RealTime IT News

From Passion to Profits in User-Generated Content

SAN JOSE, Calif. -- User-generated content (UGC) like podcasts, photoblogs and YouTube videos may be a labor of love for millions of people, but how's a company supposed to make money with it?

Perhaps it can take a lesson from iStockphoto's executives, who detailed their successes and failures in doing just that during a keynote address here at the first User Generated Content Conference & Expo today. (The conference is owned by Jupitermedia, parent company of InternetNews.com.)

Bruce Livingstone, CEO of the stock photography and multimedia site, recalled starting the company almost ten years ago as a way to share photos, an idea he felt passionate about -- more than making money. "We wouldn't have charged anything, except for the crazy IT costs as the site grew," he recalled.

"Passion is the glue," he added. "You can't really be successful in what you're doing unless you absolutely love it. The passionate entrepreneur will beat the one motivated by profit."

Eventually, Calgary, Alberta-based iStockphoto became a "real" business, selling royalty-free one-off UGC and subscription-based access. The company was acquired by images giant Getty in a deal that closed in 2007. While iStockphoto doesn't release financial details, the company reported more than $71 million in revenue in 2007, when it was last traded publicly, and gave out $20 million to contributors. Livingstone said 2008's numbers are higher.

Today, the site has almost 60,000 contributors and has more than 4 million files in its database including images, video and audio files -- the latter part of a new service launching Wednesday.

Livingstone attributed its success to the passion of its employees and the involvement of the company's extended online community.

But there have been a number of pitfalls along the way, which Livingstone and chief operating officer Kelly Thompson chalked up as important lessons learned.

For example, Livingstone recalled the "Forumeter," an idea he came up with to rate user submissions. "It was part of our social networking and the idea was to have kind of temperature gage that followed your posts around and show how other people in the network saw you, if lukewarm or hot, a clown, crabby or a troll who complained a lot.

"The problem was the community didn't ask for it and didn't want it. It was too accurate," Livingstone laughed. "We got rid of it in 30 days."

On the other hand, adding video support with iStockvideo came from frequent requests by customers, and proved an immediate hit. "In late 2006, we launched video and in two years, it's become a substantial part of our revenue," Livingstone said.

Thrilling and dangerous

Thomson added that rapid growth can be both thrilling and dangerous for a user-generated content firm. Planning and having a "flexible focus" is key, he said.

"Having too much bandwidth is costly, but not planning for growth can be a disaster," he said. "Who knew we'd become one of the top 400 sites in the world?"

It's a problem that has stung a number of high-profile user-generated content sites, like Twitter, which suffered a handful of outages during 2008.

"We feel for the guys at Twitter," Thompson said, adding that iStockphoto even today continues pushing the limits of its servers and the open source MySQL database to serve content.

In an ironic aside, Thompson said Twitter's "Fail Whale" image, which the microblogging site displays when it's suffering downtime from overcapacity, had originally been available through iStockphoto -- though Twitter has since bought it outright.

Thompson also urged the audience to remember that it's critical to keep their online communities aware of any changes as soon as possible -- even ahead of the press.

"This helps them buy in and be more in control," he said.

Attendee and author Elisa Southard took the piece of advice to heart.

"I'm giving notice to the people I work with that I'm going to be head down tomorrow and out of touch," Southward told InternetNews.com. "It's one of those tiny agreements or commitments that I think can advance your productivity."

Now hear this

Livingstone also dropped a bit of news during his talk. After several delays, the company will launch the beta version of its audio site on Wednesday, selling royalty-free audio files for blogs, videos and other uses. Professionals won't be able to participate if they belong to organizations that require them to only distribute their content on a royalty basis.

Over 10,000 audio clips will be available, he said, calling the launch the first truly royalty-free audio stock site with a true UGC foundation.

He said a lot of video customers have asked for audio so he expects interest there, but also from new customers. He added that the company generally spends up to a year accumulating content before launching a new service.

Update clarifies quote by Livingstone.