Dissecting Adobe’s Dumb Deal | Hacker News Reader

Dissecting Adobe’s Dumb Deal

ft.com

40 pointsbelter19 comments

There is nothing dumb in Adobe's deal to buy Figma.

They are buying market dominance, not the product.

The article conveys the deal is dumb because Adobe has no free tier, leaving a huge barn door sized gap open and vulnerable for the future.

Future freemium competition springing up isn't solved by this one remarkably expensive deal (which suggests Adobe is desperate, and a whole other topic). In another year or other relatively short amount of time, Adobe will need to keep executing and succeeding in acquisitions of freemium competitors who can spring up with weed-like ease. If Adobe fails to secure one the better ones, and Microsoft or any other semi-capable mega titan scoops up the competition, Adobe is the directly at risk of it's position eroding and ultimately systematically getting crushed in the seas of the open market.

All because Adobe continually chooses to rely on an easy $7-8 billion in ARR from CreativeCloud, rather than wise up and realize they need to evolve their strategy to better align with reality.

I know people at Adobe and have worked with several who are actually very good, so I'm a little perplexed. From the outside, it's hard to understand why the organization is so dysfunctional. Is upper management stuck in 90's style thinking? I wish I could be a fly on the wall at some of these meetings (probably they are mostly super boring, so only the [likely ongoing] pivotal moments where they fail to explore better paths forward, please ;)

I think Adobe's primary market focus is people who need it for their work. Assume that you're paying a creative person $60-80k+ per year, before benefits; how is $500/yr for their most important tool not a no-brainer?

There's a long term risk of another company building market-share with younger or poorer designers, but that's small, especially with how light-touch they seem to be with piracy. (Torrents of the Adobe suite are trivial to find, and have been online for years without disruption.)

Clip Studio Paint and Krista seem like notable competitors for digital drawing or illustration. Adobe Animate doesn't appear to have Flash's popularity and Clip Studio Paint seems to be the most common choice for a young person keen on animation.

Yes, and that's what makes Figma dangerous to Adobe. Adobe can justify their prices vs. any direct competitor with "professional designers need the good stuff." So Krita, Gimp, Canva will always come up short. But Figma is helping companies change how designers work to something Adobe isn't as good at. Figma or direct analogues to Figma are the good stuff, not Adobe, in those teams.

> In another year or other relatively short amount of time, Adobe will need to keep executing and succeeding in acquisitions of freemium competitors who can spring up with weed-like ease.

Figma took 10 years to get to this point. Even if someone else can get there in 5 years, as an executive at Adobe, do you care?

And the danger to Adobe wasn't Figma in its current state, it was Figma taking its performant web stack and starting to attack features in Photoshop.

This is the kind of deal which encapsulates perfectly what is wrong with the state of modern capitalism. This deal should be blocked by the FTC and Adobe should be forced to deal with a plucky, upstart competitor who could displace them.

They spent $20B for a 16B market opportunity that only generated $400M a year? Thats revenue. Even if that was profit, it would take 50 years to recoup if no further revenue was added.

Even if it doubled, it’s still a weird investment of $20B. Can’t read the FT article but is Figma even profitable?

From a Fortune article:

> Figma’s products “address a $16.5 billion market opportunity,” and this year, they’re expected to add $200 million in net new ARR [annual recurring revenue], surpassing $400 million in total ARR by the end of the year,” Durn said.

Usually, market size refers to annual gross revenue. So a one time $20B outlay to gain marketshare in a $16B a year market.

Sure, of which only 400M of the 16000M ARR is part of the purchase.

Figma is growing fast still. I think they’ll break $1b ARR in a couple of years.

This was a desperate move from Adobe to stay relevant, but if they let Figma grow and be run independently, it may have been worth it - we will see.

I think it would be a mistake to bundle it with CC though. I suspect part of Figma’s rapid ARR growth is how it’s very, very easy (automatic) to go from a free seat in your org to a low cost paid one, if you add someone as an editor to a Figma or Figma file. As a result many people in the org get converted to paying seats, not just designers

That's the entire focus of the article.

How can Adobe not clone Figma for less than $20 billion?

That doesn’t result in there being no competition in the marketplace. They don’t care about having an equivalent product they just want all the market share.

I don’t want to be rude to Adobe employees here — I’m sure they have lots of excellent people — but Figma is quite a technical tour-de-force for a web-based app with very good execution and a tailor-made, unique stack. Cloning it might be harder than it may appear.

Either spend $1b to create an alternative but lose anyway for the company to be irrelevant sooner or spend $20b to extend its lifespan by killing a competitor.

They could probably get something very close but not quite as good and then there is the problem that Figma still exists. This solves two problems.

1. Provides Adobe with a product/service they don’t have

2. Eliminates a growing competitor.

For Adobe number 2 is probably more important. Adobe as a business needs to mostly just not mess up the cash cow they have and eliminate any competitor that threatens the cash cow.

> However, without a radically different approach to pricing, Adobe’s competition problems will persist, and leave it with M&A whack-a-mole as its main defence. Is that the plan? Because at least with Compu-Global-Hyper-Mega-Net, Microsoft had a plan.

Good point at the end of the article, maybe it'll help address some of the concerns everyone has about the acquisition. (m-m-m-maaaaybe).

It's a bit of a generalization (however, I'm sure it's correct here): the biggest issue with Adobe is the fact that their CEO has been at the helm for 15 years. That's entirely too long in tech to be on the same job and not start suffering from a lack of new perspectives.

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