Lords of the Freebies

It says a lot about the computer industry when two titans can merge together and still be worth less than 10% as much as the industry leader. But that's precisely what the Adobe/Macromedia merger demonstrates. And why? Why are two highly innovative companies, each straight from the fast-growing hard-charging highly-innovative software company mold, still worth such a comparatively small amount? They've embraced one of the three early software strategies: The first, to sell software as a large, customized package for a single buyer, is largely dead, subsumed into consulting and marginalized by standardization; the second, mass-production for mass-sale, is the Microsoft model -- aim for ubiquity in every market, and ensure that every user is a paying user; the third is the compromise Adobe and Macromedia chose: Build some powerful software, but make a stripped-down version available everywhere. The result? Adobe is the standard in electronic documents. Macromedia is the standard in high-interactivity Internet content. They're both everywhere. And it didn't make them all that rich.