Having shaken up the photo business, Shutterstock is now focused on video

Having shaken up the photo business, Shutterstock is now focused on video

Mar 15th 2014 | NEW YORK | From the print edition

THESE days Silicon Alley has a Silicon Skyscraper at its top end. The Empire State Building, once stuffed to the viewing-deck with fusty, dark wood offices, has become home to several geek-filled open-plan floors. First in was the fast-growing New York arm of LinkedIn. Now, complete with gourmet cafeteria and video-game room, it has been joined by Shutterstock, the most successful tech firm to emerge in the Big Apple since it started claiming to be the new home of digital innovation.

Shutterstock was founded in 2003 by Jon Oringer, a programmer who had previously sold software to block pop-up ads. Sending out marketing e-mails, he had become frustrated by the limited supply of cheap photos to use, and when a Microsoft software upgrade killed his business, he decided to focus on solving the photo problem by creating an online marketplace for stock shots, starting with 30,000 he took himself over the course of a year.

Mr Oringer’s goal was to make the meeting of supply and demand as simple and data-driven as possible. Customers can either buy the right to use a single image or pay a subscription to use up to 25 a day. Subject to a rudimentary quality review, supply was opened up to anyone who wanted to post pictures for sale, getting paid between 25 cents and $120 each time they are downloaded. Detailed tagging about what is in each picture (dog, hat, shades) plus feedback on what is and isn’t selling have led to constant improvements in searchability for consumers. This has also helped to generate the right supply by telling photographers where demand is strongest or most unmet.

In contrast to many other startups, Shutterstock’s business model of get paid first, pay out later helped to make it instantly profitable. Its revenue growth has averaged 30% a year. Between them, 55,000 photographers around the world submit about 30,000 pictures a day, about half of which are accepted, adding to a total library of over 30m images.

Since 2006 it has also supplied videos; indeed, the firm’s supply of cheap, high-quality video may begin to displace the expensive production outfits that work for ad agencies, says Brian Fitzgerald of Jefferies, an investment bank. Shutterstock is also dipping a toe into the nascent market for instructional videos. Mr Oringer reckons this is similar to the $4 billion-6 billion stock-images market but is potentially far bigger. So far Skillfeed.com, its subscription-based website, is mostly offering videos that teach the skills needed by its army of photographers and those who consume their work. Its hits include “How to cast realistic shadows in Photoshop”.

Shutterstock’s share price has quadrupled since its initial public offering in October 2012, giving it a market capitalisation of about $3 billion. That is despite it falling by 14% after Getty Images, the incumbent whose business Shutterstock’s rise has hurt most, announced on March 6th that it will make more than 35m images available free for personal use.

The move by Getty, which is owned by Carlyle, a private-equity firm, suggests that it is feeling the heat from its upstart rival. It has long had a crowdsourced online market of its own, yet it has more onerous terms for both customers and photographers than Shutterstock, says Mr Fitzgerald, who blames an indebted incumbent’s fear of cannibalising its existing business. As Mr Oringer points out, Getty is only making pictures free for non-commercial users, whereas “99.9% of our business is commercial use.”


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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