Could it be that stock photography is the best business ever?

March 27, 2013   

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What is surprising about this business to me is how high the take rate is.

Most marketplace business take between 1 and 20%:

  • eBay: 12%
  • Airbnb: 13%
  • Stubhub: 25%
  • Etsy: 3.5%
  • Alibaba: Less than 1%

What is staggering about the stock photography marketplaces is that they take 50-75% of the sales price:

  • Shutterstock keeps 70%
  • Fotolia keeps 50%

Other amazing features:

  • You don’t care at all about the quality of the photographer given that you are buying the picture that you see directly – no need to deal with rating systems, etc.
  • The picture can be sold many times
  • The product is purely digital so you are sure the buyer gets it without needing to follow payments, shipping, quality, etc.
  • There are no copyright infringement issues like in music or film because the products are used by professionals in a very public way: web sites, ads, etc.

This may very well be the easiest marketplace to setup and operate!

What makes this marketplace unique is that you have a long tail of pro and semi-pro photographers who are willing to supply the content virtually for free. They have no pricing power and leverage over the marketplaces. While this is also true of suppliers on other marketplaces, because the marginal cost of the sale is $0 and there is no marginal work they need to do for an extra sale, they are essentially willing to accept any price. This is clearly not the case of suppliers on “traditional” marketplaces who are constrained by their gross margin structure.

Moreover, stock photography has a high number of repeat purchases while many other marketplaces which put buyers (in the broad sense of the word) in touch with sellers end up losing them on the marketplace: dating, job and real estate sites come to mind.

What I have been wondering recently: are there marketplaces out there (whether B2B like Shutterstock, B2C, C2C, etc.) that have a lot of those characteristics?

It’s time to put our thinking caps on!

  • Interesting post, Fabrice. Looks like there is room for a business that would help photographers join their forces and hence increase their pricing power to better negotiate with the few marketplaces that control the distribution of their IP…

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  • it’s not true that there is no copyright infringement issues. you need authorisations of model releases, check intellectual properties, dealing with brands, etc… 😉

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  • I literally just walked away from a presentation from Shutterstock’s new prototypes at NY Tech Meetup. What amazes me is that Google hasn’t made the minor tweaks to their existing image search functionality to provide a slightly premium service for distributors and consumers of stock photography. They have all other pieces of the puzzle.

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  • The main challenges that are there after my conversations with shutterstock and getty are: 1) legal rights releases are not necessarily automatic processes and cost money, and 2) image search/browsing/image discovery are challenging problems to solve, specially if you want to tap into the long tail of photographers.

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  • What I like in what you describe for Fotolia and others:
    ·A long tail of producers with little market power.
    ·A simple product: no logistics, no copyright, full transparency. You pay for what you see.
    ·A very large market of potential customers (“universal product”: everyone has pictures on his computer, many people need to use images professionally or privately).

    I looked into class notes market places some time ago, and I think it’s not as attractive as stock photography:
    · The product is much more complex: there is asymmetry of information (so ratings are required), it is not universal (even for the same class it changes year by year or section by section) hence “liquidity” is an issue.
    · Unit economics are not great: ARPU is 6$/year, acquisition costs 1$/user (by definition, college students are not the most wealthy segment). I don’t think it will ever be a very big market.
    · It’s already crowded (Notehall, who was first in the US market, claims 750k users). The were acquired by Chegg in June 2011 for undisclosed amount.

    I tried to think about marketplaces for products/services with similar characteristics than Shutterstock or Fotolia. One that came to my mind is cooking videos:
    · There are thousands of (semi-)professional chefs who would be happy to make some extra revenue by sharing recipes.
    · It’s a “universal product”: except for New Yorkers who order everything on Seamless, everyone needs to cook. And it’s much easier to follow video recipes than papers or books. There are countless opportunities to cross sell.
    · However, the product is much more complex than pictures, and more expensive to make (people need to be taped professionally,…).

    Somehow, pictures marketplaces are in a sweet spot between sharing a passion (like one could do in micro blogging, social networks,…) and professional services marketplaces such as Pple per hour.

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  • I don’t know about the smaller players but for the big guns like Corbis, Sipa, Getty, etc. profitability doesn’t come from their (very) long tails of stock photos but from assignment coming from clients. They do have a large staff shooting for specific clients. It’s an interesting business but it needs to be reinvented in my opinion.. The big question is whether creativity will hold this market against mass photography … Offer a way for people to sell their Instagram pictures easily during live events (to online news) for example … As an agency, I have access to a portal of events where I can pick and choose individual pictures taken at this event by individuals. The agency pay for individual pictures (or a subscription) and individuals gets a small amount of money for their pictures. Offer the same service for video. This service probably already exists.. 🙂

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  • I agree it’s got great dynamics. I looked into doing this in Brazil, but decided that there wasn’t a big enough localization component and the US businesses could easily expand internationally. The counter argument is that the content itself has to be local, such as race, style, flora, fauna and decor. But, this doesn’t necessarily require local operations.

    These dynamics would probably exist for any content marketplace with fragmented and low cost of production because the product has zero marginal cost and, as you mentioned, the marketplace will have leverage over the content suppliers. I know stock video is also a multibillion dollar market, and many data services have these dynamics.

    One day digital art might become a similar market, when it becomes easy to display digital art in the home/office.

    3D printing CAD designs (like shapeways does) will be similar as well.

    Online education could be similar as well, except that most money spent on education is spent for certification (the degree), not for actual education (the knowledge/skills).

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  • iTunes apps, web-templates and mobile app templates (there are 600m web-sites on 200m+ domains and 1-2m apps). not great examples, but..

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  • While I do not see this happening anytime soon – It would be interesting if Instagram allowed users to sell rights to images.

    On another note is there a marketplace for digital goods/gifts?

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  • Fabrice, You are so wrong about your assumptions about the stock photo industry. 1) “You don’t care…about the quality of the photographer…” Stock agencies don’t want to setup paperwork and create relationships with fly-by-night amateurs. They want pro photographers they can depend on for ongoing xlnt material, captioned well, model or property released if necessary, etc. One wrong move by a photographer can cost the company time, money and/or legal liability; 2) “…no copyright infringement issues”. My God, you are so wrong about this. Infringement issues happen daily, ESPECIALLY on public sites, often by “professionals”. You don’t define professionals, but infringement occurs by ad agencies, magazines, and many “professionals” engaged in other businesses. Finally, your comparison to ebay and others for percentage commissions is misleading. Stock agencies actively promote photographers’ images with catalogs, newsletters, ongoing relevant news events covered by photographers, etc. Their take is more because of this, and the fact that they handle scanning, captioning, delivery, exclusive vs non-exclusive usage issues, re-use billing and pricing, and a lot more. You need to do more research than post a misleading, off-the-cuff, patently incorrect information.

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  • “This may very well be the easiest marketplace to setup and operate!”
    As a stock photographer of almost 10 years, I’ve seen a lot of stock agencies or ” stock portals” start and fail. It ain’t that easy, good luck.

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  • As a photographer this post just makes me want to avoid using stock agencies like the plague. Basically what you’re saying is, “Yay there’s a bunch of people desperately trying to make a living out there with a skillset they haven’t figured out how to properly monetize/control the market price of, so instead of taking a reasonable 15% to help them sell their product we get to take 50-75% of their earnings since they have no leverage.” Unless I’m reading this wrong…

    A better idea (from a moral standpoint, and a long-term business standpoint) would be to figure out how to set up a stock agency that doesn’t take advantage of its content creators, and instead draws in the very best talent by paying a much higher percentage (say 75% to the photographer). Most stock photo sites are awash in sub-par photography, and you really have to dig to get the good stuff. A stock site that sets a standard for quality, retains elite talent, and empowers photographers to join forces to get fair prices for their work could carve out a nice niche for itself, and perhaps help turn around this disturbing trend.

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  • Interesting! I missed that one. I agree with you with the virtue of the stock photo industry. According to me, it has a lot of qualities because of its online relevance. Internet not only empowers this business but gives it its sense. There are other areas where the use of the internet makes a lot of sense, as in addition to decreasing the price by desintermediating it creates a lot of value….

    3D printing models look interesting but it is defintely too early. According to me the next big thing could be customized images ( vectors that can be changed or animated using librairies like http://d3js.org/) and it is much more than pie charts and histograms. These images count for a good part of what is sold by image banks today. Simple data like text, numbers and colors can be provided by customers to generate bitmaps, vectors or animations which can be used everywhere from ppt presentations to applications. Data visualization for the masses.

    Business wise the problem with marketplace models is that you have to give away margin to your authors. SAAS has lot of similarities with what you describe for stock images and when you look at businesses like Mailchimp you understand that email might be the “stock image” of the SAAS model 🙂 Here might be the next opportunity.

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