How Does Adobe Make Money?

Adobe gives away its innovative technologies, such as, PDF Reader, Flash Player, the Flex development framework, and now AIR, for free. So, how does Adobe make money? For Adobe, the revenue comes from several sources.

One of the revenue sources is from tooling – Adobe builds some of the best tools in the world. The more people build widgets that work on Adobe’s free technologies, the more interest Adobe hopes to drive to its tools: Photoshop, Creative Suite, Dreamweaver, and new tools, such as, Flex Builder.

The second source of revenue is from its server technologies. Adobe makes servers, like LiveCycle, which manages business process workflow, documents production, and reliably shares documents, Flash Media Server, which does streaming of video, and ColdFusion, which is a rapid application development framework.

The third source of revenue is from hosted “freemium services”, which means the services are free to some extent and then you need to pay some premium for using those services thereafter.

The fourth source of future revenue is going to be from its own standalone media player. The media player is also going to be free to end users. The way this generates revenue is: You can either watch free video streams or, if the content providers want to monetize their content, they can associate advertising with Adobe’s media player, and then Adobe shares in the advertising revenue.

Strategically, Adobe feels like the more it can help innovate and move the expressiveness of the Web forward, the better off Adobe is in terms of enabling people to produce that expressive content with its tools and servers.