Will Adobe Make the Leap?

Is Adobe planning on staying on its current course as a technology company, or is the Demdex acquisition foreshadowing a transformation into a media company? The catalyst for the Demdex acquisition was that Adobe would incorporate the product into its existing Omniture platform, expanding its offering by including audience management side-by-side with Omniture’s existing marketing and measuring capabilities.

But the transformation from software provider to media company is not without precedent. To the general public, Microsoft is still known as the maker of Windows and other ubiquitous software solutions we rely on for everyday computing. But within our industry, Microsoft is a huge media player with massive reach, selling impressions across display and search. Adobe is in the boat, widely known for its PhotoShop suite. Do advanced analytics and an interest in audiences signal a major media play.

Forbes outlined how about $1 billion of Adobe’s $3.8 billion 2010 revenue came from corporate sales that combined creative tools with analytics. According the article, Adobe thinks this market is already worth more than $10 billion. That should give us some idea as to where Adobe has its sights set. Omniture gives the company a unique “user-centric” view, so to speak, because of the data collected and measured across the Web. With Demdex, Adobe has a strong management layer for holding, understanding and theoretically applying the data for marketing purposes. But what’s still missing is something that allows for the application of this data with the actual media buying and selling platforms that exist.

If Adobe stays on the technology course and becomes that end-to-end marketing suite, it will need to buy a few pieces. Chief among them is an ad-serving platform that helps publishers forecast and deliver their online media, which will complement the current Omniture/Demdex offering. Also, I wouldn’t rule out the possible acquisition of a demand-side platform. Once publishers have a way to measure, build and forecast their inventory, they’ll need a place to connect with marketers looking to buy these audiences. All of this would give Adobe a massive opportunity to help their customers apply all of the data, with a huge financial gain for Adobe built in.

If Adobe follows this course of action, it basically becomes the opposite of Microsoft by doing what the software giant didn’t. Instead of becoming a media player and selling the advertising a la Microsoft, Adobe can make the big play and become the predominant ad creation and measurement technology company in the space — an end-to-end advertising platform for publishers, bar none.

Of course, there’s a third theory we haven’t touched on yet, and that’s the idea that Adobe’s acquisition may not single a business change whatsoever. The company, armed with that $3.8 billion in revenue, could simply be making accretive purchase for its top line. With so much cash lying around, it makes sense to expand the offering (Adobe reportedly paid $58 million for Demdex).

In the same Forbes article, CEO Shantanu Narayen hints that the company has an eye on baking its planning, tagging and tracking tools into its content creation software, helping advertisers optimize based on the number and change creative on the fly. In a year’s time, several small tech providers could be integrated under the Adobe banner, and publishers and advertisers could see a huge platform that serves every link in the chain for publishers and advertisers looking to capitalize on data. Or we could see no change at all. The possibilities and the answers to all our questions are in Adobe’s hands.