In late 2016, Adobe announced that Sensei, the company’s AI technology, would begin to power and assist in some of its Digital Media applications, such as Photoshop and Illustrator. While that was only 3 short years ago, in the dawning of the AI era, Sensei’s role makes Adobe one of the pioneers of machine learning- and deep learning-powered AI. What started in 2016 as narrow AI technology aimed at narrow use cases has become an AI engine that, according to Tatiana Mejia, group Product Marketing manager for Sensei, now powers dozens of different features across Adobe. “We don’t tag any of the features with Sensei, it’s just the engine behind Adobe products,” said Mejia.
Whether the technology is effective or not, the concept is advanced AI thinking. There are a limited number of companies today that have built or are building an AI core to run their business. Only a few come to mind, such as Google, Amazon, Microsoft, Baidu, Alibaba, Tencent, IFlytek, and perhaps Apple and a few others.
Why would such a strategy at such an early stage make sense for a company like Adobe? In Tractica’s opinion, it comes down to this: building a core of AI technologies positions Adobe to address underserved or unserved challenges in its core customer market – the advertising industry.
Adobe Under the Hood
According to Adobe’s latest 10-Q, 97% of revenue for the first 9 months of 2019 came from two segments, Digital Media and Digital Experience. 69% of total revenue came from Adobe’s Digital Media segment, which includes its Creative Cloud offerings. This segment is aimed at creative professionals, mostly in the advertising industry, who develop content. The following slide from Adobe’s November 4, 2019 financial analyst meeting shows the company’s estimate for creative professionals in 2022.
28% of total revenue came from Adobe’s Digital Experience segment. According to the 10-Q, “Digital Experience segment includes analytics, social marketing, targeting, media optimization, digital experience management, cross-channel campaign management, marketing automation, audience management, commerce, premium video delivery and monetization. These enable marketers to measure, personalize and optimize marketing campaigns and digital experiences across channels for optimal marketing performance.” As illustrated in another slide from the recent analyst meeting, Adobe’s strategy for this segment is broader than its Digital Media strategy, cutting across multiple verticals and targeting users from the C-suite to functional managers.
Estimating the AI Opportunity
Tractica maintains a comprehensive database of more than 300 distinct AI use case forecasts. In reviewing Adobe’s Sensei capabilities, we believe the company is positioning itself to address most – if not all – of the areas Tractica has identified as the key use cases for AI in the advertising industry. The key advertising use cases include the following:
- Human emotion analysis
- Video content analysis
- Ad insertions into images and video
- Performance reporting and analytics of ad campaigns
- Ad targeting and media buying
- Voice and speech recognition
- Querying image content
- Creative workflow management
- Preventing advertising fraud
The collective value of the AI software for these use cases between 2020 and 2025 is approximately $24 billion, based on Tractica forecasts published in 4Q 2019. Of these use cases, querying image content and creative workflow management, worth $4.8 billion and $1.3 billion, respectively, are key AI use cases addressed within Adobe’s Sensei-fueled Digital Media products and solutions.
When considering the AI opportunity for Adobe’s Digital Experience segment, it wouldn’t seem that human emotion analysis, voice and speech recognition, and preventing advertising fraud use cases are relevant to Adobe services. However, the remaining advertising use cases, video content analysis, ad insertions into images and video, performance reporting and analytics of ad campaigns, and ad targeting and media buying, are relevant. Their cumulative 2020-2025 market value is estimated at a healthy $14 billion.
All told, that would add up to an AI use case market opportunity in the advertising industry of $20.1 billion for Adobe. The company is a dominant player as a provider of digital tools for creative professionals, but it faces significant competition on the business side of advertising and marketing and customer experience (CX) from the likes of Salesforce, Oracle, SAP, and others. Can Adobe leverage Sensei to address these use cases and gain a competitive advantage in digital marketing and CX? The next 2-3 years could prove to be a significant battleground in the space.