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Adobe sees its future on the Web

Chief Executive Bruce Chizen places his bets on new software called Apollo and says a hosted version of Photoshop is in the cards.

If you need more evidence of the Web shaking up the packaged software business, talk to Bruce Chizen.

The CEO of Adobe Systems oversees a company that successfully harnessed the power of an earlier technology wave--personal computers--for tasks like digital publishing and photography.

Now Adobe is looking to add Web-delivered services to its product line, says Chizen. The company has already developed an online video editor and, Chizen said, an online version of image editor Photoshop is in the works. Also in the works is Apollo, a new client development strategy due later this year.

As the company develops new products, it intends to combine the multimedia authoring skills it has in Photoshop, Premiere and other applications with the Web design and development savvy of Macromedia, Chizen said. Indeed, as Web-based applications become more functional, Adobe's acquisition of Macromedia--maker of Flash and Web development tools--looks better every day, especially as Microsoft continues to challenge Adobe with competing products.

In part one of a two-part interview, Chizen tells CNET News.com about Adobe's online strategy, discloses his plans for Photoshop, and discusses how to live with Microsoft the monopolist. In part two, to be posted later this week, Chizen talks about hidden gems in the Macromedia acquisition and how to beat Google.

We've talked about this in the past, but you have said that Adobe hasn't been concerned with the low end of the market because those are not your core customers. The creative professionals are your core customers. Is that still true?
Chizen: One thing that has changed is that the low end of the market is moving up in terms of expectations. The YouTube audience--everybody wants to be a video publisher, everyone wants to be a creative. So we are doing some things like we have just announced with PhotoBucket and Remix, where we say 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. So that's one of the things we are doing with the Remix product. You will probably see us do that with an image editor. We'll look at ways of reaching the consumer where they don't have to pay.

That's new for Adobe, isn't it?
Chizen: 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. And also we have technologies in which to do it. We can take the video-editing expertise of the Premiere team and the Premiere Elements team and marry it with the Flex/Flash programming framework, which meant that we could get that video Remix product out very quickly, more quickly than we could have without Macromedia.

Right now, for photo editing, a lot of people use Google's Picasa. Those people may never become Photoshop or Photoshop Elements users.
Right, and if we offered a host-based version of Photoshop, that's Photoshop branded, that was 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 name. That's something that would be obvious for us to do.

The reason why we did video first, is that in video we said that other than Jumpcut, there was really nothing else in the market (like Remix), so why not do it ourselves?

But why wouldn't Adobe do this yourself? Why work with someone like Photobucket?
Chizen: We could do this ourselves (the combined Remix and Photobucket offering). But it's nice to have the distribution channel. It's not exclusive to Photobucket. There is no reason we can't do it with the other social sites or content providers. Imagine some of the people already in the video content business, the media houses--why they wouldn't want their users to remix videos? We could offer that from Adobe directly, but offering that from Adobe directly means we have to deal with all of the host-based aspects of the business--the technical operations of collecting the advertising and handling the transactions. That's a pain.

We're giving up some revenue by doing the deal with Photobucket, but they deal with some of the things I don't want to deal with, at least at this point in time. Now, once we see that it could be a significant revenue producer, then maybe we'll want to deal with it.

So where do you stand with a hosted version of Photoshop?
Chizen: It's an obvious place for us to go. There are a lot of online photo editors, so we want it to be deserving of the Photoshop brand. We want it to be a good app. I'd be shocked if we didn't have something in the next three to six months. It would surprise me.

What's surprising is that Photoshop Elements, at $99, is a significant revenue producer for Adobe. Even though you can get Picasa for free, people still want a full-featured product. Not as fully featured as Photoshop, but something in between. So people are buying Photoshop Elements. The question is, what is the demand for a host-based product, how much editing can you really do with a host-based product? Picasa is still a desktop app. So you're talking about a host-based image editor, and you don't want latency to be an issue for the user, so it's harder in some ways than a video Remix product.

The question becomes: how much for a host-only app--which we think some people will want--will we be limited (in) the amount of functionality due to bandwidth speeds? 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, I suspect. So is there a scenario where Photoshop Elements gets more hybrid features? Yes. Is there still a need for a host-based image editor? Yes, but it's going to be limiting to some degree.

So what will your Photoshop product lineup look like?
We'll have host-based, free, ad-driven Photoshop Elements with some host-based functionality, Lightroom for organization, and Photoshop for the serious image editors. And suites with a combination of tools.

What do you see as the most exciting technology coming out of Adobe these days?
Chizen: What's most exciting to me is Apollo. I think we, or someone else, gets to change the landscape of the Web. The way information is displayed on the Web today is kind of archaic. You can't express brand. You can't integrate graphics appropriately. Despite the fact that you have multiple media types, it's not as elegant as a newspaper or a magazine, in terms of look and feel, yet there is so much more capability.

The way information is displayed on the Web today is kind of archaic. You can't express brand. You can't integrate graphics appropriately.

Through Apollo, we get to express that capability through rich Internet apps. That's exciting for the Web; it's exciting for Adobe. It means a lot to our business and to anybody who is creating Internet applications, whether it's a consumer app or a B2B app, B2C app, government app, even internal applications. Something like 61 percent of all information we see gets ignored. That's a lot of information that gets created and dismissed, because we are exposed to too much information. The challenge for anybody who is communicating to anyone has gone up. It needs to look good, interactive, engaging, reliable and secure. We have an opportunity to provide in Apollo all of that.

So for the average user, what will Apollo applications look like?
Chizen: It works like a (desktop) app. There's an icon and you click on it to start it like any application. For instance, we have shown an eBay application (built with Apollo). It looks and feels like eBay, the way eBay wants to be expressed. You are not distracted by the browser. You're not limited by the browser, so you have transparency, you have the ability to have the eBay logo come out of the window itself. You have the ability to have the application look the same across platforms, or you can have it look more consistent with the platform, if that's what you choose. You have the ability to do offline activities if you want to prepare for an auction or capture images or use a Webcam.

You can do all of that without even being connected. And yet, when you are connected all of the buying and selling activity takes place through a user interface that is much more pleasing and engaging to the user.

Another example is Amazon. If you want to buy something from Amazon you might have a watch list. Instead of being notified by e-mail, you might have a desktop app that sends you notification when your item is available and you can buy and sell through that application.

Yet another example is a mortgage application. First of all, a lot of people don't want to do that online. The bank needs the requirements of a PDF, but the user wants a much more engaging experience in which to fill out the application. You probably want real-time charting so you know how much you will pay given a certain interest rate. You can do all of that offline with some apps provided by Fidelity (Home Mortgage) or Wells Fargo. I don't think that we at Adobe realize how many things can be created by this new platform. (Apollo) is cross-platform, runs on Mac, Windows and Linux and ultimately on non-PCs, and they only have to create the app once and it leverages the investments they have already made in HTML, PDF and SWF. It renders all three file formats and they can use all or one of them.

It's also a mobile technology?
Chizen: Eventually it will be a mobile technology. Some of it is the limitations of the devices. We want to take Flash Lite and have the ability to display Apollo or a subset of Apollo on mobile devices. First it will be Mac and Windows and then Linux.

How does Adobe monetize this? How do you make money on it?
Chizen: A few ways. First of all we will provide tools. Any Flex or Flash app can be easily turned into an Apollo app. So we get to sell more Flash authoring and more Flex data services, the traditional tools like Photoshop and Illustrator. The second way is that there will be some apps that we will build that will be Apollo apps. For instance, the Digital Editions project we are working on, the e-book reader, that will eventually be built on top of Apollo. We just announced the Video Remix product. Eventually, that will be an Apollo app. Right now, it's a Flex/Flash app.

But there's no reason that can't be Apollo, so you can actually remix those videos offline on your desktop. We've demonstrated something called Philo that is a Flash video player that can do some neat things like content-sensitive advertising. So those are three examples of apps that we can build and you'll see us do that, in the same way that we built Acrobat for PDF and we have LiveCycle for the enterprise around PDF and Reader. We'll take advantage of Apollo.

How far will you use this internally, given that you say Apollo has all of these desktop advantages?
Chizen: Ultimately, you will have hybrid applications. The big challenge with host-based apps is that the capability of the PC still outperforms by a high margin the experience you get through a broadband connection. So if you are using a heavy-duty app like Photoshop today to edit your images, the last thing you want to do is do most of your image editing over the Web, because it would be horrendous. But there are some features, like color collaboration, that you might want to do over the Web as part of your Photoshop experience and there is no reason why over time some of that, or all of that, couldn't be an Apollo app. So you can imagine us using Apollo to adjunct the existing apps, and in some cases, some of the less-intensive apps, like a Photoshop Elements, could then switch completely over to Apollo. So we foresee making money on Apollo in those ways.

The big challenge with host-based apps is that the capability of the PC still outperforms by a high margin the experience you get through a broadband connection.

It also is a great way for us to continue to extend PDF and Flash. For the developer and the content creator, it's evolutionary. For the user, the experience will be revolutionary, which we think is the right formula. You don't want a revolutionary experience for the developer because that's work. In many ways, that's what Microsoft is doing with Windows Presentation Framework and their Expressions tools. Great experience for the user, but it's a lot of work for the content creator. We're saying, hey, use your existing tools and you can give your user a revolutionary experience cross-platform.

What's the time frame for Apollo?
Chizen: For the first developer release, we're targeting June or July. The hope is for some time in March to do something on Adobe Labs and to have the first release in the fall.

The hybrid model--that's also coming out of Microsoft these days, with their software plus services agenda. Is that where you want to take Adobe in general?
Chizen: In general, but it really varies by product, by solution. And for those computing-intensive solutions, most of the work still has to get done on the desktop--apps like Photoshop and Illustrator and InDesign. It's not a great experience to lay out a magazine remotely. Contributing to a magazine, that could be a host-based experience. So they will all be hybrid, but how much work is done on the host, and how much is done on the desktop will depend on the application. Real-time collaboration and the Acrobat Connect stuff, that's all host-based. So it's really going vary by user, by app.

But you expect that all apps will have some aspect that is hybrid?
Chizen: Over time, yeah. In fact, even on Creative Suite 3, most of the apps will take advantage of the color management stuff we have in Adobe Labs today. Clearly, there are some apps that will need to be so sophisticated and tie so closely to the operating system, you will still want to use C++ and heavy-duty programming.

Let's talk about Creative Suite 3 and Vista: Will CS3 take advantage of some of Vista's new graphics capability or other new aspects?
Chizen: No. One reason was the timing on when Vista would really ship and our own time frame. We didn't really know. Also, another reason is how many customers are really on Vista in the installed base and is it worth the work, especially in the creative customers? And we have no desire to really showcase Microsoft's technology. But we will be compatible with Vista. Whereas, with Mactel, we're really taking advantage of that fully. We had to recompile the apps to be Mactel compatible.

Do you expect Microsoft to really come after your creative customer base?
Chizen: I don't know if they are going after Adobe, but they certainly are going into many of the areas where we already participate. So I don't know if it is a direct attack or a byproduct of what they are doing. We have more reach to the end user, with PDF and Flash, than anyone, including Microsoft. It's greater than anyone else in the world, from a device perspective. I suspect they don't like that. You can ask them.

What I guess they also don't like, if you look at the standard for exchange of documents, other than the standard for creation of documents, which is .doc, is that the standard for sharing documents is PDF. I don't think they really like the fact that PDF is the standard, or that Flash is the standard for animation. And I don't think they like the fact that people use the Adobe solutions for the creation of information other than text and spreadsheets.

If you are Microsoft, you try to displace PDF. XPS is their attempt. You try to come out with tools that leverage their developer community with Expressions. They are big, they have a lot of revenue, they have a lot of resources. They are a monopolist. So I don't trivialize anything that they are doing, but we are moving full speed ahead. We have anticipated that they would come after us. It's taken a lot longer than we ever imagined. With that said, I do worry about them because they have a lot of money and they can go at it forever and ever.