Adobe Augments Its Marketing Platform With Mobile Enhancements

Adobe (NASDAQ:ADBE) entered the digital marketing industry in 2009 with the acquisition of Omniture. Since then, the company has expanded its services systematically, and currently offers six products under its marketing cloud solution. The Adobe marketing cloud includes a complete set of analytics, social, media optimization, consumer targeting, web experience management and cross-channel campaign management solutions. The digital marketing cloud makes up 20% of Adobe’s estimated value and generated around $1 billion in annual revenues in 2013. Furthermore, the revenue run rate for its marketing solutions has increased to over $1.2 billion for the first nine months of 2014. Having been built from the acquisition, the business has a compounded annual growth rate (CAGR) of 106% over last four years. In order to expand its marketing portfolio of services, the company has launched new data driven marketing capability that delivers personalized mobile experience. In this article, we will explore the latest upgrade to Adobe’s digital marketing platform.

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Mobile Marketing – The Next Frontier

Digital marketing is gaining momentum as companies are looking engage users with personalized content across channels and on all devices. As a result, company budgets for online marketing are fast gaining traction. According to IT research firm Gartner, companies spent 3.1% of their revenues on digital marketing in 2013, and the figure is expected to rise to 3.4% this year. ^[1]

First time users in many countries are logging onto the Internet using smart connected devices. According to eMarketer, the amount of time people spend on a mobile device is growing 14 times faster than desktop usage. Additionally, mobile commerce (m-commerce) is becoming a prominent channel for commercial transactions. eMarketer forecasts that retail mobile-commerce sales in the U.S. will reach $57.79 billion this year and climb to well over $132.69 billion by 2018. ^[2] As a result, mobile-first marketing strategy is gaining traction across the globe. However, since mobile audience is fragmented by devices and platforms, marketers face a difficult task to distribute the content across these devices and screen sizes. We expect that this will drive the innovation cycle for omni-channel marketing tools. Adobe is now targeting this segment by adding new mobile capability to its existing product line.

Mobile Capabilities For Adobe’s Marketers

Over the past few years, Adobe has built a strong platform that addresses various needs of digital marketing. According to Forrester’s Marketing Cloud Wave report, it leads the digital marketing industry with over two thirds of Fortune 50 companies as clients. We believe that this platform not only provides a cost effective digital marketing solution to companies but also helps them manage marketing campaigns across different channels (online and offline) and devices. Adobe’s marketing cloud is one of the most comprehensive and integrated marketing solution available in the market which includes Adobe Analytics, Adobe Target, Adobe Social, Adobe Experience Manager, Adobe Media Optimizer, and Adobe Campaign, as well as real-time dashboards and a collaborative interface. These tools together handle around 2.5 trillion mobile transactions annually. Some of the capabilities include: ^[3]

• In AppMessaging: This facility will enable marketers to trigger messages in an app based on user behaviors, lifecycle metrics, or location data collected from iBeacons.
• Mobile Campaign Management: Within the Adobe Campaign Manger, the company has the new Digital Content Editor (DCE) which allows marketers to create responsive design emails based on recent store visits or other mobile app experiences. Marketers can also use the location data to refine audience segmentation for future campaigns.
• Mobile App Management: Adobe Experience Manager now has a mobile app dashboard that allows management and testing of mobile apps performance easier, and keep app content fresh and relevant.
• Mobile Search Advertising: Adobe Media Optimizer has been tweaked to offer multi-dimensional portfolio modeling that will enable marketers to use automated Mobile Bid Adjustments (MBAs) to place search ads across mobile devices. It will also enable marketers to reliably forecast expected clicks, cost-per-click (CPC) and revenue for search ads by specific devices.
• Adobe Social App: The new native Adobe Social App allows brands to view and manage their social activities on-the-go. While the app will be available as a beta on iOS for iPhone, support for other mobile platforms will be delivered over the coming months.

We expect Adobe’s marketing platform to continue to lead the digital marketing solutions market in the short term, as it enjoys strong brand recognition. Adobe is aiming to increase its revenues from cloud based marketing solutions by expanding in new geographies and verticals where it has a strong presence. Currently, we project revenues from its digital marketing division to reach $3.89 billion by the end of our forecast period in 2021. However, if the revenues grew to $5.5 billion by the end of our forecast period there can be 10% upside to our price estimate.

We currently have a $57.79 price estimate for Adobe, which is around 20% below the current market price.

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1. Digital Marketing Budgets Increase, Reflecting Focus on Customer Experience, January 9 2014, www.gartner.com [↩]
2. Total US Retail Sales Top $4.5 Trillion in 2013, Outpace GDP Growth, April 10 2014, www.emarketer.com [↩]
3. Adobe Advances Data-Driven Marketing Across Mobile Devices, November 18 2014, www.adobe.com [↩]