WEB 2.0 - Adobe adapting to hosted SW model

WEB 2.0 - Adobe adapting to hosted SW model

Adobe Systems Inc.'s CEO Bruce Chizen spoke at the Web 2.0 Summit in San Francisco and IDG News Service had a chance to interview him before his appearance at the event. In this edited version of the conversation, Chizen spoke about Adobe's strategy for hosted software, its baby steps in the online advertising business and its AIR technology for building desktop-based rich Internet applications.

What is Web 2.0 to you, and what is Adobe's role in it?

To me, Web 2.0 is the realization of everything we talked about in the Web 1.0 era: the ability to take advantage of Web services, to have rich Internet applications, to have socialization and collaboration, to have hosted applications. These things were talked about but hard to do. Web 2.0 is the execution of that, and Adobe is the enabler of a lot of that experience.

Most of the images on the Web have probably been touched by Photoshop. Most of the video is probably edited or enhanced with Premiere. Most of the animation and video playback is Flash. A lot of the rich Internet applications are being built with our Flex framework, taking advantage of Flash. The graphics [involve] Illustrator, and on and on.

It seems that in recent months, the Adobe story has gotten more complicated than it was a few years ago, as the company moves into new areas and technologies, like hosted applications. Are you concerned that this might confuse and alienate existing customers?

Your perception is accurate. Our business has gotten more complex and more diversified. As a company that has been growing 20 to 30 percent a year, in order for us to sustain that growth, we need to address more customers with different products and solutions. But our mission hasn't changed for the past 25 years: to help enable the communication of rich ideas and information in a reliable, compelling, engaging manner.

Twenty-five years ago we did that on paper with [printing technology] PostScript. What has changed is the world around us: more people are trying to communicate more information than ever before so we're able to address more markets.

Am I concerned we'll be alienating our current customers? No. As long as we continue to serve their needs, we'll be OK.

Do you currently generate any revenue from online ads?

A very tiny amount today via a hosted application called Premiere Express. It lets consumers do simple video editing. We offer it through partners like Photobucket [and MTV]. Some of those business models are advertising-based. We'll continue to experiment.

Our Adobe Media Player [now in beta] is also an ad-based business model. We enable broadcasters and content providers to make money on their content through a very clever advertising user interface. We're also working on a Photoshop Express, which will let consumers do image editing. It'll be either ad-based or subscription-based.

Do you foresee online ad revenue becoming a noticeable part of Adobe's revenue mix?

It depends on how many years you look ahead. Many of our core customers care so much about the quality of the information that they're trying to provide that they want their solutions to be unencumbered and won't put up with advertising. But there will be more casual users who will want our capabilities but not pay directly for it, and that's where you'll see advertising.

Do you offer any of your packaged software products in full-featured but hosted versions?

No, we don't.

Will there come a time when your full-featured products will be offered as a hosted, software-as-a-service (SaaS) model?

Yes, but over time. To benefit from a full-featured version of Photoshop, the experience as a hosted application wouldn't be very good, and that's because of bandwidth speeds. The capability of broadband doesn't equate to what you can get from your local computer.

You'll see us do hybrid applications that take advantage of the desktop, but where appropriate we'll provide hosted functionality for things like sharing. Our Kuler [web-hosted application] lets people collaborate using different color settings, [and works in conjunction with] producs like Illustrator, which resides on the desktop.

That's going to happen over the next number of years: We'll have these hybrid environments for full-featured applications. As broadband gets greater and greater, there's the possibility of taking the desktop app and moving it to the host. Five years is probably the minimum.

But the capability of the desktop and laptop is advancing so quickly ... and broadband capability isn't increasing that rapidly. Even if it increased that rapidly, people are throwing more data into the pipes, which will slow down the delivery of the information.

So you're seeing interest from users in hosted software that simplifies workgroup collaboration?

For more casual users, we'll have hosted services. We announced a service recently called Share [in beta version], which lets you extend what Acrobat does or what the Adobe Reader does -- document sharing, PDF creation, word processing -- which will all be hosted, but you're still going to want to do a lot of things on your desktop.

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