How istockphoto.com Sells $4,000,000 Photo Downloads Per Year at $1 Each

CHALLENGE: Every year art directors and designers spend several
billion dollars on stock photography. Getty Images, the company with
the largest marketshare, is predicting $600-$610 million for its own
sales alone in 2004.

Back in 2000, a group of Colorado-based photography nuts set up a
barter site where photographers could swap photos -- for free. As
the library grew, they began to get requests from non-photographers
who wanted buy the rights to use photos.

Obviously the current stock photo industry wasn't filling a need. In
fact, the team decided the industry had two basic flaws:

Flaw #1. Inventory growth barriers
Stock photo houses require that any contributing photographer have
10,000-20,000 images in his or her portfolio. So, anyone outside of
this elite group can't sell images.

But, the digital camera boom has removed the barrier of having to
understand the mysteries of the darkroom. Now, loads of people, from
enthusiastic amateurs to professional photographers, have a
collection of pretty good photos they'd like to sell.

Executive VP Patrick Lor says, "If I'm in the right place at the
right time taking a great photo, why shouldn't I be able to sell
that?"

Flaw #2. Pricing barriers
None of the services allowed designers and art directors to buy just
the exact photo they wanted cheaply. Your choice was either buying a
limited, static, collection of photos on a disc for a few hundred
dollars; paying $399 or more for the use of one particular image; or
buying a subscription to an online pool of photos for $500.

So, in 2002, the barter site became a content sales business at
istockphoto.com. The goal was to democratize both ends of the
business -- to throw open the doors to any decent photographer on
the planet, and to price photos low enough that anyone could afford
to buy them.

CAMPAIGN: The problem with flinging your doors open to anyone who
wants to post photos to sell is that pretty quickly your database
will be filled with crud. And if customers notice a high crud ratio,
soon they'll stop visiting your site entirely.

So, istockphoto.com instituted a three-step quality-assurance
system:

-- Photographer's application
In order to start selling photos, wanna-bes have to answer a
pop-quiz to demonstrate they understand the basics of the stock
photo industry. Do they understand copyright? Do they have consent
forms for all their models?

"People have to understand it's a global business. It's not just
about how nice their photo is," says Lor. That said, applicants also
have to submit three sample photos to demonstrate basic technical
skills.

Anyone rejected can reapply at any time. "Our system isn't set up to
exclude people, it's set up to educate people. We're looking to
train those legions of photographers throughout the world on how to
shoot stock photographs and the business behind stock -- what makes
a photo saleable, and the laws and regulations."

-- New photo approval process
No matter who the photographer is, every time he or she uploads a
new photo, it's put through a review process. A human set of eyes
checks that it's a clear, non-offensive image. The process takes
about three days.

istockphoto.com relies on an in-house team plus 20 volunteer "image
inspectors" around the world to handle reviewing an average of 3,000
new photos per week.

-- Openly visible sales records
Site shoppers can see exactly how many times a particular image has
been sold. "If that photographer put a dud in their portfolio, you
be the judge. We give them enough rope to hang themselves or to
build a rope ladder to go up to the next level," explains Lor.
Visitors can also post reviews, and the site allows you to surf by
user-favorites.

Like other online businesses hoping to profit from
"democratization", istockphoto relies heavily on word of mouth to
drive traffic. One key that helps: because photographers selling via
the site see income coming in, they are incentivized to drive
shoppers to their portfolios online.

Once people get to the site, they can surf istockphoto.com's image
library for free. If they don't find exactly what they're looking
for, they can also post a query to the message boards to see if any
photographer would be interested adding something to the available
inventory.

Plus, as an added incentive for repeated surfing, new photos are
added to the database the minute they are approved -- around the
clock. Inventory is constantly growing and freshened.

istockphoto.com wanted pricing so low that even art directors and
designers on skintight budgets would be tempted to pop for photos.
After all, once you get below a certain price point, it's purely a
volume business, so you have to encourage massive buying volume with
what-the-heck pricing.

So, prices range from fifty cents to $1.50 per photo downloaded. (In
comparison, competitor Comstock charges $399 per image.) "It's about
bringing the price down to a level where everybody can afford to buy
a stock photo," says Lor.

To lower transaction costs, 1stockphoto.com instituted a
credit-buying system much like buying tickets at a fair. Customers
can purchase in blocks of $10, $25, $50 and $100 at a time. At the
$10-level, you get 20 credits at fifty cents each. At the
$100-level, you get 250 credits at forty cents each.

Last November istockphoto.com lowered the bar even further,
partnering with a micropayments vendor to accept payments as low as
$1 for a single photo.

RESULTS: "We sold 44.52 gigabytes yesterday and the average download
ranges from 100k to eight meg. You do the math," Lor told us last
week. We did, and by our estimate, istockphoto.com is selling
$20,000 of photos per day currently.

If you blink, that number will be even higher. "Our growth numbers
are something like 25-45% month on month growth," says Lor. "It's
always been growing like that. It's something like 600% per year.
I'm amazed every single day; it's almost incomprehensible."

Just because the prices are low, it doesn't mean buyers are all
small-fry. "We have a bunch of A-list clients, big Fortune 500
companies have accounts with us. Art directors set up accounts and
give their designers all access to it."

The micropay experiment is also growing quickly. In just five months
roughly 2% of sales are from micropay customers, who are often
consumers instead of design pros. These consumers may just buy once
in a blue moon to have an image for their personal site or perhaps
to create a greeting card. It's one more natural step in the
self-publishing revolution.

About 15-20% of photographers attempting to join the system fail
their first time around. Interestingly, some pros fail when
enthusiastic amateurs make it, simply because they don't understand
the business aspect as well as they should.

Roughly 3,000 photos are submitted each week, and about 1,500 are
accepted. As of this writing, the library has about 110,000 images.
In contrast, competitor Jupiter Media's Photo.com claims to have
100,000 photos.

While none of istockphoto.com's participating photographers are
making a full-time living from the site, Lor says in time this will
change both because sales are rising and because photo libraries are
evergreen content. Once you've posted enough quality photos for
critical mass, you could make money off them for the rest of your
life.

"Some people struggle to make $5,000 a year. Some easily make
$10-15,000. It's recurring income. It's like song-writing. It sits
there on the server and every time that song gets played they get a
dime for it. Ultimately they can sit back and do nothing. These
residual income streams are what stock photography's about."

Participating photographers are happy enough to have posted
thousands of "buy my photos here" links from their own sites to
1stockphoto.com. This has a tremendous side benefit -- Google
ranks sites based on related site link popularity, so
istockphoto.com dominates the organic (free) Google listings for
terms such as "stock photos".

How big can istockphoto.com get?

"We don't think we've tapped out the designer market yet. That may
take a couple of years if we continue at the rate we've been
growing," says Lor. Plus, if you add in the self-publishing consumer
marketplace, "this is a business model with almost zero
limitations."

Related links:
BitPass - the micropayments vendor istockphoto.com uses:
http://www.bitpass.com
istockphoto.com
http://www.istockphoto.com
Getty Images
http://www.gettyimages.com
Jupiter Media's Photo.com
http://www.photo.com
Phototalk - a Blog covering the stock photo industry
http://talks.blogs.com/phototalk/stock_photo_industry/

Its amazing.... but it prooves once again that innovation can make a huge inroad even into what some would consider a saturated market.

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