The online service is part of a larger move to introduce ad-supported online services to complement its existing products and broaden the company reach into the consumer market, Adobe CEO Bruce Chizen told CNET News.com.
Chizen said Adobe laid the foundation for a hosted Photoshop product with Adobe Remix, a Web-based video-editing tool it offers through the PhotoBucket media-sharing site.
Like Adobe Remix, the hosted Photoshop service is set to be free and marketed as an entry-level version of Adobe's more sophisticated image-editing tools, including Photoshop and Photoshop Elements. Chizen envisions revenue from the Photoshop service coming from online advertising.
"That is new (for Adobe). It's something we are sensitive to because we are watching folks like Google do it in different categories, and we want to make sure that we are there before they are, in areas of our franchises," Chizen said.
Chizen described the introduction of Adobe Remix and the forthcoming hosted Photoshop as part of a larger move toward integrating hosted services into the company's product mix.
Like Microsoft, Adobe's business is built largely around packaged software, installed locally on users' PCs. Likewise, Adobe's plans to diversify its business with online services mirrors a large-scale effort at Microsoft to introduce a combination of software and services.
As online applications become more functional, can fill out its product portfolio, Chizen said.
The company intends to offer entirely hosted applications, as well as "hybrids," in which Adobe uses the Web to introduce features to desktop products, such as Adobe Photoshop Lightroom, he added.
"We recognize there is a customer there--we recognize they are not going to pay us, necessarily, directly. But we could use ad revenue as a model. Google has demonstrated that it works pretty well for certain types of applications," Chizen said.
Indeed, Adobe's online push has as much to do with consumers' expectations as encroaching competition from Google, said Peter O'Kelly, an analyst at Burton Group.
"From a digital-media consumer experience, Adobe really needs, for competitive and customer value reasons, to be the end-to-end products and services supplier," O'Kelly said. "It doesn't portend well if Adobe can't get on top of it."
The latest version of Google's Picasa, which is a desktop application, introduces features to post photos on the Web. It also allows people to read Photoshop files, O'Kelly noted.Showdown with Picasa?
Chizen said that although hosted Photoshop is meant to be a low-end product, the company intends to ensure that it is of a higher quality than free alternatives. As an online image-editing application, Adobe faces a challenge in providing a good experience for customers, he added.
"You don't want (network) latency to be an issue for the user, so it's harder, in some ways, than a video Remix product," he said. "Even though bandwidth is increasing, the pipes are getting filled with video, so the user experience will likely stay the same for the next three to five years."
The company is also wary of not diluting the brand name of such as designers and illustrators.
"If we offered a host-based version of Photoshop that's Photoshop-branded (and is) potentially better than Picasa, you'd probably go the Photoshop route because of your belief in the Photoshop brand and the quality associated with the brand," Chizen said.
A Google representative on Wednesday said that the company has had good success with the Web upload feature in Picasa since introducing it.
"We've seen really exciting growth in Picasa Web Albums since it launched last year, and we're continually listening to user feedback to further improve our products," the Google respresentative said.
As Adobe introduces more online multimedia features and products, the company intends to use its expertise in products such as Photoshop and video-editing suite Premiere Pro, and to combine it with the Web development savvy it gained through its acquisition of Macromedia.
Remix, for example, was written using Flex, the development environment for Adobe's Flash Player.
Chizen noted that Google's wealth of technical talent in Web development makes it the most likely candidate to challenge Adobe as it offers hosted media-editing applications. He indicated that Adobe is still weighing its options in regard to how it will deliver hosted, ad-supported services.
Its deal with PhotoBucket around Adobe Remix is not exclusive. The partnership arrangement allows Adobe to share advertising dollars without having to invest in the computing infrastructure and people to operate the Web site, he said.
But revenues from Web ads could potentially justify an Adobe investment in offering hosted services directly, Chizen said. "Once we see that it could be a significant revenue producer, then maybe we'll want to deal with it," he said.
The company already offers Acrobat Connect, a service for Web conferencing introduced with the most recent release of its Acrobat PDF reader.