- Five years after Adobe paid $540 million for adtech business TubeMogul, only a small part of the business remains.
- Former employees, analysts, and ad buyers broke down what happened to Adobe’s once-lofty ad ambitions.
- They said Adobe struggled to understand advertising’s business model and win over TV ad buyers.
- See more stories on Insider’s business page.
Five years ago, Adobe had big advertising ambitions.
Adobe acquired $540 million for TubeMogul, a video adtech company that buys ads for brands programmatically and competed with Google, Amazon, The Trade Desk, and MediaMath.
At the time, Brad Rencher, then-EVP and general manager of Adobe’s digital experience business unit and a key player in the TubeMogul integration, promised the deal would create a “‘one-stop shop’ for video advertising, providing even more strategic value for our Adobe Marketing Cloud customers.”
The deal would set Adobe apart from other cloud giants including Salesforce and Oracle that invested in marketing tech but not the actual ad buying.
“Adobe, traditionally, has been known for having a marketing cloud that primarily helped advertisers measure interactions with their audience and data,” former TubeMogul CEO Brett Wilson told Insider in 2017. “Advertisers usually have totally separate media execution software. Adobe is the first marketing cloud to have a fully executable advertising layer, riding the gap between martech and adtech.”
But last summer, Adobe shut down a big part of its TubeMogul acquisition, closing its advanced TV business that sold linear TV ads and political advertising to advertisers. Adobe kept its self-serve advertising arm where marketers can buy search, digital and OTT ads.
Advertising has remained a tiny part of the company, comprising 4% of its non-subscription revenue in 2020, down from 7% in 2018. Adobe also has a small amount of ad revenue that’s part of its subscription revenue.
Insider spoke with five former Adobe ad executives as well as analysts and ad buyers about what happened to Adobe’s advertising ambitions. The former execs’ identities are known to Insider but they spoke on the condition of background out of concern for their career prospects.
They said Adobe struggled to fit advertising into its bigger subscription-based model and to pitch advertisers new ways of buying ads. Adobe also felt the pinch of adtech industry consolidation and the pandemic.
Finally, sources blamed Adobe leadership, saying it got increasingly hands-on with its newly acquired advertising business and squelched TubeMogul’s high-energy startup culture. One former employee said that Adobe changed the management of the ad business several times after the TubeMogul acquisition.
“They didn’t understand exactly how media works, but they are very good on the marketing and creative sides,” said a second former Adobe ad exec.
Asked to comment for this article, an Adobe spokesperson sent a statement saying that the pandemic played a role in its decision to axe part of its advertising business.
“Given Covid-19 has further slowed the adoption of a data-driven business model in the TV industry, Adobe announced in Q3 2020 that it will focus its Ad Cloud strategy on its software solution for search, display, video, audio and connected TV advertising as well as new integrations between Ad Cloud and other areas of Experience Cloud,” said the spokesperson. “With this shift we were able to increase our investments in other strategic growth initiatives to serve our customers’ evolving needs. We decided to no longer invest in our managed service, transaction-based product for programmatic TV advertising and fully align the business with our Experience Cloud software-based go-to-market strategy.”
The ad business model clashed with Adobe’s subscription business
Like most ad sellers, TubeMogul charged advertisers based on how much they spend on advertising. Adobe, meanwhile, had a software as a service model that charges clients like Ben & Jerry’s and Sprint monthly fees to use its analytics, e-commerce, and design software tools.
“Selling something on a percentage of media is completely foreign to a company that transacts everything on a software subscription model,” said a former Adobe ad exec. “Adobe was never able to wrap its head around how we made money and was constantly forcing Ad Cloud as a round peg into a square hole of financial accounting and credit.”
“No one is a pure SaaS business model the way Adobe is,” said another former Adobe employee.
Adobe itself suggested that it wasn’t interested in chasing advertising budgets that can fluctuate widely but wanted to sell advertising as part of its subscription-based model.
“I think the decision to be made associated with reducing our focus on the transaction-based advertising revenue … if you look at everything that’s happening associated with that business, there are other companies in that space. I think that was a good way to do it,” CEO Shantanu Narayen said during Adobe’s first-quarter 2021 earnings call, of Adobe’s decision to axe part of its ad business.
When it did that, Adobe reassigned its ad sales team to high-growth areas like Signs and Document Cloud. Top ad talent and longtime TubeMogul staffers left, including global head of agency partnerships Nick Reid; director and general manager of programmatic TV Todd Gordon; and North American ad sales lead Jeremy Bloom. One former employee said around that time, the last set of the vesting periods for TubeMogul’s executives ended.
Adobe struggled to crack the TV advertising market
TV advertisers still buy most of their ads directly from TV networks, spending the rest of their budgets throughout the year.
Adobe, meanwhile, wanted to sell traditional TV advertising through annual commitments, which made it hard to make inroads with TV ad buyers and strained its relationship with ad agencies, former Adobe ad execs said.
“Adobe is in the software business, they’re not in the media business,” said a second former employee. “I honestly think that they shut down the business for Adobe reasons — not industry reasons.”
Adobe’s marketing tech clients tended to focus on harder metrics like sales and lead generations, which made traditional TV advertising, with its focus on softer metrics like awareness, a tough sell, a third former exec said.
“The TV story wasn’t resonating with them because that wasn’t the plan with their marketing stack,” said the second former Adobe exec.
Adobe also faced growing competition from adtech companies including Simulmedia, Tatari, The Trade Desk, and Comcast-owned FreeWheel that were also trying to shake up how TV ads are sold.
Since shutting down its TV business, Adobe has focused on its existing clients, limiting the number of advertisers it can pitch, said one former executive.
Adobe’s ad revenue dropped in early 2020 as advertisers cut spending in the pandemic, the final nail in the coffin for its advanced TV ambitions, two former Adobe executives said.
Adobe faced tough competition for ad dollars
As Adobe tried to figure out the digital ad business, advertisers were consolidating their spending with giants like Google, Amazon, and The Trade Desk.
Adobe ranked No. 5 behind Amazon, Google, Verizon, and The Trade Desk in a recent poll by research firm Advertiser Perceptions asking advertisers which demand-side platforms they consider the most for OTT ads. About one-fourth of ad buyers used Adobe’s DSP, followed by Roku, Amobee, MediaMath, and AT&T’s Xandr.
When it came to self-serve ad tools, only 16% of ad buyers used Adobe’s platform, putting it in sixth place behind companies including Google, Amazon, Verizon, and AT&T’s Xandr.
Adobe’s return to martech has its own risks
Adobe’s return to marketing tech could actually position it better by making it less reliant on ad targeting and measuring methods that Google and Apple are making obsolete.
Andrew Frank, VP and a distinguished analyst at research firm Gartner, said that advertisers are clamoring for tools like Adobe’s to figure out what people buy and what they do online.
But brands may be wary of going all-in on one company for all of their data needs, said Amanda Martin, VP of enterprise partnerships at independent ad agency Goodway Group.
“If [brands] have all eggs in one basket, does that help or hinder you?” she said.