How Animoto's video-slideshow app seeks paying subscribers

Animoto hopes the holiday spirit will get people in the mood to create video slideshows and montages.

The company today released an app for iOS that lets people take their photos, add a song from the company's database of 500 titles, add subtitles, slap on a theme and background, and quickly create a video that can be viewed or shared with family and friends. The videos are stored in the cloud, so they can be accessed by any device.

The app's dead-simple model, already available on the PC, is designed for those who aren't particularly savvy when it comes to editing and creating videos.

"We want people to access high-quality production values without any knowledge of video," Animoto CEO Brad Jefferson told me in a recent interview.

I got a chance to test out the beta version before it was released, and as promised, it was easy to use, with Jefferson and I creating a simple--and extremely ridiculous--video within minutes. It works fairly well, and I'm sure people will flock to this app.

But what I find more interesting about Animoto is its business model. The app is free to use, but there's a premium model that's unique to this kind of service. Rather than a onetime payment, the company is betting people will like this service enough to use it regularly.

Just like its online service, it costs $5 a month to use, or $30 a year. The free service lets you create a free 30-second video, while the premium version allows you to make unlimited full-length videos. The subscription gives you access to services on both the phone and PC.

It's a unique--and risky--model for an app of this kind, which typically relies more on small onetime payments for upgrades or features. Rather than a standard photo or video app, Animoto's model emulates services such as Netflix or Hulu. In those cases, however, people are consuming other content, as opposed to creating their own.

"It's closer to a model normally reserved for the content providers," Jefferson acknowledged.

But Jefferson expressed confidence in the model, saying it has been fairly successful on the PC side. Animoto boasts a conversion rate of 10 percent with PC users, according to Jefferson, who said he expects to exceed that mark with the mobile app.

In total, the company already has 3.7 million registered users, and more than 100,000 paying subscribers, Jefferson said. (Some registered users ended their subscriptions, which explains why the number of pay customers is lower than the 10 percent rate.)

While Animoto keeps all of the revenue on the PC side, in the case of the app, it has to give a 30 percent cut to Apple.

"You have to play by their rules," Jefferson said.

The premium service helps cover the expense of rendering the video. Videos are rendered at 360-pixel resolution, which looks OK on a computer screen. Users can pay extra for a higher resolution video--$3 for 480p and $6 for 720p--a fee that comes on top of the standard subscription rate.

With a lot of developers looking to become the next Instagram or hit photo app, Jefferson said he wanted to create something that would complement those services and present the images to people in a new way.

"We're turning photos into a nice story," Jefferson said.

Inside Apps will not run next week because of the holidays and return on January 2.