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For years, Adobe has dominated the design industry.
However, a lot of analysts saw the design-software startup Figma as a real threat, in part because of its double annual recurring income.
According to a company press release, Adobe put a significant wager on the future of design by announcing plans to purchase Figma for $20 billion, eliminating its largest competitor in the process.
Figma, founded in 2012 by Dylan Field and Evan Wallace, had a simple thesis: Web-based apps facilitate better collaboration between people more so than desktop programs like Adobe Photoshop.
Adobe made a 2x offer to buy the business on the premise that web-first collaborative design platforms will be the way of the future. We see that with the rise of websites like Canva.
Adobe’s extravagant spending may have more to do with fear than wise business decisions. Figma is in direct competition with Adobe’s XD software. Adobe is eating it rather than fighting it. Investors are concerned that the company is paying too much out of desperation to eliminate competitors, and I’m inclined to agree.
Expected to officially close in 2023, Figma will become Adobe’s third acquisition of over $1 billion since 2020, and by far its largest to date. For nearly two decades, Adobe has had the Facebook mentality to competition.
If you can’t beat them, buy them…
Purchasing competitors as a business strategy can bring a company much success. On one hand you eliminate a major competitor and on the other you gain a large section of the market.
Some acquisitions fit perfectly into the Adobe ecosystem and become a booming part of their growth, like Behance. Others fall to the way side and become obsolete, like Macromedia. You may know them as Flash Player.
As competitors are incorporated into Adobe’s creative suite, some claim that this consolidation may result in less innovation. Reminiscent of Google’s app catalog, how many of Adobe 40+ products do you actually use?
I can count mine on one hand… honestly, on three fingers…
However, Adobe has not defeated all of its competition, yet. Popular graphic design tool Canva just unveiled its own set of tools that may one day compete with Adobe’s Creative Cloud.
Adobe may actually have to compete in this case. Acquiring Canva seems highly unlikely since the startup is sitting at a $40 billion valuation and a current yearly revenue of $1 billion.
Most Adobe users hail from creative backgrounds (i.e. graphic design, illustration, animation, etc.). Many of the Adobe Creative Suite products do not offer online collaboration between creators, unlike Figma that allows entire teams to engage in the product design process through real-time collaboration.
The funny thing is that throughout this acquisition process, people were trolling Figma founder Dylan Field for his ironic tweet from last year:
Then a year and a half later, he tweets…
The responses remind me why I love the internet:
But let’s be real.
Figma is a startup company. The founders, Dylan Field and Evan Williams, looked to create the world’s greatest collaborative design interface. Their investors would probably say they have done just that. The ultimate goal of any startup is a successful exit (or purchase).
The company’s history of investor funding was consistent with a rising unicorn and would surely be a major contender for other’s in the space.
Figma’s Rounds of Funding:
With this consistent growth, it was only a matter of time for Figma to reach a $20 billion valuation. They would eventually become too big for Adobe to purchase. At that time, Figma could begin to siphon a large number of Adobe users and seriously hit them in their pockets.
For Adobe, it was now or never.
People are concerned that Figma’s user-friendly interface will become entangled in Adobe’s subscription nightmare and delayed development cycle. Comments on the Product Hunt thread express dissatisfaction with the prospects of using Figma inside the Adobe system.
Most comments speak to Adobe’s expensive subscription pricing which has already pushed users into the arms of competitors like Sketch, Figma, Canva and InVision.
Well, it looks like they’re about to get their customers back.
As Figma integrates into the Adobe system, users can expect a price increase on par with the rest of Adobe’s Creative Cloud products.
As an active Adobe subscriber, I know first hand the frustration of spending $55 a month on the Adobe Creative Cloud All Apps plan (marketed as the “best value”). Too bad I only use three products.
The alternative is to purchase individual subscriptions which would end up being $60+ a month.
Figma users, welcome to our hell!
Whether you hate or approve of Figma’s major exit, this impending acquisition has the ability to change everything in the design industry.
The employees of Adobe’s closest ally, Microsoft, were growing fond of Figma, potentially endangering a long-standing industry relationship. That bromance may be spared now that Adobe and Figma are teaming up.
But other rivalries still exist.
The online design tool, Canva, recently debuted their Visual Worksuite, also known as Canva Docs. The new feature allows users to edit papers, websites, data visualizations, and more in addition to graphic design.
Co-founder Cliff Obrecht claims the firm is simply “entering a new phase of Canva” and is not seeking to “go head-to-head with Google Docs.” However, the recent move is making Canva appear more like a competitor for Google Workspace and Microsoft Office than a graphic design company.
Tech companies are fighting to stay afloat due to post-pandemic inflation, but Canva is still going strong thanks to its profit from last year, raising $200 million and reaching a $40 billion valuation.
With the launch of its Visual Worksuite, Canva is becoming the world’s most effective visual collaboration tool for a fraction of the price.
Adobe has to use their recent acquisition to differentiate themselves from fast-growing firms like Canva, even though the Adobe-Figma merger makes me wonder if it will be more of the same going forward.
The half-stock, half-cash buy-out for Adobe occurs on the same day as an unimpressive earnings report in which the company pointed out that the Digital Media division’s revenue for the upcoming quarter (which primarily consists of its flagship Creative Cloud suite) will fall short of the $550 million consensus by about $150 million.
The Figma deal may put a smile on Adobe shareholders’ faces for now, but another David will one day come to slay Goliath. The company may be forced to face the threat and not just pay them to go away.
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