Case Study: Choosing to Compete with a Former Partner

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Eighteen months after starting, ARTS PDF's team of 60 part-time and full-time engineers completed the application. But the real work was just beginning. In the past, the business had sold its products only through its online store, telephone sales, and a global network of corporate resellers. Now, De Abrew and Chandler began courting big-box retailers. Since they had no retail contacts, they hired a publishing and distribution partner with an established network to negotiate deals for them. They also added staff to their small sales office in San Francisco to establish a bigger U.S. presence and started a word-of-mouth marketing campaign by distributing free beta versions of the software to hundreds of users through the Planet PDF website.

In April 2005, De Abrew and Chandler officially unveiled Nitro PDF at a software trade show in Orlando. An Adobe executive speaking at the event mentioned the release in her keynote speech, briefly referring to new competition as she talked about the changing PDF industry. She didn't show a hint of hostility, but the general reaction from the Adobe team was chilly. In years past, the two groups would have greeted each other like old friends. This time, the conversation was curt.

Throughout the conference, the ARTS PDF booth was packed with people interested in learning more about Nitro PDF, and the company left the event with dozens of sales leads, Chandler says. It needed them. Shortly after the conference, Adobe pulled its sponsorship of Planet PDF and launched a competing site, AcrobatUsers.com. It also stopped giving ARTS PDF consulting work. Ricky Liversidge, a director of product marketing at Adobe, says the company's decision to compete with Acrobat did not come as a surprise. "That changed the relationship to a form of 'coopetition,' " Liversidge says. "In this industry, that's nothing new. We face that with many different companies."

ARTS PDF isn't quite the "other Adobe," but the company is on track to sell 100,000 units this year, according to Chandler. De Abrew and Chandler expect revenue to ramp up significantly this year, fueled by sales at nine major retailers, including Amazon, Office Max, and Circuit City, and 19 corporate resellers around the world. The company's main concern, Chandler says, continues to be its loss of revenue from the plug-in business. ARTS PDF will eventually start to feel that loss as its Acrobat plug-ins, which the company is no longer developing, become obsolete. "We've bet the farm on Nitro and restructured the entire company around our new direction," Chandler says. "We are playing with the big boys now, but we remain utterly convinced that it was the right decision."

The experts weigh in

Corporations won't buy it

ARTS PDF has bet the store on this strategy. There is demand for a lower-cost version of PDF software. That said, I don't think many large corporations will jump over to Nitro, even if the lower price means they can buy more copies for their employees. Corporate users expect a high level of service from software providers--that's one of Adobe's strengths. Smaller companies can't deliver the same service.

Tim Bajarin
President
Creative Strategies
Campbell, California

It's a matter of trust

It's a double-edged sword. Increasingly, I get calls from clients who are upset with Adobe's pricing model. There are many companies that will say, "Hey, we just need these basic functions and we don't want to spend the extra money for Acrobat." On the other hand, Adobe is an extremely well-known company. It's very hard to overcome that kind of brand loyalty. It's almost like somebody coming out with an office suite to compete against Microsoft. People know Adobe. I'm not sure they would trust another brand.

Rita E. Knox
Research vice president
Gartner Research
Van Nuys, California

Creative marketing is key

It sounds like a smart strategy, but it won't be easy. De Abrew and Chandler saw some chinks in Adobe's armor, studied the marketplace, and found out what people wanted. The question is whether they have the resources to promote Nitro PDF with enough marketing and advertising. They really need to get their message out if they are going to make inroads against a big company like Adobe, which has much deeper pockets.

Dave Dolak
Founder
Marketing by Dave Dolak
Charlottesville, Virginia

What do you think? Should ARTS PDF have gone head-to-head with Adobe? Sound off at casestudy@inc.com.