Some acquisitions have far wider implications than others. While it made perfect sense for Shutterstock to acquire a company like Rex Features in order to grab a foothold in the editorial space, it was just that. A simple acquisition of content along with established corresponding sales channels. Shutterstock recent acquisition of FlashStock, however, is vastly different.
When a new wave of custom/on demand photo companies started to emerge a few years back, not many took notice. The model had been seen before and had failed (OnRequest Images). But this time, facilitated by a much larger pool of photographers able to respond much quicker via their always-on mobile phones, they created a quite comfortable niche for themselves. It certainly helps that in the last decade, photographers are much less demanding regarding their compensation. Companies like Foap, Twenty20, Snapwire, Flashstock or ImageBrief took full advantage of a ripe market condition. What they did, in the process, is turn the stock photo market upside down.
Traditional stock photo companies work this way: Sellers dump a large amount of images into an online database for buyers to search within. When there is a match of need and offer, a transaction is made. The stock photo company who maintains this marketplace make a commission on each of these transactions. This is the way a company like Getty Images or Shutterstock functions. With on demand, there is no database of images. Instead, it is replaced by a large database of photographers. In this model, a buyer makes a very specific request for photos and receives corresponding images that photographers either shoot or pull out from their personal archives. Here again, when an offer meets a need, a transaction happens. And same as the traditional model, the company that maintains this marketplace receives a commission. The difference between the two, as you might have noticed, is the disappearance of the large online database of images ( to the tune of tens of millions of images). A huge cost center the company no longer needs to have. Profits go up substantially.
But that is not the only difference. In the traditional model, because images are created before any demand, if ever, one needs to have a large volume of choice. A bit like in a supermarket, where a lot of items will never be purchased for lack of demand. The company can continuously edit the offers but it will never be able to match them at 100% success rate. Never. In fact, it is estimated that only 10% of a stock photo total image collection ever gets licensed. The on-demand approach doesn’t have this painful model. While 100% of the demand might not be fully matched, it comes very close. Fewer frustrations. Less waste. Less cost.
The On Demand model has its own limitations. For one, to be truly effective, it has to have a critical mass of contributing photographers. This can be challenging to maintain as many will either never be able to fulfill a demand (not the right location, for example) or find the exercise of their work being repeatedly declined overly frustrating. As well, buyers might never be able to find the image corresponding to their demand and also find the process unrewarding. Time, as well, can be a factor. While one can easily immediately download an image at 3:00 AM in the morning from a stock agency, with on demand, they might have to wait a few hours, if not days.
But this is today. Imagine replacing this large pool of photographers with a very capable visual artificial intelligence. Buyers types in a request, machine interprets the request and builds the corresponding image. Buyer is happy. All this at any time of the day and in seconds. This is not science fiction. In fact, most of the basic technology is already in place. Ikea already produced 75% of its catalog images via cgi. Photoshop artists can create any new image using a combination of existing images and computers can already render 3D visuals based on simple phrases. We are just a few years away to putting all the pieces together and switching the on button.
Thus, Shutterstock’s acquisition of Flashstock is not just another simple predictable step. It is the first investment in a model that will transform the way the world licenses visual content. While it significantly covers its bases today and allows the company to gain more reach into the assignment market ( which has higher revenues than stock licensing), it is establishing the foundation for future growth. Flashstock will certainly immediately benefit both from the 1 million plus buyers Shutterstock currently offers but as well, from access to the millions of its worldwide contributors. It will certainly take some significant market share from the other on demand companies in the space who are all bootstrapped or VC funded startups led by green management. The next step is to see if Shutterstock’s competition will take notice, especially Adobe who has a significant technological advantage.
Photo by Lauren Manning