32 Comments

Summary:

Google (GOOG) should buy Adobe (ADBE), but not for the reasons you might think. Google would acquire some great software in Acrobat, Photoshop and their desktop run-time environment (now called Adobe Integrated Runtime, or AIR). But while these are good software assets that could be integrated […]

Google (GOOG) should buy Adobe (ADBE), but not for the reasons you might think. Google would acquire some great software in Acrobat, Photoshop and their desktop run-time environment (now called Adobe Integrated Runtime, or AIR). But while these are good software assets that could be integrated nicely into Google Docs, Picasa and other desktop applications, what Google needs Adobe for is video. For this is the next frontier for Internet advertising revenues, and without a strong presence, it could get away from them.

The most compelling asset in the Adobe arsenal is Flash. Google needs to own Flash because, as anyone who has used YouTube knows, this software is currently the prevalent method for playing and authoring Internet video. The Google monetization of video is beginning, and this represents a large, untapped market that has the keen interest of many advertisers. Put simply: The ability to serve user-targeted and relevant advertising embedded within a Flash video on YouTube represents a marketing opportunity that few advertisers could resist. Besides, Google already owns YouTube.

The other reason Google needs Adobe is to stay ahead of Microsoft (MSFT). Microsoft has recently launched its own Internet video-authoring and production software, Silverlight. It will undoubtedly soon be present on every Windows desktop, competing with Adobe Flash on millions of computers without the need for either a download or browser plug-in.

The monetization of Internet video is a nascent market with enormous advertising revenue potential. Although Google clearly knows how to monetize Internet content, they’re not there yet with Internet video. Google: Buy Adobe and secure that future revenue stream.

  1. Just wondering…Google is converting the YouTube videos to standard H.264 for the iPhone. Standards are good, Flash is proprietary. Could Google in fact be moving away from Flash?
    You could probably argue that YouTube made Flash Video. Could it also kill it?

    Share
  2. Not sure what the case is for Google to buy Adobe. Wouldnt Youtube be able to insert pre-roll and post-roll ads as part of the videos uploaded on youtube by themselves?

    Why do they need to own “Flash” technology?

    Share
  3. Allan Leinwand Tuesday, August 14, 2007

    whatthecase – by owning Flash Google will be able to control their destiny around video advertising. While they can do ad insertion today, if they owned the technology they could make ad insertion easier and more relevant to the video. Not to mention that they could monitor the analytics of the users watching the video itself (start, stop, pause, fast-forward, etc) for advertisers.

    Share
  4. I’m pretty sure that by buying Adobe just for Flash, they’d kill their bread and butter – Photoshop and all the other quality programs. The last thing that Adobe’s professional products need is Google’s touch.

    Allan, I see what you’re getting at, but it’s not a convincing argument.

    Share
  5. It makes no sense at all to buy Adobe.

    1) Adobe market cap is 23.7 B
    too big to be easily digestible

    2) Flash is a tiny portion of what Adobe
    does and their most promising product
    is neither the Flash playr, nor the
    Flash editor. It’s actually FLEX,
    a compiler and developer environment
    that actually makes possible things
    like the one you describe.

    And guess what… FLEX will be open
    source later this year, when it’s
    finally released out of beta.

    No need to buy Adobe to get Flash !!
    You probably missed the press release

    Google -no doubt about it- is already
    working with Adobe to address the next
    advertising delivery wave on the
    Flash/Flex system.

    http://labs.adobe.com/wiki/index.php/Flex:Open_Source

    That’s on the content creation and application development side.
    On the Flash Player client side we also have good news:
    http://www.gnu.org/software/gnash/

    Gnash, even at its early stage of development is already capable of playing back Youtube content.

    So, that’s succintly why your article doesn’t make any sense at all.

    Share
  6. Wesley Boland Tuesday, August 14, 2007

    Video will be part of HTML spec in the future… well maybe still in draft but we can hope.

    http://en.wikipedia.org/wiki/HTML5

    Share
  7. This article really doesn’t make any sense. Google wouldn’t be able to make any proprietary strategic utilization of Flash without antitrust vultures swooping down. And the lack of owning Adobe isn’t what’s stopping them from doing pre/post roll ads anyway.

    @PXLated
    The only reason the iPhone uses H.264 is because it can’t handle Flash.

    Share
  8. Allan Leinwand Tuesday, August 14, 2007

    vruz – you bring up good points, but if Flash/Flex is about to be open source (and subject to a GPL/GPLv3 or BSD-type license?) then it is likely that any attempts by Google to monetize video using this software could be open source as well. Seems unlikely that Google would want a mechanism for doing analytics and monetizing video in the open source. Just a thought…

    I believe that monetizing the video stream from Flash content is a key advertising segment for Google going forward. Since Silverlight from MSFT will be on the desktop soon there will be competition in this market.

    Share
  9. Does anyone know how Adobe makes money from these various developer products such as Flash?

    Share
  10. I guess Google is out to gobble up everything that gets in their way.

    Share

Comments have been disabled for this post