The Implications of Canva's Acquisition of Affinity on Adobe's Dominance in the Design Industry

Assessing Adobe's growth

The chart below illustrates Adobe's quarterly revenue over the last 10 years. One thing is pretty clear -- Adobe's sales growth is impressive. But like many behemoths, growth eventually begins to decelerate. This makes sense as businesses, like people, go through different cycles and eventually reach a maturity point.

Competition is heating up

In the aftermath of the Figma deal, Canva made a move of its own by teaming up with Affinity. With 175 million users on the platform, Canva has clearly demonstrated that it can acquire a critical mass. Should Adobe investors be worried? The basic templates that Canva offers combined with more professional-grade tools from Affinity put the company in direct competition of Adobe.

Moreover, new tools such as DALL-E from OpenAI, among other competing platforms, are flooding the market and placing even more pressure on Adobe. While the competitive landscape is intense, there is a silver lining here. Namely, I don't see a meaningful portion of Adobe users leaving the platform for Canva or its counterparts. Maybe some will seek lower-cost alternatives, but I think the majority of Adobe's user base will remain. Ultimately, the company's comprehensive ecosystem of product offerings remain sticky.

The bigger threat I see is Canva may begin to take away new market share from Adobe -- impacting Adobe's long-term growth trajectory. For now, I wouldn't worry too much about Adobe. The company still holds a commanding lead in the creative market. However, Canva's acquisition of Affinity should serve as a wake-up call for Adobe, and a reminder to management not to rest on its laurels. I think the company needs to identify additional areas for growth in order for Adobe to differentiate itself from competition in the long run. If it fails to do that, Adobe may turn into a slow-growing business in an otherwise high-opportunity market.