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Weird article. Point 1 is exactly correct: This is a purely defensive play designed to protect their existing market cap. Figma and Canva put the once ironclad

Weird article. Point 1 is exactly correct: This is a purely defensive play designed to protect their existing market cap. Figma and Canva put the once ironclad Adobe cashflows at risk, simple as. In that sense, paying 20 billion to protect and enhance your market cap is a no brainer. Point 2 and 3 however I disagree with heavily. Figma purchase is exactly about Adobe's failures to build a good competitor, its not like Figma is this new arrival, people were raving about it for quite some time already and Adobe had a lot of time to respond. This purchase shows that Adobe's cashflows are nowhere near as secure as they were thought to be, hence the rerating on the stock is not a simple blip. And that Lina Khan should stay off this? Give me a break, this is exactly what she should be targeting if she is serious about antitrust. Adobe + Figma bundle destroys this market for anything not named Canva for at least 5-6 years. The idea that FTC should reward innovation by allowing monopolistic/oligopolistic buyouts for big prices is how Whatsapp and Instagram ended up with Facebook.

WillAdams 4y ago
The thing which kills me is that Adobe won't do an on-line text editor which supports styles which will then seamlessly import into InDesign. Surely they're not making that much from InCopy licenses that this wouldn't pay off in the long-term.
karaterobot 4y ago
In my mind, points 2 and 3 conflict with point 1. If Adobe actually believed Figma was an existential threat to the future of their business, and they decided to use their current dominance to subsume it, that's equivalent to admitting failure at some level. And if that's true, then they're trying to stamp out any meaningful competition, which is the kind of thing the FTC should at least be paying attention to.
ghiculescu 4y ago
What is the antitrust risk? As both you and the author say, there’s viable alternatives in the market - and this deal will encourage more of them. It’s unclear how any consumers are harmed by this.
- drc500free 4y ago
  None of the investment thesis is about making Figma better than it was or cheaper than it was. Every dollar they paid is because they believe they can squeeze more than a dollar out of consumer surplus and into their bottom line by preventing competition between Figma and their legacy products. Consumers will be harmed by Figma becoming a more expensive, worse product and Adobe remaining a more expensive, worse product.
- mamonster 4y ago
  Antitrust risk is simple: Adobe takes up Figma, bundles it into existing Creative Cloud and essentially "dumps" the horrible parts of Creative Cloud onto the market as part of the bundle. Competing with bad parts of Creative Cloud is not possible because they are essentially subsidized by the strong parts. Might be a controversial opinion, but this is exactly what Microsoft did with Teams at a certain point. Teams was just dumped on enterprise clients along with the usual Office 365 shebang, and Slack couldn't compete effectively because the bundle effect was too strong(and by compete effectively I mean that if Teams was offered as a standalone Slack would destroy it in every review).
hahaxdxd123 4y ago
I agree. The whole point of a free market is that it should lead to a competitive market, in which profits shrink and consumer surplus expands. He literally says that Figma is threatening Adobe's margins. Stopping mergers of companies like this is ... exactly what antitrust is for?
- ensignavenger 4y ago
  I think the argument is that Figma might not exist in a world where such deals are blocked (or future Figmas may not come into existence if this deal is blocked), and thus would lead to more market harm than it would help. I'm not sure I agree with that reasoning, but it is plausible.
  - dml2135 4y ago
    If that is the case that means that investors cannot see themselves competing with established players in the market. That would be an indication that the current market dominators should be broken up, not that they should be allowed to acquire more companies.
- charlesdm 4y ago
  400 million revenue, 20 billion acquisition price. Sounds like free market to me? They paid up to protect their business and everyone walked away happy.
  - triceratops 4y ago
    > everyone walked away happy Except Figma customers.
    - ghiculescu 4y ago
      Why wouldn’t they be happy? Nothing bad has happened to them. I know some are grumpy on Twitter but none have articulated a real harm. It’s just as likely this is good for them, like how Microsoft really improved GitHub.
jasode 4y ago
>And that Lina Khan should stay off this? Give me a break, this is exactly what she should be targeting if she is serious about antitrust. Adobe + Figma bundle destroys this market for anything not named Canva for at least 5-6 years. But the concept of "market competition" isn't just something outsider observers like us can judge and say -- "Yes, we conclude that this Figma acquisition is anti-competitive." True genuine competition also depends the actual founders' internal motivations and future plans -- which we can't see. In other words, there isn't any competition if the co-founders don't want to compete anymore. Humans have complex motivations and the FTC can't make them compete if they don't really want to. Figma wasn't making profits yet. Yes, they were growing the revenue but every founder has different thresholds of fighting on vs selling. For example of genuine competition, consider that Mark Zuckerberg said "no" to Yahoo's offer of $1 billion. He also said "no" to Microsoft's buyout offer of $15 billion. MZ valued his company more than Yahoo and Microsoft did, so "no" made sense to him. Did founders Dylan Field and Evan Wallace have see their Figma company staying independent the same way? I guess not because they said "yes" to Adobe's $20 billion. >The idea that FTC should reward innovation by allowing monopolistic/oligopolistic buyouts for big prices As for the "innovation" paradox, what the blog author was trying to explain is that Figma never would have gotten this big unless the original VC investors saw a future possible acquisition by Adobe/Autodesk/Microsoft/etc. More startups get acquired than actually go all the way to IPO. Without the option of "Adobe might buy them later so we can get our investment money back", Figma never even becomes Adobe competition because they never got the $332 million in funding in the first place. If Figma was a bigger publicly held company with other multiple powerful shareholders besides Dylan and Evan, that would make more sense for FTC to block the transaction because other owners+managers within that hypothetical company may really want Figma to "compete". If startup cofounders really don't want to compete anymore, FTC can't do much about that.
- CPLX 4y ago
  > True genuine competition also depends the actual founders' internal motivations and future plans -- which we can't see. In other words, there isn't any competition if the co-founders don't want to compete anymore. Humans have complex motivations and the FTC can't make them compete if they don't really want to. Any citations for this extremely novel legal theory?
dwallin 4y ago
Agreed, I think it's a big failure of the imagination to think that a monopoly-cementing acquisition is the only way to encourage more competition. A world in which large dominating companies can be overthrown by a promising upstart is, for me at least, a way more exciting world in which to start a new company. Adobe would not be spending this much money if they didn't foresee a future where Figma significantly disrupts their market position.
master_crab 4y ago
Just commenting because most of the replies seem to forget that the FTC doesn’t regulate competition because MONOPOLY but because their job is to ensure customers aren’t screwed over. No one here seems to have raised a cogent argument that this is an unalloyed positive for customers (disclaimer: I have an adobe CC subscription and it is the buggiest piece of garbage around). This is bad for customers and blocking the deal, based on current history, is the right course. Adobe can use that $20 billion to instead build a not-shit product.

WillAdams 4y ago

The thing which kills me is that Adobe won't do an on-line text editor which supports styles which will then seamlessly import into InDesign. Surely they're not making that much from InCopy licenses that this wouldn't pay off in the long-term.

karaterobot 4y ago

In my mind, points 2 and 3 conflict with point 1. If Adobe actually believed Figma was an existential threat to the future of their business, and they decided to use their current dominance to subsume it, that's equivalent to admitting failure at some level. And if that's true, then they're trying to stamp out any meaningful competition, which is the kind of thing the FTC should at least be paying attention to.

ghiculescu 4y ago

What is the antitrust risk? As both you and the author say, there’s viable alternatives in the market - and this deal will encourage more of them. It’s unclear how any consumers are harmed by this.

drc500free 4y ago
None of the investment thesis is about making Figma better than it was or cheaper than it was. Every dollar they paid is because they believe they can squeeze more than a dollar out of consumer surplus and into their bottom line by preventing competition between Figma and their legacy products. Consumers will be harmed by Figma becoming a more expensive, worse product and Adobe remaining a more expensive, worse product.
mamonster 4y ago
Antitrust risk is simple: Adobe takes up Figma, bundles it into existing Creative Cloud and essentially "dumps" the horrible parts of Creative Cloud onto the market as part of the bundle. Competing with bad parts of Creative Cloud is not possible because they are essentially subsidized by the strong parts. Might be a controversial opinion, but this is exactly what Microsoft did with Teams at a certain point. Teams was just dumped on enterprise clients along with the usual Office 365 shebang, and Slack couldn't compete effectively because the bundle effect was too strong(and by compete effectively I mean that if Teams was offered as a standalone Slack would destroy it in every review).

hahaxdxd123 4y ago

I agree. The whole point of a free market is that it should lead to a competitive market, in which profits shrink and consumer surplus expands. He literally says that Figma is threatening Adobe's margins. Stopping mergers of companies like this is ... exactly what antitrust is for?

ensignavenger 4y ago
I think the argument is that Figma might not exist in a world where such deals are blocked (or future Figmas may not come into existence if this deal is blocked), and thus would lead to more market harm than it would help. I'm not sure I agree with that reasoning, but it is plausible.
- dml2135 4y ago
  If that is the case that means that investors cannot see themselves competing with established players in the market. That would be an indication that the current market dominators should be broken up, not that they should be allowed to acquire more companies.
charlesdm 4y ago
400 million revenue, 20 billion acquisition price. Sounds like free market to me? They paid up to protect their business and everyone walked away happy.
- triceratops 4y ago
  > everyone walked away happy Except Figma customers.
  - ghiculescu 4y ago
    Why wouldn’t they be happy? Nothing bad has happened to them. I know some are grumpy on Twitter but none have articulated a real harm. It’s just as likely this is good for them, like how Microsoft really improved GitHub.

jasode 4y ago

>And that Lina Khan should stay off this? Give me a break, this is exactly what she should be targeting if she is serious about antitrust. Adobe + Figma bundle destroys this market for anything not named Canva for at least 5-6 years. But the concept of "market competition" isn't just something outsider observers like us can judge and say -- "Yes, we conclude that this Figma acquisition is anti-competitive." True genuine competition also depends the actual founders' internal motivations and future plans -- which we can't see. In other words, there isn't any competition if the co-founders don't want to compete anymore. Humans have complex motivations and the FTC can't make them compete if they don't really want to. Figma wasn't making profits yet. Yes, they were growing the revenue but every founder has different thresholds of fighting on vs selling. For example of genuine competition, consider that Mark Zuckerberg said "no" to Yahoo's offer of $1 billion. He also said "no" to Microsoft's buyout offer of $15 billion. MZ valued his company more than Yahoo and Microsoft did, so "no" made sense to him. Did founders Dylan Field and Evan Wallace have see their Figma company staying independent the same way? I guess not because they said "yes" to Adobe's $20 billion. >The idea that FTC should reward innovation by allowing monopolistic/oligopolistic buyouts for big prices As for the "innovation" paradox, what the blog author was trying to explain is that Figma never would have gotten this big unless the original VC investors saw a future possible acquisition by Adobe/Autodesk/Microsoft/etc. More startups get acquired than actually go all the way to IPO. Without the option of "Adobe might buy them later so we can get our investment money back", Figma never even becomes Adobe competition because they never got the $332 million in funding in the first place. If Figma was a bigger publicly held company with other multiple powerful shareholders besides Dylan and Evan, that would make more sense for FTC to block the transaction because other owners+managers within that hypothetical company may really want Figma to "compete". If startup cofounders really don't want to compete anymore, FTC can't do much about that.

CPLX 4y ago
> True genuine competition also depends the actual founders' internal motivations and future plans -- which we can't see. In other words, there isn't any competition if the co-founders don't want to compete anymore. Humans have complex motivations and the FTC can't make them compete if they don't really want to. Any citations for this extremely novel legal theory?

dwallin 4y ago

Agreed, I think it's a big failure of the imagination to think that a monopoly-cementing acquisition is the only way to encourage more competition. A world in which large dominating companies can be overthrown by a promising upstart is, for me at least, a way more exciting world in which to start a new company. Adobe would not be spending this much money if they didn't foresee a future where Figma significantly disrupts their market position.

master_crab 4y ago

Just commenting because most of the replies seem to forget that the FTC doesn’t regulate competition because MONOPOLY but because their job is to ensure customers aren’t screwed over. No one here seems to have raised a cogent argument that this is an unalloyed positive for customers (disclaimer: I have an adobe CC subscription and it is the buggiest piece of garbage around). This is bad for customers and blocking the deal, based on current history, is the right course. Adobe can use that $20 billion to instead build a not-shit product.