and upsell them to the other solutions. As you see on the slide in front of you, the 5 solutions that we have is Adobe Analytics. We're clearly the leader in Adobe Analytics with trillions of transactions that we process. What's driving the Adobe Analytics business right now is the move towards mobile. Increasingly, people are measuring not just their mobile traffic, but also what's happening within mobile applications that are instrumented to be measured. The Adobe Experience Manager that we delivered through the acquisition of Day, that business continues to be on fire.
There isn't a single company in the world that's not thinking about what their next-generation content management web experience solution should be. The fact that we've integrated our analytics with the Web Experience Manager is a clear differentiator for Adobe with respect to every other company that delivers solutions in this space. Adobe Target is where we actually make it actionable and where we convert it to enabling our customers to make money. The whole idea with Adobe Target is if we understand the analytics and we have the experience management, content management solution, we're able to deliver a more personalized experience than anybody else can.
Adobe Social is a relatively new product and solution for us, but the key value proposition that we have in Adobe Social is that there is no other company that can actually understand what's happening with respect to listening or social sentiment and translate that back into what the return of investment is. The fact that we have the websites instrumented with Adobe Analytics allows us to uniquely identify which part of what's happening on the social sphere translates into revenue and translates into customer satisfaction for our customers. Last but not least, Adobe Media Optimizer. This is about people increasingly moving their spend to be digital spend. We have over $2 billion in marketing spend under management, and our value proposition is that we are able to spend that money with better return of investment across social, across search, as well as across display.
Two really exciting summits that we organized, both the summit in Utah that some of you attended, as well as a summit recently in London, were incredibly well-attended, which I think just reflects the interest that we're seeing in this explosive growth category. We continue to believe that the marketing spend within an enterprise will actually eclipse a lot of the other spend, and we continue to be optimistic that we will drive 25% bookings growth and 20% revenue growth in this multi-billion-dollar category. We are on a run rate to achieve over $1 billion in annual revenue. I think today was a really major step as we declared that the Creative Cloud is really the future platform for innovation for our creative customers, whether you be individual customers, whether you be small or medium businesses or large enterprises.
Since we launched the Creative Cloud, we've seen tremendous adoption. Customer satisfaction for people on the Creative Cloud is significantly higher for people who transact business with us in other ways. We're able to, as you saw today, deliver innovation on a far faster pace than we could by the traditional 12 or 18-month product cycle. In order to focus and align the entire company around the opportunity with the Creative Cloud, we decided, as we mentioned today, to make available all of the Creative Cloud innovation only through the subscription service. I'm sure there are a lot of questions, and we'll touch on the implications associated with that.
I think what continues to be really exciting for us as we think about the Creative Cloud is it is now truly the single-stop shop for a stunning set of creative applications that are clearly the leaders in their respective categories, whether it's Photoshop for imaging, whether it's Illustrator for artwork, whether it's InDesign, whether it's Premiere, as David mentioned right now, which is the leading category in video. We have the leading applications, and we can continue to innovate on a more rapid pace. I think having the ability to have access to all of those mobile assets across mobile devices with the synchronization of whether it's colors or fonts, is a major step forward in enabling people to have access to all of their assets in a mobile way. Collaborating with oneself has never been easier.
I think you also saw the integration that we provided with Behance, the million-plus members of the Behance community now also have an ability to share their work, to find new jobs in a faster way than they've ever had before. It's clear that the creative community has been the core of Adobe's business since it was founded over 30 years ago. I think today's announcements show that we continue to innovate extremely rapidly in this space. What I'd like to do right now is have David talk a little bit more about the specifics, and then Mark will go into the numbers.
Thanks, Shantanu. I'm going to do a fairly quick recap of what we announced this morning and maybe set a little bit of the context. The rationale, if you think about the changes that are happening in the industry and some of the things that Shantanu touched on earlier, there are a lot of changes that are affecting all of us, but are, in particular, profoundly impacting creatives. If you think about content, one of the things I mentioned earlier today was that two and a half exabytes of data and content are created every day. What that really means for a creative professional is that they need to be much more dynamic, and their content needs to stay more fresh because it's competing with more content in the industry as they deploy and they create their own elements. The second thing is devices. Device consumption is rising.
I think last year we saw a 2X increase in terms of amount of time people are spending on devices. You put those two things together, the explosion of content and the consumption on devices, creatives have to think very differently about how they create, where they deploy, and how they actually reach their audiences. In other words, I have to create content in a more rapid place to keep up with the ever-changing evolution of the content that's being created. I also have to make sure that the content I create can run across devices, can run in the browser and as an application. Collaboration is another area that's had a profound impact on this industry. We've been seeing a fundamental change because of the level of production work that goes into creating content.
We're seeing more collaboration across creative individuals and creative professionals than we've ever seen in the past, which means they have to collaborate more effectively and efficiently than they have in the past. File sharing has been cumbersome and error-prone for various reasons, including things like file versioning and access to each other's content and keeping things in sync. File synchronization isn't sufficient for a creative. They have to think about their brushes, their tools, their colors, their work, and their workspaces. These are just as important to a creative as an individual file. They have to think about collaboration very differently. Until this morning, there really weren't great solutions for how they actually work together. Last, but certainly not least, is community. We're seeing a profound shift in the creative community away from creation alone.
If you think back even three or four years, the primacy of creation within an enterprise was a very secretive process. People would create content, they'd create media that they wanted to push live, but it wasn't a part of their nature to actually share that with a broader set of creatives while they were going through that process. We've been seeing that major shift, and that's where opportunities for things like Behance have really arisen and why we're seeing such quick growth in those creative communities is because creatives now see the opportunity to leverage each other more actively and do more collaboration in the open. With these as the background for driving sort of change in the creative community, we saw obviously a remarkable opportunity to meet these needs, and in the process of doing that completely restructure how we deliver innovation to our customers.
We think that's going to have a profound impact on how they create, how they collaborate, and how they build their own personal brands as they create their content. This morning we talked about what we're delivering. We talked about it coming out on June 17th. It obviously continues to start with the great tools that we've always provided. Our CC apps, we talked about a brand change from CS to CC. These applications, we've made major updates, hundreds of features, new features across all of the CC apps. Unlike in the past, we didn't stop there. We've now connected the creative apps into a creative process that really speaks to those other issues I just talked about upfront. When creatives save their work in the applications, all of their files and their folders are automatically synced across all of their devices.
Once they have it in the cloud, they can then go ahead and collaborate and communicate with other people, their peers in the industry, the content is then synchronized across all of their laptops and all of their devices as well. You now have a group set of people working on a particular production piece. As we also talked about, as people become much more open in terms of how they create, they need to start thinking about who they're going to collaborate with earlier in the process, even though they may not know them. The idea of benefiting from a global community has been one that's been very appealing to a lot of the creatives that we see.
We connect our creative apps all the way through to Behance, that creative community that Shantanu was talking with millions of active creatives on there at this point. We also let them then aggregate all of their finished work into online portfolios. As the community develops, they get to build and personalize their own brand within the community, they get to start to build their reputation and start to actually seek career advances beyond where they are right now. Finally, we make it easy for them to actually publish their work. They can publish their work as a personal website, or they can publish their work directly to app stores. That really makes the Creative Cloud.
One other very important thing is that all of these pieces today are underperforming in terms of how they actually meet the needs of a creative, they're also very disconnected. By having it all come together in a single place where you can actually manage everything that you need, all of your content, all of your relationships, and all of the discussion threads that are going on in a single unified place as a creative, this is a big opportunity for them to streamline their entire. This is what makes up the Creative Cloud: the applications, the settings and assets across devices, the collaboration, the community, all the online portfolio, and the published work. When we launched Creative Cloud a year ago, one of the things that we said we were going to do is not wait a year or 24 months to innovate.
We were going to release innovation on a regular basis. Since then, we've literally released hundreds of features, new tools and services, all of them combined. Lightroom, we added a couple of months after we launched Creative Cloud. Digital Publishing, single edition was introduced a few months later. We acquired Behance, and we enabled all of that to work directly with the Creative Cloud as well, so all of the customers got some of the paid Behance services as part of their membership. Apple released the Retina display Macintosh. We updated Photoshop and Premiere and all of these tools to benefit from that right away. There were a lot of benefits that members got throughout the course of the year. As Shantanu mentioned, this is now our top customer satisfaction product. We track customer satisfaction, and all of our products have relatively high customer satisfaction.
Photoshop has always been at the top of that list. Creative Cloud is now the top customer satisfaction product we have, and one of the top reasons is the access to all of the innovation over the course of the year. Today, we had a series of announcements with the CC apps. Obviously, hundreds of features across these apps. Productivity was one of the major pillars of the release. Things like the Edge tools and services that we showed you for web creation, really a major extender in terms of the productivity. Responsive content for mobile devices. The Photoshop workflow with Reflow was a great example of that, we also have improvements and new capabilities in a number of our other tools, including Muse and some of the new tools we've announced over the last few months.
A lot of that Adobe magic, things like shake reduction and a few other features like the refine edge that we showed this morning. Things that really make a big difference in terms of the end product and the quality. The big thing that we did today was we also announced that all of these apps are deeply connected into the core services, so that our customers are able to stay connected across all of their devices, whether it's their device or someone else's. They're able to collaborate more effectively, efficiently, not just by going to a website, but directly and deeply back into the tool and the way they use the tool. Of course, they're able to leverage that community that I talked about earlier. That's the evolution of where we've gone over the last year.
The other thing, though, that I think is very important for us to understand is that this evolution is one that's been planfully growing the serviceable market for us. We started last year by focusing on creative individuals. We serviced Creative Cloud a year ago with access to all of these applications, 20 GB of storage, and a host of great services like Digital Publishing Suite, the Behance ProSite, more recently, Typekit, PhoneGap Build, a number of these services that the creatives want to use. We made it primarily available through adobe.com with a monthly or annual offering. This was a big first step for us, it was limited in terms of scope because not all of our customers transact on adobe.com. Recently, we launched Creative Cloud for Teams, this becomes a large market expansion opportunity for us.
We give members everything that you get with the individual service. We also give them 100 gigs of storage, central deployment, additional support, and also the ability to leverage the reseller in the relationship so that the reseller can actually administer their access to the applications if they so choose. That is an optional feature that some customers are taking. This is also available on adobe.com, and we are seeing some of our customers move and select adobe.com. It is also a way to start to engage the channel in selling the benefits of Creative Cloud to the SMB market and also departments within enterprises. Last, we recently announced the availability of Creative Cloud for Enterprises.
This is all of the CC apps that I talked about today. In addition to it, we have integration with our Digital Publishing Suite for Enterprises, AEM, in particular, for content management, and of course, a number of our other Marketing Cloud capabilities. This is one that we are at the early stages in terms of those integrations. They are very powerful integrations that really set us apart from any other player in the marketing space or the creative space. This is going to be available primarily through our direct sales force, but also through corporate resellers. In effect, it is a replacement or an evolution of the old ETLA, or enterprise term agreements, that we used to have in market. As Shantanu mentioned, a couple big business announcements today.
The first is that all future innovation in our CC applications will come through Creative Cloud. You need to be a Creative Cloud member to receive those. We have no future plans to rev updates on the old perpetual Creative Suite products. We will continue to sell and support the CS6 product because we believe some customers will continue to choose to purchase that way in the short term. Mark will share how we are thinking about that transition with all of you. The key thing to note here is that as we have gone through this process, the customer satisfaction has been something we have been watching very closely, especially as we make this move in the business model.
The thing that is going to matter most is how quickly we innovate, how high quality of the products we release are, and how effectively our customers start to advocate for us on behalf of this. That is something that we are working very hard to do simply by releasing these products on a regular basis and just delighting them with the features we are adding. Now, we think also that this move to focus our efforts and innovate faster with Creative Cloud as the only delivery model is going to accelerate the transition of Creative Cloud. We have already indicated, given you guidance for the year. Mark will talk about that. All of the things that we are doing now have been part of our plan for some time, and that is what is going to drive the growth in the back half of the year and the acceleration that you see here.
With that, Mark, maybe you can talk a little bit more about that.
Thanks, David, and thank you all for coming out today. What I wanted to start with was just the inter-quarter update that David mentioned. We put out a press release this morning, which I'm sure you all saw, just to show you that the quarter, Q2, is on track. The year is also on track, all relative to the guidance that we provided back in March on our earnings call. As David mentioned, these announcements have been planned for some time. These announcements are contemplated in that guidance, and I'll talk more about how this relates to the longer-term guidance as I move forward.
In terms of the Creative Cloud opportunity, David and Shantanu, both this morning and this afternoon, discussed the strategy and our new customer offerings. From my perspective, as the CFO of the company, this is really extremely exciting. If you step back 18 months, two years ago, we laid out this strategy for you. A year ago, we shipped the product. We recently passed 500,000 subscribers that are paying us. We're making incredible progress and all our focus is now going to go towards Creative Cloud. It's very clarifying for us as a company from an investment perspective, and it also makes for a much clearer transition to the subscription offering. Our end goal, from my perspective, of faster revenue growth for this business and more recurring revenue is now even clearer than it was before, and these announcements today really reinforce that.
We've been, I think, very transparent with you in terms of this transition for the past year. I know there are some things I can probably tell from this room that every one of you has asked us for just a few more tidbits of information, I'm going to slowly reveal a little bit more to help you with your models. I think there are three things that I'll walk through right now that will help you understand the opportunity that Shantanu mentioned just a bit more. The first is our total potential market or TPM. This is the total universe of people who we can market Creative Cloud to. The second I'll take you through is the mix of creative product family revenue that we have today by these same user types.
Lastly, the big one that I know you're all holding your breath for is the current creative product family install base units by version. I will walk you through that. I think what you'll find in all three of these is that they will all demonstrate that there is a very large opportunity just to migrate the install base that we have to Creative Cloud, not to mention bringing in new users, which we fully expect to do. First, TPM. We've shown you TPM in the past. In 2010, the creative professional market we estimated was about 6.7 million people, and today we estimate that that's about 8 million creative professionals. Creative professionals we define as designers, web pros, professional photographers, videographers.
Based on the data from the Bureau of Labor Statistics and all the international equivalents, we estimate that that market is now about 8 million professionals. In the past, it included print designers and web designers and an intermediate category called interactive designers, we've kind of combined them all now into designers to cover all of those disciplines. These numbers exclude piracy. All of our numbers exclude piracy. We limit the estimate to professionals to whom our products are relevant. The 8 million creative professionals that I just mentioned is about a 7% CAGR from the 6.7 million estimate that we gave you back in 2010. That growth really comes from population expansion, employment expansion, and it is weighted towards emerging markets. This is a TPM calculation. It's not 100% addressable market.
In fact, there's a high growth of creative professionals in emerging markets where the price point for our Creative Suite products was a barrier to entry. There's an anticipation from our part that the subscription model now with a much lower price point will attract some of these users where our old model would not have attracted them. That's the first group. We also target Creative Cloud at a core market of creative professionals, but beyond that, the opportunity is much bigger. In 2010, we revealed 3 other categories that we target. The first is at-work creatives. These are people that have marketing roles in small and medium businesses. These are knowledge workers in the enterprise. They're people that have been trained on creative tools. We continue to estimate that there are 10-plus million people that's an opportunity to target in this category.
We continue to be aggressive at targeting these at-work creatives as well as the professionals. Second category is at-work, at-home individuals. These are recreational creatives. These are photographers and hobbyists. You've heard us talk about the halo effect before. This is the halo effect around the creative professional market. We don't size the market, but it represents a material part of our business, and you'll see that in the next section. The last piece, one of our most important vertical markets, is the education space. This is faculty, it's administration, it's students grades 6 through 12 and higher education. This is a very important category for the creative products. In fact, in any given year, it can represent as much as half of the units that we ship.
Students licensed through individual licenses and special education pricing, educational institutions will utilize enterprise license agreements, as David mentioned, which are now migrating, as you know, to enterprise term-based license agreements, we take that revenue ratably. There are tens of millions of potential seats in this category, we continue to be very aggressive in this space as it is a very important vertical market. You'll see from the revenue mix how that maps out. This is 2012 revenue, roughly. Bridging from these last two slides showing the total potential market, this shows the 2012 creative product family revenue broken out by the different categories. This mix does change year to year, but this is fairly representative. If you look at the 8 million creative professionals that I talked about, it's about 40%, say, of 2012 revenue. That's a very big piece, of course.
There are tens of millions, as I said, of potential education buyers, you can see the importance of the education space. It's about a quarter of our revenue, like I said, it could be as much as half of our units in any given year. It's also important to note, as I mentioned, that while the creative pro is our key target market, the halo effect is significant. You can see the at work, at-home people can represent as much as a third of the business from a revenue perspective. TPM and a representation of how the revenue breaks out into some of those user-type categories. Then the slide you've all been waiting for, the install base. We took a stab at our Q1 FY 2013 install base.
By the way, these slides are on the website, you don't need to write down every number. These numbers, by the way, exclude, they do not include, the 500,000-plus people that are signed up for Creative Cloud today. They're not in these numbers. High level, quick observations, there are plenty of customers since CS3, this does not show CS1 and CS2 because we would view those at this point as new users coming back in. This is just CS3, which is 2007 and beyond. You can see that CS3 to CS5, we have 4.3 million people on suites. That's a significant opportunity in and of itself to move people from CS3 through CS 5.5 over to Creative Cloud. There's another 4 million people on CS6 suites. These are users that recently bought in the past year or so.
They may not migrate right away, they're clearly going to migrate within the next couple of years. You've got 8 million people in the suite category alone that we can migrate over. On the point product side, there's another 4 million people on point products. Those 4 million people, they may buy point products, if they buy a couple of point products, they're most likely going to buy the full suite on Creative Cloud. You've got 12, 13 million people here to get to the 4 million people that we talked about trying to target in 2015. Obviously, a significant opportunity just to get to those 4 million, an opportunity to get well beyond the 4 million that we targeted in 2015. Okay.
Given that opportunity, let me build on what David had to say and break out how they come down across each of the different categories. If you look at the mix, about half of the install base are individual users and half are volume purchasers. We've been telling you this for quite some time. The new news here for you is that within that volume piece, about 35% would be team, people that are buying for teams, and about 15% would be people buying for the enterprise. That's relatively new news for you. For Creative Cloud, you know the price points. For individuals at full price, $49.99 a month. Teams, full price, $69.99 a month. Of course, we have promotions going on at any point in time. We haven't historically shared pricing for the enterprise because we don't want to compete against ourselves in the enterprise.
To calculate ARR, as you know, our annualized recurring revenue, which I've used as a surrogate to show you how much is moving from perpetual over to Creative Cloud, it's simply the number of individuals and teams that we have at any point in time, times the average revenue per user per month, times 12. Then for the enterprise, the ARR is just the first year of their ETLA. As David said, some significant announcements today. All our innovation, all our R&D dollars can now be focused on Creative Cloud. We have no plans for new releases of the perpetual license product. This transition to subscription only, like we said, has always been our plan, and it is reflected in both the 2013 guidance and the longer-term guidance.
Our progress with the product and our momentum with customers has really reinforced that this is the right move to make, and it's the right time to do it. We've spent an incredible amount of time thinking this through. Customers, as David said, can still buy CS 6 perpetual, and they can buy support for CS 6 perpetual. Perpetual revenue will exist for some time, and I'll show you what that might look like in a rough idea in a minute. A lot of you have been asking me, how are we going to hit these subscriber goals? How do we get to the 1.25 million this year when the ramp accelerates in the back half? How are we going to get to 4 million subscribers in 2015? This is a big piece of that. We continue to innovate in the cloud.
We continue to show them why this is a much better offering, and I think you saw that today. At the same time, we show them that we're not going to be innovating in the perpetual product. We think that really is now the push that people will need to move over to Creative Cloud. As I said, 4 million Creative Cloud subscribers in 2015. We continue to target that. We think we've got, like I said, a great install base opportunity that's multiples bigger than the 4 million to drive just the install base over to that 4 million, and that doesn't include, obviously, new users. The 4 million, again, keep in mind, does not include enterprise users. In the 4 million subs, we do not include enterprise. Then you can see the ARR.
We gave you ARR targets for the end of this year. The ARR maps with 2014 and 2015, along with the subscribers and the move to enterprise ETLAs. For the ARR number, it does include enterprise. Again, just to be clear, because there's been some question about this, the 4 million subscriber count does not include enterprise, but the ARR numbers do include the ETLA portion for enterprise. Obviously, the big benefit to this, and what gets me excited about this, is the move to ARR. The move to subscriptions just drives a bigger and bigger recurring revenue stream. Ultimately, David's business will be virtually 100% recurring revenue now with the move away from perpetual. This is what the transition looks like. Given the subscriber trend line, we're modeling it something like this, and I know this isn't precise, but we can't be that precise.
2013 is still the big transition year. That hasn't changed. We've said that for some time. This is the big transition year. We still expect, and we've said this for some time, that revenue in David's business in the Creative space will grow next year. This is the key transition year. 2014 revenue does grow, and you can see that. In 2015, roughly in 2015 now, we would expect perpetual revenue to be de minimis. It's hard to believe that people would be buying CS 6 in 2015. Revenue accelerates in 2015 and 2016. A number of you have figured this out, but we said that 2014 through 2016, we would have a CAGR in this business of over 15%. We still believe that's true.
2014 is slightly less, in 2015 and 2016 it really accelerates because you start to get the stacking effect by recognizing the subscription revenue of all of those subscribers. The growth really takes off as you get beyond 2014. That, at a high level, is the way we're thinking about this business. The big takeaways from my perspective, really exciting product announcements that David's team made today. It's really clarifying from my perspective that we focus all our investment dollars on Creative Cloud. We focus all our marketing and all our energy around Creative Cloud. The transition to subscription, from my perspective, just gets much clearer now.
The customer success has demonstrated, like I said, that it's the right time to do this, and we will ultimately end up with the Creative business with a very large business, very fast top-line growing business, and a very high percentage of recurring revenue. It's really exciting. With that, the three of us will take whatever questions you might have.
We did a press conference just before this, Jay, we said only one question for I don't know whether that's going to be applicable here, with the financial community. Okay. Fire away.
There will be a microphone going around. As a reminder, this is being webcast, we please ask that you use the microphone for your questions. As Shantanu just pointed out, let's try to keep them to one question per person. We'll have plenty of time for Q&A. If you could just identify yourself and your firm, that's helpful as well. Jay.
Thanks. Jay Vleeschhouwer, Securities. Question about your install base number and your thinking about the adoption of Creative Cloud. If I remember correctly from the last disclosure of the base two and a half years ago at MAX 2010, I think at that time it looked like it was about $5.6 million. You've grown by about $2.8 million over that period, or roughly $300,000 a quarter. If all that math is right, how are you thinking about the pace of Cloud adoption versus the Creative Suite adoption that you've seen on average per quarter over the last
Two or three years, do you expect that the majority or large majority of adoption will in fact come from the base versus new users?
I think, Jay, if I understand the question as it relates to what we see in terms of the adoption of the subscription, we still think that the install base is a great opportunity for us to get onto the Creative Cloud. We've said that we ship around 3 million units. If you looked at the numbers there, they were higher than that because they included the maintenance as well as the upgrade plan. I think, our primary focus is let's make sure, as all of the innovation that David talked about first, let's continue to get that. We've talked about new customer adoption being more successful with the Creative Cloud, none of these numbers also talk about piracy. Clearly targeting our existing customer base, people who are accustomed to doing business with us, showing them the innovation that exists.
We want to get them to move to the cloud, continue to attract customers, as you really have more features like David alluded to, which are completely cloud-based features, we have a better chance of combating piracy than we ever have before.
Hi, guys. Ken Wong from Citi. You guys mentioned you guys have 13 million in your install base, by fiscal year 2015 you guys are going to have 4 million subs. What do you think happens to that 9 million kind of other guys in between now and then? Is it for three years they're just not going to upgrade? They're all going to buy CS6? How should we be thinking about that?
Well, clearly we think at Adobe that the right long-term solution is the subscription offering and the Creative Cloud. We just don't have as much experience with the Creative Cloud right now in terms of the adoption. I think today's announcements, it will take some time for people to digest it, clearly we would like everybody who's been a user of CS3 onwards to move to the Creative Cloud to be able to attract all of those new customers as well. What we, I think, try to do is give you how we are modeling the business right now, we'll continue to give updates as we're transparent after the announcements of today. Certainly we expect or we would like to see all of those existing install base move to the Creative Cloud. That's right. They can continue to.
If the question is, in the interim, what do they do? For those who haven't moved to Creative Cloud, CS6 will continue to operate, whether it's an existing CS6 customer or the prior versions will continue to do it. I think it's incumbent on us as we continue to delight them with all of the new features, and we are clear about Creative Cloud being the only option by which they can get access to the innovation. I think we'll see them continue to adopt Creative Cloud.
I think the other takeaway from that data that would be relevant is that, as Shantanu pointed out, we'll see how that migration transpires. The bigger takeaway in my mind is that 4 million isn't the top. There is upside to that in the out years as well, and there is a lot more of this kind of.
Peter Goldmacher, Cowen and Company. David, what do you perceive to be the number one barrier to adoption for people's unwillingness or reluctance to move to Creative Cloud?
I think that when we see people move over, they're doing it for all of the innovation that they're getting on a regular basis. We see it because they are embracing the new concepts and creativity around cloud and around all of the community and collaboration features that we've been adding. They're doing it because they've migrated over already to digital as their primary creative outlet. Where I think we'll see a little bit more in terms of a slower adoption or slower migration are customers that are still very print-focused, and frankly, where existing products are sufficient for their needs.
As we all know, the macro trend here is going to be more toward dynamic digital content, and those customers will also come over time, provided that we execute, we innovate, and we do everything we can to continue to just surprise them on the upside in terms of the capabilities.
I think, Peter, the lack of knowledge of the Creative Cloud and the capabilities of the Creative Cloud so far has been the reason why people have not moved. I think our strategy that we laid out was first to introduce the Creative Cloud and to actually demonstrate innovation on the cloud. I think David's slide, when you look at it and think about how much innovation we've delivered over the last 12 months, it was really important to us to set the bar that this was not about a new business model, this was about a new way to innovate. I think all of the new customers who use the cloud, they just look at it and say it's the most natural way to do business with us, and why hasn't it always been this case?
I think there are people who have resistance to the change, and I think it's incumbent on us again, through the innovation and through the education, to really explain to them why this is the best way for them to create.
You've got roughly 595,000 people or customers who are creative. Everyone here today can be surprised. How do you get that message out?
Get the microphone
customers are excited. What about everybody else?
Yeah, the question was around how do we get the message out to the rest of the non-5,000 people who attended. As soon as this conference is over, David will be going on the road, and I don't know when I'll see him again.
No, but that is it. I think we have to have very personal conversations with a broad set of our customers. First, we intentionally put up the URL there. Obviously, 5,000 people saw the keynote live today, but we have a much broader set of people watching it streaming live, and we have an even larger population that will watch it over the coming weeks and months. We expect to have a very active conversation on social, but also in person. We have 40 cities planned in the next few weeks that we're going to send evangelists to. Those events, in some cases, are north of 1,000 people who come in attendance. This is a big change, and we have to recognize that and appreciate that. The way we get through that, as Shantanu said, is innovation. The way we get through that is dialogue.
That's what we're going to do.
Would you say some of it, too, would be viral at some point, right? The more people that use it-
Yes
the more the word's going to get out. That happened with Suites as well.
Yeah.
I would say one other thing, Peter. This time, we actually briefed less people on the changes to the Cloud than we did in normal releases. I think you will see us unleash all of our marketing efforts right now in terms of describing all of the benefits of this. The fact that you haven't seen it till now is more a reflection of what we wanted to do today and have that conversation with them today. Starting today, in all seriousness, through every medium possible, I think you're going to have people talk about all of the benefits. What does it mean? How do you migrate? How do you translate? All of that information is available to all of our customers starting today.
Thanks. Kirk Materne with Evercore. I guess when you guys think about the educational market, it is 50% or so of units. Can you just talk about some of the challenges that you think might arise as people have to get out of their habits of buying software traditionally in that market? It is perhaps a little bit more indoctrinated in that market. What are you, David, I think you referred to it, that we could talk to you about it and things like that, but to really have 50% of your users move over, there has to be, frankly, a pretty seamless process so you do not get caught up having conversation after conversation about the same thing with all these customers are out there.
I guess when you think about the 4 million subs, do you assume that the educational market will be trailing the traditional enterprise market or individual market? Can you just talk about how that mix shakes out.
Sure
The numbers you think.
Maybe I will start, then.
Yep
Feel free to add. First, with respect to the half a million creative subscriptions that we already have had, we've actually seen considerable success in the education market. I would not actually jump to the conclusion that the education market is going to lag the other customers because it's actually for that next generation of creative, a more natural way to do business. We've already seen a significant amount of success in the education market.
I think when we talk education, we really need to look at it in two segments, right? There's the individuals and the students and teachers that are purchasing. To Shantanu's point, these students today are used to renting things, right? Renting services. The subscription model is not foreign to them. We've seen certainly some pickup and good adoption there at this point. The other half of the education market is institutional purchases. Large institutions purchasing on behalf of faculty or on behalf of faculty and students. What we've found there, as we've started to roll out the new ideas around Creative Cloud for Enterprise and the future of ETLA, is that the education institutional purchasers are very receptive to that model. We feel pretty good about the education market in particular.
May I fire three questions quickly or just one? First, if you look at the trends that's happening from a software distribution perspective, app stores are playing a major role. With the next release of Apple OS, the only way they will allow, I don't know if it's really true, but the rumors are, is the applications have to be purchased through an app store. That's the reason Microsoft is trying to put the Office on an app store. Same is on the Windows platform also. App store becomes the prime distribution mechanism. In a way, now you are one step beyond the customer touch point. How do you plan to address that? If I can ask two quick questions. Second is, your presentation was very wonderful today. It emphasized a lot on creative people, but it also de-emphasized the developer community, your open source Flex.
I think you have another product which is called ColdFusion, which is really not in your strategic direction. Do you think open sourcing is just like giving away? Instead of open sourcing, you can sell it to so many companies around which will help you gain some money. One last question is, your cloud product is running on Amazon EC2. There are two opposing views. One is from Zynga, another is from Netflix. Zynga said after a certain size, we have to move away from EC2 and create our own data centers. Netflix says completely opposite, we will always remain on EC2. Suppose you become wickedly successful in this offering, say, five years, 10 years down the road. Do you think being on Amazon EC2 will make sense to you or creating your own data centers? That's all. You can answer just one question. That's fine.
A fair, quick one. Let me address the first one. I think we're in a very good position with respect to electronic software distribution, and I think there will be multiple channels for electronic software distribution. I think the experience that you saw today that we delivered in terms of being able to have a download experience from, in this particular case, the Adobe Store, and to be able to install it. It's easily translatable when we decide to do it with other app stores. I think we're very well positioned. I wouldn't just look at the app stores that you're referring to, whether it's the Apple or the Windows App Store. Amazon's also going to be in that particular market with respect to electronic software distribution, and we view that as a channel as well.
We've already distributed some products like Photoshop Elements, through the app stores. Certainly, the Creative Cloud desktop application's going to be available through the Mac App Store as well as through the Android and iOS Store. We're very well aware of what's going on with app stores, and I think we will react as appropriate. I think on the second one, the internal architecture of how we deliver this stuff, I think we continue to use Amazon where appropriate and where it's relevant. I think they've demonstrated very significant innovation in this space, and I think we understand what parts of that we need to control ourselves. As you also know, with the Marketing Cloud, we have a significant presence with respect to distribution of software and distribution and services.
I think we will continue to monitor it, but I think Amazon provides some incredible services today that we leverage. The third question was associated.
Yeah.
Well, that's what I said, Amazon.
Yeah, third was about developers
The third question was about developers.
Yeah, I think that's actually a good point, a good opportunity to illustrate a change that's happening in content creation. It used to be that individuals in our creative professional base really focused on silos. I was either a photographer, or I was a videographer, or I was a web developer, or I was a graphic designer. One thing that's changing, especially with the new mediums and the convergence that we're seeing in content creation, is that we're seeing a convergence of these bases. If you look at Creative Cloud, one of the reasons people are excited is because of the ongoing innovation. The other reason is that people are looking at this and saying, "I have all of this. Everything Adobe has to offer, I can start experimenting," and we're starting to see that convergence. That's no different for interactive developers, people who do front-end development.
They were using Flash, they're now using Flash and some of our Edge tools and technologies. We see a good opportunity for adoption there as well.
Hi, Brad Zelnick with Macquarie. Mark, just as we try to reconcile our models with the new information that's been presented today, if I look at how I've built up to my creative revenue estimates for this year, we're still expecting over $1 billion from the perpetual product without any incremental innovation. I know CS6 has been a fantastic release. Is that reasonable? Can you then answer that in the context of what does the ETLA business look like, and ASPs and the assumptions that we should expect there? What are the assumptions in your model as we go out through the remainder of the year?
Yeah. We do think that's still reasonable. We still think people will buy CS6, and I said that for some time, people will still want to buy CS6. Again, this was baked into our guidance as we did our model for this year. We knew we were going to go down this path, and that's assumed in the numbers that we did. From an ETLA perspective, I said that Enterprise is about 15% of the mix. That gives you some flavor as to how big Enterprise can be. It's not all ETLA today, but that will quickly migrate more and more over to ETLA. You saw that in the last couple of quarters, we started talking about more and more ETLA business. We fully expect Enterprise to still be 15%, mainly ETLA oriented.
The price point on the ETLAs, it depends on the volume, and that's why we don't disclose a price for that business. If you're doing a very large deal, it's going to be potentially lower than an individual price.
What about your ASP assumption for the non-ETLA portion of the business?
Well, we said that we were in the high $37-ish range right now in terms of the ARPU for individual and team kind of combined. We said that that would change as the mix changes.
Thanks. Just one quick one.
Yep.
On the install base slide, is it also reasonable to assume that 15% of the install base is enterprise, roughly?
Well, we didn't break that out.
Yeah, we didn't break it out
as we've built more licensing schemes, we have not shared what the exact
Unit is
unit of the install base is with the Enterprise.
Right. Thank you.
Mark, on that topic, I'll ask a question. There was a slide, I'll just check because I know I'm going to get questions about this, it maybe follows Brad's question. The install base for CS6 Suites.
Yeah.
There were some asterisks there, if you could just.
Yeah, I missed that point when I did my presentation. Shantanu just touched on it in Q&A. If you add up CS6, you'll see that it's more than 3 million units for point and suites. If you think about the fact that CS6 has been out about a year, we've always said we ship on average 3 million units a year. You say, "Why is it higher than 3 million?" It's because of upgrade and maintenance plan. As Enterprises upgrade and move over, that shows up in the units. That's why it looks bigger than the 3 million that we ship on average in a year.
Do you have any other questions, Mike?
I have a bunch, but I'll point to the audience.
He's just trying to save himself work later, that's all.
Hi, it's Jason Mader from Wells. A question about piracy and unsanctioned usage. Love to maybe just get some comments from you on what you think may be domestically here in the U.S. and then also internationally, what this move can mean for that opportunity to monetize sort of usage, but not paid licenses.
Yeah. The normal data that we give for piracy is typically built off what the BSA, the Business Software Alliance, does. I would say there are probably three kinds of piracy that we see. There's a hardcore piracy that we see in emerging markets. I think China and India, you can say 90%-plus piracy that exists. I think there's what we call casual piracy, which is you might have five or six creatives in a particular group, and they buy one piece of software, and then they are using the same piece of software at different times. Then there's respect to what we have in enterprises, and that's where they contract to get a certain amount of licenses. Then since we've distributed that software, there's a true-up provision. It's not piracy, but it's a way for us to true up.
In the U.S., the estimate is something like 20% piracy. The numbers are fairly meaningful. I think this is a next step, honestly, in addressing piracy as it relates to synchronization of all of the things that we talked about. I think the real next step, and we showed a glimpse of that in a couple of features, is where it's actually having Adobe Photoshop running on the cloud and the files going to the cloud in order to do the deblur feature or the shake reduction feature, and that just cannot be pirated. I think all of this is an infrastructure that we're setting in place to address all of those different kinds of piracy. As it relates to the enterprise, since they all now have IDs with us, we know exactly how much usage, we know exactly how many downloads has happened.
I think we've really got the infrastructure in place to address that in a meaningful way. I think there's one more step that we need to do with respect to showing more of those cloud-only features that I think will be the tipping point.
The follow-up then would be, when you talk about accelerating growth in 2014 to 2016, do you assume a fairly hefty level of, call it, recapture within those numbers? What's sort of the underlying assumptions around that?
The underlying assumptions associated with the numbers are not including any of the piracy.
Right. No piracy.
The piracy is.
Upside
upside, over and above that.
Right.
They're not in the install base, and they're not in the projection for subscribers in the out years.
Any more questions? Jay and then Trip.
Okay.
Trip, go first since you have a mic.
Perfect. I was just wondering, these are the opportunities and businesses you are in today. I was at the ACM transactions meeting last week, and they were talking a lot about data science and data modeling and visualization. I was wondering, have you put some thoughts, of course, it's very nascent, but that is the area which Microsoft is not paying attention to, neither is Google. You have the broad tools, but just you need to put some people on the ground on that. What is your current thinking on discovery of data and visualization modeling? That's all.
What we have with the Adobe Marketing Cloud and what we announced at the recent Marketing Summit was that this project that's codenamed Tartan is all about being able to visualize all of the marketing data that people are collecting on behalf of companies. We're actually certainly tackling two parts of the large volumes of data that exist within marketing departments. The first is visualization through this project, Tartan. For those of you who haven't seen, it's all delivered through really intuitive user interfaces on iPads and other tablet devices. You can make all of your marketing data actionable. The second thing we've actually invested a fair amount in is in predictive algorithms to do what we call the last millisecond in the Adobe Marketing Cloud.
I would say that we focus on both visualization and predictive a lot more in the Adobe Marketing Cloud offerings, I think those are coming to market. Clearly, they're resonating with marketers because suddenly all of that data at the back end is becoming not only visible but actionable. Mark and I like to talk about the Monday morning meetings that we have. We've completely transformed how we run the company. We used to run the company looking at data that was a lot more about actuals to date. Now increasingly, we're looking at all of the data with respect to what is the funnel, how much is the traffic, and therefore, what do we predict that business will be. I think we're not alone.
I think every company is going to have to look at trends as it relates to marketing traffic in order to get a better sense for the business. That's really more the opportunity for the Adobe Marketing Cloud than in the Creative space.
One for Mark and then a follow-up for Shantanu and David. For Mark, before this today, you had already disclosed that you would be discontinuing shrink-wrap software.
Yes
which would presumably save you a few tens of millions a year in those costs. As the perpetual business decays, however long that takes, is there some guidance you can give in terms of what that might mean for sales and marketing expense, or how you might reinvest-
Yep
Lastly, again for Shantanu and David, at the Salt Lake conference a couple of months ago, it was pretty obvious that you were increasingly on a path of connecting the two sides of the business, Digital Media and Digital Marketing.
Does anything you announce today influence the timeline or nature of what you'll be delivering from the other side of the business as you recently tied those two halves together?
Sure. Mark, do you want to go?
On the margin side, as it relates to David's business, it's actually interesting because there's a lot of puts and takes, or at least there's a few puts and takes. We're not shipping a box anymore. We're not shipping a CD anymore. From a sales and marketing perspective, as we build up this base, it's clearly going to be easier to market because we'll have an ID and an email address and be able to get to customers directly, which is much, much harder if they buy the box through a channel, let's say today. Less cogs, if you will, potentially less sales and marketing. There is more cost as it relates to storage and bandwidth. There's some offsetting things going on in there.
Without a doubt, given where we are today in this transition year, David's margin gets better and better as we move out and as we get more and more subscribers. What that ultimate margin looks like and how that compares to, say, the peak from where we were under the perpetual model is a little hard to forecast right now because we've got a lot to learn as we go. Margin definitely continues to get better now.
Jay, with respect to, I think, the integration between the Marketing Cloud and the Creative Cloud, the sweet spot that we've clearly identified that customers resonate with is associated with that digital asset management. Increasingly, we find everybody telling us that when they see what David has done with the Creative applications having the Creative Cloud as a back end, if they don't want that data out there in the public network, they want our Marketing Cloud solutions to ensure that they have all of those assets in a private cloud behind the firewall.
Very much the plan of record is to make sure that with the CQ content management or web experience solution and digital asset management, that we can go to an enterprise and say, "All of your assets, if you want them behind the firewall, here is the complement to the Creative applications in terms of the digital asset management." Most customers are telling us they'll probably have some of those assets externally, and that's reflected in the Creative Cloud icon, and they'll have a lot of those assets internally. Those, as you know, are priced separately. The Digital Publishing Suite for the enterprise, the digital asset management solution for the enterprise, and the entire web content management for the enterprise, they work in conjunction with the Creative applications but are not part of the Creative ETLA.
Just a quick one. I'm sure you guys will go into detail on this, initially with the Creative Cloud, how much discussion have you had with customers in terms of actually the storage that you're giving them and whether or not that's enough, and do you have elasticity in terms of pricing with that? I'd imagine, especially people who are developing in video and things like that are going to blow through 20 GB pretty quickly. How much of a pushback are you getting on that? When you think about charging people for storage or including that in your pricing, obviously there's a cost implications for you all.
Yeah.
How do you guys think about that, and where do you think that trend goes over the next year or so?
Sure. Personally, I see the cost of storage continuing to decrease. We'll always look at that in a context. There's also a given market price for storage today. There are a number of, what I'd say, sort of flat file system options out there with Dropbox and Google, which are really just flat file system options for synchronizing elements. What we're doing right now is we give people the 20 GB and the 100 GB. It seems like we've hit the right part of the sweet spot given all of those compares. People seem quite happy with it. Anything above that, we will certainly sell and charge incremental for. That's sort of the way we look at it.
It's not something that we're looking to make as a primary focus of innovation and cost. We believe that this is a cost that the customers are more than willing to incur and have a recognition of. I agree with you. I think especially as video starts to become a more centerpiece of this, that actually represents an opportunity for us.
Two of the-
Just one more thing. You should see this as the way we're looking at the model and the business as a whole, which is we have a lot of value in the core offering. There are these added services that we believe that we can position and start to address the ASP or the ARPU question that was asked earlier.
Two things I was just going to add was, first, I think until today's applications, it wasn't as seamless as it needs to be in terms of the storage and synchronization across multiple devices. To your question, we might see an explosive usage of assets now that it's so easy to use and people don't fully understand that it's automatically synchronized across each one of them. Clearly, the benefit to us also is that we think it just makes the more assets they have on our servers, it makes our offering more sticky. If we keep innovating on that, we announced at NAB a video anywhere solution as well, where you can actually have one copy of the video up on a file server, and everybody with a tablet application can actually do real-time non-linear editing with these massive files.
I think it's the tip of the iceberg in terms of what we can do once we have those assets on our file servers.
Question back here.
Thanks. Brad Zelnick again. David, just to follow up on your keynote this morning, when you announced that CS 6 would be the final perpetual version of the product, you made a reference to government and education customers and said that there would be information out later today about helping them make the move to the cloud, can you just expound on that a little bit?
Sure. This is what Mark and Shantanu were also talking about in terms of the transition of our ETLA. The way I described it earlier is that we have the CC applications that we're shipping as part of the other offerings, the team and the individual offering, will be part of that enterprise ETLA offering. Enterprises will have the choice of whether they want to use the cloud storage, whether they want to integrate with the DAM and some of the on-premise options that we have, or whether they want to do some hybrid. The point of that was really just making sure that we got the bit out there that if I'm an enterprise or government customer that has certain restrictions on cloud storage, we didn't want them to feel like they didn't have options.
Any other questions? I think we'll wrap it up there. Thanks again for everybody for coming to L.A. and joining us at MAX. As a reminder, your badge gets you into any of the sessions on a space available basis, so if you're going to stick around for tomorrow, there's lots of great, excuse me, sessions that you can attend. Tomorrow night is Sneaks, which is an event every year, which is pretty exciting. The developers show some of the stuff they're working on in the labs to give you some insight into where we're going. Tomorrow night's the bash as well, the party. Thanks again for coming.