CHALLENGE

Every year art directors and designers spend several billion dollars on stock photography. Getty Images, the company with the largest marketshare, is predicting $600-$610 million for its own sales alone in 2004.

Back in 2000, a group of Colorado-based photography nuts set up a barter site where photographers could swap photos -- for free. As the library grew, they began to get requests from non-photographers who wanted buy the rights to use photos.

Obviously the current stock photo industry wasn't filling a need. In fact, the team decided the industry had two basic flaws:

Flaw #1. Inventory growth barriers

Stock photo houses require that any contributing photographer have 10,000-20,000 images in his or her portfolio. So, anyone outside of this elite group can't sell images.

But, the digital camera boom has removed the barrier of having to understand the mysteries of the darkroom. Now, loads of people, from enthusiastic amateurs to professional photographers, have a collection of pretty good photos they'd like to sell.

Executive VP Patrick Lor says, "If I'm in the right place at the right time taking a great photo, why shouldn't I be able to sell that?"

Flaw #2. Pricing barriers

None of the services allowed designers and art directors to buy just the exact photo they wanted cheaply. Your choice was either buying a limited, static, collection of photos on a disc for a few hundred dollars; paying $399 or more for the use of one particular image; or buying a subscription to an online pool of photos for $500.

So, in 2002, the barter site became a content sales business at istockphoto.com. The goal was to democratize both ends of the business -- to throw open the doors to any decent photographer on the planet, and to price photos low enough that anyone could afford to buy them.

CAMPAIGN

The problem with flinging your doors open to anyone who wants to post photos to sell is that pretty quickly your database will be filled with crud. And if customers notice a high crud ratio, soon they'll stop visiting your site entirely.

So, istockphoto.com instituted a three-step quality-assurance system:

-- Photographer's application

In order to start selling photos, wanna-bes have to answer a pop-quiz to demonstrate they understand the basics of the stock photo industry. Do they understand copyright? Do they have consent forms for all their models?

"People have to understand it's a global business. It's not just about how nice their photo is," says Lor. That said, applicants also have to submit three sample photos to demonstrate basic technical skills.

Anyone rejected can reapply at any time. "Our system isn't set up to exclude people, it's set up to educate people. We're looking to train those legions of photographers throughout the world on how to shoot stock photographs and the business behind stock -- what makes a photo saleable, and the laws and regulations."

-- New photo approval process

No matter who the photographer is, every time he or she uploads a new photo, it's put through a review process. A human set of eyes checks that it's a clear, non-offensive image. The process takes about three days.

istockphoto.com relies on an in-house team plus 20 volunteer "image inspectors" around the world to handle reviewing an average of 3,000 new photos per week.

-- Openly visible sales records

Site shoppers can see exactly how many times a particular image has been sold. "If that photographer put a dud in their portfolio, you be the judge. We give them enough rope to hang themselves or to build a rope ladder to go up to the next level," explains Lor. Visitors can also post reviews, and the site allows you to surf by user-favorites.

Like other online businesses hoping to profit from "democratization", istockphoto relies heavily on word of mouth to drive traffic. One key that helps: because photographers selling via the site see income coming in, they are incentivized to drive shoppers to their portfolios online.

Once people get to the site, they can surf istockphoto.com's image library for free. If they don't find exactly what they're looking for, they can also post a query to the message boards to see if any photographer would be interested adding something to the available inventory.

Plus, as an added incentive for repeated surfing, new photos are added to the database the minute they are approved -- around the clock. Inventory is constantly growing and freshened.

istockphoto.com wanted pricing so low that even art directors and designers on skintight budgets would be tempted to pop for photos. After all, once you get below a certain price point, it's purely a volume business, so you have to encourage massive buying volume with what-the-heck pricing.

So, prices range from fifty cents to $1.50 per photo downloaded. (In comparison, competitor Comstock charges $399 per image.) "It's about bringing the price down to a level where everybody can afford to buy a stock photo," says Lor.

To lower transaction costs, 1stockphoto.com instituted a credit-buying system much like buying tickets at a fair. Customers can purchase in blocks of $10, $25, $50 and $100 at a time. At the $10-level, you get 20 credits at fifty cents each. At the $100-level, you get 250 credits at forty cents each.

Last November istockphoto.com lowered the bar even further, partnering with a micropayments vendor to accept payments as low as $1 for a single photo.



RESULTS

"We sold 44.52 gigabytes yesterday and the average download ranges from 100k to eight meg. You do the math," Lor told us last week. We did, and by our estimate, istockphoto.com is selling $20,000 of photos per day currently.

If you blink, that number will be even higher. "Our growth numbers are something like 25-45% month on month growth," says Lor. "It's always been growing like that. It's something like 600% per year. I'm amazed every single day; it's almost incomprehensible."

Just because the prices are low, it doesn't mean buyers are all small-fry. "We have a bunch of A-list clients, big Fortune 500 companies have accounts with us. Art directors set up accounts and give their designers all access to it."

The micropay experiment is also growing quickly. In just five months roughly 2% of sales are from micropay customers, who are often consumers instead of design pros. These consumers may just buy once in a blue moon to have an image for their personal site or perhaps to create a greeting card. It's one more natural step in the self-publishing revolution.

About 15-20% of photographers attempting to join the system fail their first time around. Interestingly, some pros fail when enthusiastic amateurs make it, simply because they don't understand the business aspect as well as they should.

Roughly 3,000 photos are submitted each week, and about 1,500 are accepted. As of this writing, the library has about 110,000 images. In contrast, competitor Jupiter Media's Photo.com claims to have 100,000 photos.

While none of istockphoto.com's participating photographers are making a full-time living from the site, Lor says in time this will change both because sales are rising and because photo libraries are evergreen content. Once you've posted enough quality photos for critical mass, you could make money off them for the rest of your life.

"Some people struggle to make $5,000 a year. Some easily make $10-15,000. It's recurring income. It's like song-writing. It sits there on the server and every time that song gets played they get a dime for it. Ultimately they can sit back and do nothing. These residual income streams are what stock photography's about."

Participating photographers are happy enough to have posted thousands of "buy my photos here" links from their own sites to 1stockphoto.com. This has a tremendous side benefit -- Google ranks sites based on related site link popularity, so istockphoto.com dominates the organic (free) Google listings for terms such as "stock photos".

How big can istockphoto.com get?

"We don't think we've tapped out the designer market yet. That may take a couple of years if we continue at the rate we've been growing," says Lor. Plus, if you add in the self-publishing consumer marketplace, "this is a business model with almost zero limitations."

Useful links related to this article:

BitPass - the micropayments vendor istockphoto.com uses:
http://www.bitpass.com

istockphoto.com
http://www.istockphoto.com

Getty Images
http://www.gettyimages.com

Jupiter Media's Photo.com
http://www.photo.com

Phototalk - a Blog covering the stock photo industry
http://talks.blogs.com/phototalk/stock_photo_industry/