Canva Business Model Breakdown: Product, Revenue, Competition, and The Big Question

“Everything artificial is designed.” - Dan Norman, author of The Design of Everyday Things

What is Canva?

Canva is a software product that helps designers of any skill level to create media 10x faster.

Canva simplifies designing:

• Presentations
• Blog post covers
• Social media posts of different formats (regular posts, stories & WhatsApp Status, etc.,)
• Ads across every digital ad network (Facebook Ad, Twitter Ad, LinkedIn Video Ad, Leaderboard Ad, Story Ad, Feed Ad)

Canva makes it simpler and faster to design media assets embedded across the internet.

Product:

• The product is designed with the perspective of getting a particular job done for the user rather than aggregating a bunch of tools that allow a designer to edit an image.
  • Example: Not everyone who wants to create a LinkedIn cover photo has the skill, time & patience to wrestle with the complex tooling available in Adobe Photoshop. Instead with 1 click, Canva allows anyone to get started, and within 5 mins of intuitive exploration of Canva’s predefined templates the user will be able to come up with a new custom LinkedIn Cover image.
  • The effort to do the job of creating a LinkedIn Cover post is reduced by 10x with Canva. The same holds for any type of job that Canva supports currently.
• Time Saver as a Mental Model: Great products save great amounts of time to their consumers.
  • Cornelius Vanderbilt's railways saved time to travel across the country for people and goods.
  • Amazon saved time for consumers to go to the big box stores.
  • Canva saves time in designing media that is routinely used everywhere on the internet.

Business Model:

• Canva uses the popular freemium model commonly used by most of the Software as Service products. They give away the product for free and charge a premium price for more advanced features.
• Pricing options include Free ($0), Canva Pro(12.95/Month $119.40/Year) & Canva for Enterprise (Pricing is unavailable).
• Canva's freemium version is generous and for a majority of use cases, the premium subscription is not required. This strategy helps Canva in building a large satisfied customer base that will become strong advocates for their product and even drive their enterprise subscriptions.
• The reciprocation effect is at its peak effect. It is also a bottom-up strategy that has been successful in other SaaS products like Slack.
  • As someone who has created a ton of media assets on Canva, I would bet Canva has one of the highest NPS scores in the industry.

Positives:

• Product: Canva nailed the in-browser product experience for creating media assets while the industry started moving from desktop to browser. They also nailed down the use cases consumers are using the product for, which was a step away from what Adobe was building at the time.
• Instead of competing with other design products like Figma, Canva's approach has been about integrating with competition and making them partners. A designer could still design things on multiple products like Figma, Facet.ai, or Adobe and in the end, create the final product in Canva.
• For every investor dollar that goes into a startup, $0.5 goes into two types of taxes.

  • Cloud tax: Paid to AWS, Azure, or GCP

  • Marketing tax: Paid to Google or Facebook

    Canvas adoption is also the result of nailing the use case of creating Ads across Google and Facebook ad networks.

• Product & Market Expansion: With a significant customer base, Canva has the opportunity to expand its product into the arena of companies like HubSpot in case of marketing and also compete with Shopify in case of Click to Print category services.

Negatives:

• This is a personal bias as a long-time Canva user, but there is hardly any negative that I can see as an outsider in Canva's product, strategy & execution.

Competition:

• Adobe has a Canva equivalent (Adobe Spark) which doesn't address the customer job to be done as well as Canva.
• There are new startups like Simplified, Facet.ai & Invideo (in India) which are creating products to make it easier to create media assets.
• The previous iteration of companies made it simpler to create & edit media in browser, the next generation of products will be an attempt to make them smarter using AI & ML.

The Big Question:

• For a long time, the prediction was that Adobe would acquire Canva. This scenario is now more unlikely. Canva is estimated to be making a cool $1B revenue/year in revenue. This is higher than a lot of publicly traded SaaS companies. Adding to that equation is the recent fundraising announcement of $200M at a $40B valuation. It looks like a Canva IPO is more likely in the next couple of years than a Canva acquisition.

P.S: The cover page for BMB newsletter is designed in Canva.

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