Stock Photography

I personally feel that  the main aim of providing a product or a service is to satisfy and to retain the customers in this competitive world.

iStockphoto is both an online community for photographers and a source of high quality, low-cost stock photos. As of October 2006, iStockphoto’s stock photo library contained ~1.1 million images contributed by 23,000+ photographers.iStockphoto’s success opened up a new market segment for stock photography, catering to customers who could not afford traditional, high cost stock photos from the likes of Getty Images and Corbis. This success caught the eye of Getty Images, who acquired iStockphoto for $50 million in cash in February 2006.

Launch strategy and marketing

iStockphoto was originally started as a hobbyist site in May 2000 by Bruce Livingstone. Bruce created the site as a means to share and publicize his portfolio of photographs. Initially seeded with 1,600 of Bruce’s photos available for free download, the popularity of the site prompted Bruce to open the site to other photographers who also wanted to contribute their photo collections. This transformation took place 6 months after initial launch, creating a thriving community of contributing photographers.

Bruce initially marketed the site by word of mouth, telling friends via e-mail. One of Bruce’s friends, web design guru Jeffrey Zeldman helped publicize the site from its early days by blogging about it and using iStockphoto images in magazines like Macworld. Mr. Zeldman’s influence in the designer and photographer communities was highly instrumental in popularizing the use of iStockphoto for royalty-free stock photos. As the iStockphoto community evolved, its photographer base served as the main marketing vehicle. By promoting their own iStock photos, these photographers create publicity and word of mouth marketing for the service. iStockphoto provides them with some interesting marketing tools (like free, customizable business cards) to help them self-promote their portfolios. Later on its lifecycle, iStockphoto began advertising its service on the Internet, in print, and at trade shows. An extension of this advertising strategy was to maintain good long-term relationships with influential book authors within the design community who could provide increased awareness for the iStockphoto service.iStockphoto provides them with some interesting marketing tools (like free, customizable business cards) to help them self-promote their portfolios.

Key success factors

Offered a free alternative for a previously high cost service

iStockphoto established the market for “microstock” photography by providing high quality stock photos at extremely low price points. iStockphoto’s innovation was offering all its photo licenses royalty-free, available via easy download over the Internet. The notion of high quality photos licensed for free was a game changing development in the stock photography market in 2000. iStockphoto enabled the distribution of photos from budding and semi-professional photographers to reach a large market for the first time. iStockphoto also drastically reduced the cost of stock photography for a slew of customers (graphic designers, small businesses, non-profits, etc.) that could not afford traditional sources of stock photography.
As iStockphoto increased in popularity, hosting and bandwidth fees for the site grew proportionally, forcing a decision upon Bruce as to how to pay for bills approaching $10,000 per month. Bruce opened the discussion to the iStockphoto community, ultimately allowing the community to determine an acceptable solution. In February 2002, the community decided to charge $0.25 per photo mainly to cover site maintenance fees, with 20% of charges going back to the photographer. iStockphoto has since gone through several iterations of its business model, but continues to offer photos at a relatively low price point. The first iteration occurred in 2004, when iStockphoto officially became a for-profit entity. At that point iStockphoto charged 1, 2, or 3 “credits” (priced at $0.50 per credit) for photos of different sizes, offering a 20% commission to the contributing photographer. Today, iStockphoto offers photos at a myriad of price points and has a more robust photographer commission structure. For example, photos are offered at price points of 1, 3, 5, 10, 20, or 40 credits (priced at $1 per credit). Commissions vary from 20% - 40% based on sales milestones reached and whether the photographer grants iStockphoto exclusive use of images.

Fostered a loyal and active community

iStockphoto was started as a hobbyist site by founder Bruce Livingstone and it remained so for several years. The fact that iStockphoto wasn’t created as a business venture from the start was a big factor in iStockphoto’s success. iStockphoto consciously fostered its community from day one through forums, emails and face-to-face meetings. iStockphoto has many active online forums where new users can post questions and get help from experienced users. These active forums have made the iStockphoto community welcoming to new users and engaging for experienced users. Secondly, iStockphoto makes a point to provide very prompt responses to user questions submitted via e-mail. Thirdly, iStockphoto hosts a series of trips (called iStockalypses) where users can shoot photographs of interesting places and share knowledge about the stock photography trade.

For one, it provides transparency around how active certain members are with the site, specifically around number of photos uploaded and number of paid downloads. This enables new users to learn from the success of power users, providing examples of the types of photos that get the most traction. iStockphoto also creates a sense of positive psychological exclusivity amongst users by only approving photos that meet certain quality standards. This process helps users improve their photo taking skills and makes them feel that they have “earned” their place within the community.

Emergence of low-cost “prosumer” digital SLR cameras

In the winter of 2003, the Canon Digital Rebel (a 6.3 mega pixel prosumer digital SLR camera) became available at a price under $1,000. Bruce viewed the availability of these cameras as a turning point for iStockphoto because he created a great influx of high-quality photos. iStockphoto was in a great position to capitalize on this emerging trend through the infrastructure he had developed over the previous years.

Took measures to ensure that submitted photographs met quality standards

As the popularity of the iStockphoto service grew, the number of photos submitted exploded. At the same time, customers came to expect a certain level of photo quality from iStockphoto. As such, iStockphoto developed detailed guidelines for what constituted acceptable photo submissions. iStockphoto views this both as a quality control mechanism and a means to provide feedback to photographers.

Exit analysis

iStockphoto was able to support its operations for many years from the revenue generated by photo sales. However, during business planning in late 2005, the company realized that they needed about $10 million to meet their future growth expectations, including $3 million for hardware expansion costs. With this new capital requirement, the iStockphoto management team sought venture funding for the first time. After securing a term sheet from a VC, management became hesitant that this was the best option for the company. The team feared that they would not be able to maintain product control or nurture the community in the same fashion that iStockphoto had been built upon. Thus Bruce decided to seek other options, and contacted Jonathan Klein, CEO of Getty Images. After some positive conversations regarding company strategy and cultural fit, iStockphoto was sold to Getty Images in February 2006 for $50 million in cash. This represented a valuation substantially higher than the valuation placed on the company by the proposed VC investment. Hence the sale to Getty Images made both financial and cultural sense for Bruce and the rest of the iStockphoto team.