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As a disruptive technology, online photo sharing marked the end of the Kodak era and helped usher in Facebook, Instagram and dozens of other social media companies. But the landscape has changed quite a bit recently. Six years ago, the FlipCam was all the rage and RockYou and Slide were used to make online slideshows. Now, FlipCams are relics, RockYou has pivoted far from photos and the Google-acquired Slide.com URL doesn’t even work anymore. Even though online photo sharing is hugely popular, it’s still incredibly easy to end up in the industry deadpool because technology is moving so fast and the current business model options are limited.
There’s no question that the market potential is huge. The photo/video category on iOS is the third most popular category, and hundreds of millions of people are capturing digital photos and video clips every day. Some people still want to print them on cards, t-shirts and other objects. But a fast-growing number are interacting with them solely on a screen, whether it’s a mobile phone, tablet, laptop or TV. The world of photography is increasingly moving from one of atoms, things we can touch, to one of digital bits, things we can’t touch. Companies are being forced to figure out how to monetize photos in a world of intangible goods.
With everyone running around taking, editing and sharing photos and video clips, the revenue should be flowing, right? Wrong. There’s a lot of “fool’s gold” in this industry. The easy part is attracting users, since photos have proven to be the most universal currency for driving social network virality. The hard part is figuring out how to build a vibrant business model around photos and video clips.
Here are the five distinct approaches that companies are taking:
As the world goes digital there’s still a strong market for atoms-based personalized products with photos printed on them. It wasn’t that long ago that printing a photo on a pillow or wall-mounted canvas was impossible for the average consumer. But companies like Shutterfly and Snapfish have done very well selling photos printed on everything from cards and calendars to mugs and t-shirts. Last year there were about 30 million custom photo books sold in the U.S., double-digit growth from the year prior. The market for tangible photo products will always exist — but digital alternatives are coming, and could be quite disruptive.
Digital derivatives are enhanced versions of photos and/or video clips, and they are 100 percent bits-based. Examples include a filtered photograph, an enhanced video clip, an online photo book or a video slideshow set to music. The magic here comes with creating a sense of emotion through production value and storytelling. Similar to tangible goods, digital derivatives are products that were formerly nearly impossible to create for the average consumer without training, time and access to expensive tools. But now, with a few clicks, we can all create amazing photos and video slideshows that tap into peoples’ emotions and nostalgia in a way that a raw image or video clip rarely does. Because digital derivatives can carry much bigger emotional value than tangible goods (e.g. a movie-trailer-like recap of a recent family trip), people are willing to pay for such services and tools that can easily create and share their digital creations.
Peace of Mind
There’s no question that photos are among our most precious possessions. But while they were once thought to be irreplaceable, that’s really no longer true — if you have them backed up in the cloud. What a feeling it will be when we all have the peace of mind that every photo that’s important to us, even those taken years ago using film, are safe and sound in the cloud and can be reprinted, reframed and re-hung, anytime we want. That sense of security is easily worth tens to hundreds of dollars a year, in my opinion, and that’s why consumer cloud services like Dropbox, iCloud, and Microsoft SkyDrive are sure bets for being profitable. For photo and video startups looking to compete with the larger horizontal cloud players, the key is focusing on the user experience, since that’s much harder for larger players that need to focus on other types of files in addition to photo and video.
Advertising may seem like an obvious way to monetize online personal photos and video clips, but it’s actually a very tricky business model for a pure-play online photo hosting and sharing company. The challenge is scale and context. First, you need a lot of page views or large news feed volume for an advertising business to work. So even if your business does intend to use advertising, it’s not the appropriate focus for the early days of your company, since Job Number One should be getting traffic. Second, if you’re lucky enough to get to scale, then it’s very difficult to implement an ad model that doesn’t freak out your user base. The issue is that people don’t generally want to see ads next to their cherished family photos.
True, the hope of being acquired is a far cry from building a sustainable business model. But this long-shot approach is the most common I see from the dozens of photo and video-related companies that launch each month. There are enough high-profile acquisitions for companies with no business model that it doesn’t even seem that weird to have a photo business with no contemplated business model these days. However, for every Instagram — or even SocialCam — there are hundreds if not thousands of shelved photo and video companies.
To make money off of digital photos and video clips, you can either monetize the photos by selling tangible goods, digital derivatives or peace-of-mind cloud storage, or you can use the photos as currency to monetize your community through advertising. If none of those will make you enough money to sustain and grow your business, then you should hope that your technology, user base or scale will be strategically complementary to an acquirer that can gain revenue in one or more of those ways. The long-term industry winners will have a blend of these business models but, interestingly, there aren’t many examples of such companies today.
Brad Jefferson is the co-founder and CEO of Animoto, an online video creation service that empowers people and businesses to create and share videos using their own pictures, video clips, words and music. Follow Brad at @brad_animoto.