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Bruce Livingstone, President, CEO, iStockphoto

Bruce Livingstone Google, eBay, MySpace and YouTube are successful because they take advantage of what the Web does best: connect the many to the many. So does iStockphoto.com, which connects stock photographers with their customers and takes a slice of each transaction along the way.

In February 2006, Getty Images acquired iStockphoto, which added a stock video exchange to its offering in September. [Getty Images competes with Jupitermedia, parent company of Jupiterimages and internetnews.com.] Now the company is looking to expand internationally, starting in Japan. Internetnews.com spoke with iStockphoto founder, president and CEO Bruce Livingstone to find out more about his plans for one of the Internet's most innovative business models.

Q: To what do you attribute iStockphoto's success?

There are a number of reasons, but probably the most important one is that we invented the space. There was no micro-payments industry until we came along. There wasn't even the concept of micro-payments stock photography.

The name, iStockphoto, we bought from Network Solutions for $25 and I was sitting there thinking, I'm going to make this cool Web site. We're going to have this open marketplace for images. It was just around the time the iPod came out and everybody was saying "e-enable your business and e-this and e-that."

That was the cheesiest thing, I thought; let's just buy iStockphoto.com. Searched for it and hey, it was available. Turns out that name has been golden for us as far as getting to the top of natural search.

Q: Everyone talks about how great this model is, but what have been the surprising challenges?

Developing the model was the first challenge. When we first started it was actually just a site where you traded images. Nobody actually got any money. There was no money changing hands.

We got this Web posting bill for $10,000 and we were like, "Oh my God how are we going to pay for this?" We decided to cover costs; we would charge 25 cents. It wasn't meant to be this big huge business model. It was only meant to cover bandwidth costs.

A year later it went to 50 cents. Then we got smart and decided that if we had multiple resolutions we could charge $1, $2, or $3. Then we saw some real action and contributors saw "Wow, I sold image for $3 dollars and I just got 20 percent of that." Then people went crazy for it and the traffic just popped after that.

Q: Ebay has power users, people who make a living off selling on the site. Are there people you would call iStockphoto power users?

Absolutely. We actually have iStockphoto divas. The upper-echelon, the diamond contributors of iStockphoto make between $100,000 and $200,000 a year. Not all of them, but the upper-most echelon.

A lot of the people in gold to diamond area are making a really decent wage and lots of them are quitting their day jobs. But the average user with a good number of images is making $300 to $500 dollars a month. I'm pretty average and I do that.

Q: How has the site taken to the addition of video since it introduced video last fall?

It's been great. [In September], we had about 2,000 videos and now there's about 15,000 videos. It's moving along very nicely. The sales are credible. We're still selling around 5 to 7 percent of the collection every day.

Q: Have you had any problem with managing the rights of the images and videos?

The strategy is not unlike a traditional agency with editors, except we call our people inspectors. They look at every single one of the images that goes online.

Currently there are 1.4 million images online and everyone of those has been looked at by one of these people and cleared for copyright and trademark. There are 73 [inspectors] around the world, so they're always working. We accept about half of what we get.

That's the front line, but we also have this back line where if something does come back to haunt us then our people go out and research things for us in the community.

We maintain a technical wiki, which has entries for things that are patented and you can't shoot. Like the mansion where Citizen Kane was shot, for example. It's user-contributed and the corporation has some legal staff working in it, as well.

But more than that, whenever there is a misuse or an image that shouldn't have been released, the community is our best police. They do all the work for us. So we don't really need a big staff.

Q: So where do you see iStockphoto going from here? Growth has been good, does the line graph continue in the same direction?

The graph has looked like a hockey stick in the past. Now, the bend just won't be as dramatic. But we are going to keep expanding through localization. We're going to start in Japan this year and head east and stop when we get to China.

The cool part about localization for us is that there are only two search engines that support multiple languages and one is Getty Images and one is iStockphoto.

Q: Do you have to invest in those local communities or just put a site up?

It's really important to localize and have a real presence with the business there. Part of our strategy is to use the office Getty has already set up, which is one of the reasons the acquisition was so important for us.

Q: What else went into your decision to accept Getty's offer?

The management team at iStock knew we had to grow significantly in 2006 and 2007. I was sitting there looking at a term sheet from [a venture capital firm] and had my pen out and I went, "Maybe I better return those calls from Getty from last year and just go have a chat with them before I commit to this crazy deal."

I went and met Jonathan Klein in Seattle's sleepy suburbs. It was a very poignant and auspicious kind of day. We hit it off. I've always respected Getty. I've always respected Getty and trusted [Klein's] opinions on the market. The marriage between Getty and our goals to localize in all these languages and have offices in all these places, it just really worked for us. I've always said I'm CEO Jr. and learning from the best.

Q: So your big advantage was your business model, but you can't patent that. Is competition brewing?

There are a handful of sites out there that are pretty much rip-offs of iStockphoto, but that's OK. Competition is healthy. My prediction for you is that 25 percent of our competition will disappear, either get acquired or go bankrupt this year.

This industry is an industry of acquisition and consolidation, and I think you'll see some names just quietly disappear.