Flash Is Going Extinct, but Adobe Doesn’t Seem to Mind (GOOGL, ADBE) By Zaw Thiha Tun | Updated February 18, 2016
Alphabet Inc. (GOOGL) recently announced that starting June 30, 2016, it will stop accepting ads made with Adobe Systems Inc.’s (ADBE) Flash software, and it will ban them entirely starting Jan. 2, 2017.
This latest turn of events should come as no surprise however, as Google has been systematically phasing out Flash since its Chrome browser began blocking the program’s elements by default last September. That being said, according to NetMarketShare, Chrome currently has over 35% of total browser market share, second only to Microsoft Corp’s (MSFT) Internet Explorer. Google’s uncompromising path towards a Flash phase out in favor of HTML5 essentially marks the end of the web’s most popular multimedia platform. (For more, see also: What Google’s Shift to Mobile Means to Advisors.)
Steve Jobs Was the First to Call Out Flash
Phasing out Flash for HTML5 is not an idea unique to Google. In 2010, Steve Jobs released a now famous letter, lambasting the outdated nature of Adobe’s software. Let’s take a look at some of the most important points that pivotal letter made.
First, Flash is entirely proprietary software, only available from Adobe, and thus is subject to the sole authority of Adobe when it comes to pricing and enhancement decisions. HTML5, on the other hand, is an open standard.
Second, Adobe claims that 75% of web videos are in Flash, though they fail to mention that the same videos are available in other formats as well.
Third, Flash is a security risk. According to Jobs, Symantec Corp. (SYMC), said Flash had one of the worst security records in 2009, and while six years have passed since the infamous open letter, Flash was recently riddled with security issues in 2015.
Fourth, Flash is a huge battery hog.
Finally, and perhaps most pertinent to our current age is Flash’s poor scalability when it comes to the touch screen. As reported by The Next Web, citing research from the Internet Advertising Bureau, nearly half of the U.S. population has a phone with mobile access, and one in five pageviews happen while on mobile devices. In other words, that is a lot of ad revenue that Google, AOL, Conde Nast, Forbes, The New York Times, Time Inc., and the Wall Street Journal could potentially lose out on.
So What About Adobe?
If you are feeling sorry for Adobe, don’t. The shift towards new multimedia standards means the company can finally cease supporting its outdated legacy systems and focus on new tech. CMS Wire reports that at a tech conference last November, Adobe’s CFO Mark Garrett, addressed the Flash question, stating that the company has taken people off of products that Adobe didn’t need to focus on as much, such as Flash. In turn, the company has been able to redeploy those resources elsewhere in the business. Later during the Q&A, Garrett goes even further and states that “Flash is not a material part of our revenue, and we are helping people in many other ways outside of Flash now.”
So there you have it, Adobe probably didn’t so much as flinch at Google’s announcement, but rather released a sigh of relief. Judging by its latest investor presentation, the shift to HTML5 means more resources to focus on more pertinent matters like the cloud.
Ex1. Adobe’s Operating Cash Flows have been increasing (Adobe Investor Presentation)
Adobe’s Operating Cash Flows have been increasing
Ex2. Adobe has been exhibiting healthy business momentum (Adobe Investor Presentation)
Adobe has been exhibiting healthy business momentum
(For more, see also: Adobe Systems: A Company In Transition.)
The Bottom Line
Flash is going the way of the dodo thanks to Google’s announcement to ban all ads featuring Flash elements, starting January, 2017. However, this shift away from Flash should come as no surprise, as many media and tech firms have long since voiced their disdain for the multimedia platform. Furthermore, the adoption of HTML5 is also beneficial to Adobe, who no longer has to support an immaterial aspect of their revenue base. Instead, Adobe can now deploy their resources to new technologies such as the Cloud.
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