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.
