Shutterstock's new tools revamp photo and video search
A microstock's job is connecting customers with the right image among millions. By injecting color into photo discovery tool presentation of videos better, Shutterstock hopes to juice sales.
It's a challenge for anybody selling a wide range of anything online: how do you get the right products in front of the right customers?
Shutterstock, which sells stock-art photos and videos to customers such as ad agencies and PowerPoint presenters, has the matchmaking problem in spades. With 550,000 active customers and more than 23.7 million images, pairing the right buyer with the right photo isn't easy.
Which is why the New York-based company, which went public last October, is retooling how it presents its products to better compete with iStockphoto and other rivals.
Shutterstock has just launched a new stock image discovery tool called Spectrum on its labs site that lets people explore categories of photos based on their dominant color.
It's not the first such move. Last year, it launched an iPad app whose "mosaic" interface presents wall-to-wall images that customers can browse rapidly by swipe gestures. A similar interface for the Web, Instant, was the first Shutterstock labs project.
And it's not the last, said Chief Executive and founder Jon Oringer: an overhaul for video is on the way so customers can evaluate footage with something approaching the ease and rapidity that they can check the results of searching for still images.
"With 50 thumbnail image results, it's very easy to scan. When it's 50 video clips, it's very hard to scan -- you don't know what's in each video," Oringer said. "We're working on ways to take that whole page of data and show it to you really quickly."
On top of that, the company takes a very Googley approach with its traditional photo-search techniques, in which customers type in search keywords and see an array of image thumbnails. "We're tracking hovers [where people direct their mouse pointers], clicks, and downloads," checking how customers refine searches and otherwise gathering data on what converts a search into a purchase, said Wyatt Jenkins, the company's vice president of product. "Our results are more relevant."
The formula is working, said Lee Torrens, who watches the industry closely at Microstock Diaries.
"They're innovating a lot on the buyer-side functionality, helping them catch up to iStock in terms of getting buyers to the image they're seeking as quickly as possible," Torrens said. "Overall, they're growing very quickly, remaining uniquely friendly to contributors, and pushing closer and closer towards iStock."
The new search techniques can appeal to different designers or to the same designer in a different mood. With the new avenues for exploration, "We see people downloading different images. It gets their creativity moving in a different direction," Oringer said. And relative use of the iPad app increases on the weekends, he added.
So far, the company's held things together in its transition from private to public. Revenue for its most recently reported quarter, ended Sept. 30, increased to $42.3 million from $31.2 million the year earlier. Net income increased from $4.3 million to $6.6 million.
Shutterstock raised $82 million in its October IPO, when the shares went public at $17 piece. Its stock now trades above $24.
Oringer has a big stake in how things go at the 250-employee company -- indeed, by owning 55.2 percent of the company's stock, a controlling stake.
Stock imagery in a nutshell
Stock photos are a staple in advertisers' imagery diet -- the senior couple strolling through the park, the fit-looking woman in a yoga pose, the businesspeople shaking hands. They're used in everything from annual reports to blog posts.
A decade ago, the stock-photo business moved from the hands of a relatively small number of professional photographers to a vastly larger pool of people as digital camera image quality improved and the Internet provided a global market. Making the commerce possible were microstock start-ups, led by iStockphoto, which old-school agency Getty Images acquired in 2006.
Microstock companies offered photos for relatively cheap on a "royalty-free" basis, meaning that customers could pay once to license a photo and then use it over and over in many ways. It's a much more liberal mechanism than the traditional rights-managed approach that came before, in which photo use is limited to particular geographic regions, times, and other constraints.
There are plenty of microstock companies out there -- well established Shutterstock competitors also include Dreamstime, Fotolia, and 123RF Images. With dozens of other out there, photographers can call on even more middlemen such as PicWorkFlow that'll retouch photos, add keywords, and upload to multiple microstock agencies.
Shutterstock tries to set itself apart. One way is that doesn't try to draw contributors into exclusive partnerships that increase royalty payments if photographers sell imagery only through a single microstock.
"The bottom line is that as a microstock photographer it just doesn't make sense to be exclusive to any one agency," Oringer said in a blog post. Among the company's reasons for not offering exclusivity: "Image marketplaces that offer exclusivity to contributors must favor certain images...While other agencies sort their search results based on maximizing revenue, we maximize on search success."
Sales by subscription
Another distinguishing feature is that Shutterstock offers a subscription model. Customers that spend $249 a month (or less, if they sign up for longer periods of time) may download up to 25 images each day. Most microstocks, in contrast, sell images one at a time, an option Shutterstock also offers.
About half the company's revenue comes from subscription plans, according to the company's regulatory filings. (Video footage, a fast-growing part of the company's business, is not available through subscriptions.)
And Wall Street likes subscription businesses, with their lower churn rates.
"What makes us a good candidate for going public is we are at the core a subscription product with predictable, repeat, recurring revenue helps smooth things out on a quarter-to-quarter basis," Oringer said. "In general, we have remarkable consistency in terms of acquiring subscribers and monitoring how much they download. That's been stable. If the stability was changing, we probably would taken a different route -- gone for a more private kind of equity raise."
Subscriptions might seem like a bad idea for the contributing photographers who supply Shutterstock with images. The company only passes on 25 cents per photo to photographers for a shot sold via a subscription plan, according to Shutterstock's photographer payout formula, though that rate goes up to as much as 38 cents as the photographer's lifetime photo sales increase.
In contrast, an on-demand purchase of a single image generates 81 cents to $1.24 for lower-resolution images and $1.88 to $2.85 for high resolution.
Low cost, high volume
But subscriptions can also encourage customers to loosen up, downloading images more often and not losing a lot of sleep over which one is best or over which resolution to buy, Oringer said.
"Shutterstock is selling more images than anybody else in the world," with two images downloaded each second on average, Jenkins said. "In sheer volume, we're the clear leader...The subscription is a motivator."
And of course customers who like it will continue with their subscriptions, which ultimately is good for Shutterstock contributors. Shutterstock customers who spent money in 2010 spent more than double as much in 2011, accordinging to a company regulatory filing. And from 2010 to 2011, customer growth was 71 percent. (The company hasn't yet released 2012 statistics.)
The approach is the opposite of iStockphoto's strategy, which emphasizes upselling customers to expensive images, but Torrens said it works.
"Their business model still makes them the cheapest of the cheap," Torrens said. But photographers forget about that fact, "especially when Shutterstock sends them more money at the end of the month than any other agency."