In 2003, Jon Oringer started Shutterstock. He is a programmer and a photographer who successfully merged the two skills to form the company. Revenues are solid for the company with increasing revenues in each of its years since inception. One caveat is that the percentage gains of revenues are declining. However, the growth is positive and has increasing free cash flows. For those who believe in using price-to-earnings (P/E) to gauge whether a company is overvalued or undervalued, Shutterstock comes in at a whopping 96 P/E which would be considered quite high under this measure. It is much higher than its industry average. Some consider high P/E ratios to be a sign of growth.
Oringer had attempted (and failed) several technology start-ups before making it with Shutterstock. A large reason why many of his previous start-ups failed was he tried to create them after the Dot Com Bust. Shutterstock was different in that there was serious demand for this type of service.
How the Company Started
As part of his other failed tech ventures, he always needed to find stock photos. These were extremely costly, and this sparked the idea that he could offer a similar service for far less. He went out and photographed everything he could imagine. After weeding down his photos, he managed to create a database of 30,000 stock photos.
Oringer did not want outside funding. He felt he could create the necessary assets (photos) that would be used to sell. He knew a stock photo service was badly needed in the market and he satisfied that need.
Because Oringer did everything himself, in the beginning, he ran into problems with overloaded demand on his servers. Those servers were being maintained in his New York City apartment. They blew out the electrical boxes of his apartment building.
Why it Works
The company was one of the first to get into this market. Oringer started the service with about 30,000 uploads and made them available by subscription only. As the service expanded, the company adopted a per download fee without the need to subscribe.
In newspapers and on the web, it is highly likely you have seen photos credited to Shutterstock. It is one of the largest, if not the largest sources of licensable media assets on the web. Through acquisitions, it has expanded to other media types, including video and audio.
The company also took a unique approach in branching out to let others get paid for their photos. This not only expands the number of assets available, but it also gives people an opportunity to get paid for their work. He created what he termed a contributor community.
Because of this contributor community, the company was able to scale up quickly. The company currently boasts over 100 million assets are available to download.
Creating a business on the web requires fast turnaround. Oringer recognized that he needed to be able to obtain images without all the red tape and high cost associated with the process at the time. He also projected that since his need was strong, other players in the internet business space would need the same kind of access.
Another factor that makes the company stand out is they ensure proper release of their assets. They check copyrights and if there are pictures of people, they require contributors to submit a model release. Many photo sharing sites don’t do this, and it can get people in legal trouble. Copyright infringement can cost people thousands of dollars and can even land some of them in jail.
One unique feature the company released in 2014, is called SkillFeed. This allowed members to download tutorials that they can use to help bring in customers to their websites, etc.
Unfortunately, the company made the decision to shut down this feature and became unavailable in 2015. Some reports suggest it was not a popular feature. It could be the market simply wasn’t ready for it as online training is a growing aspect of content distribution.
One subtle, but at the same time obvious method of promotion is when people see credits given to Shutterstock in books, magazines, the web, etc., this raises the curiosity level of readers. Further, those credits are linked when they are on the web so viewers can go directly to the company’s website to get more information on acquiring assets for their own use.
The business model itself, which in today’s terminology is called crowdsourcing, allows for contributors to promote the service. It’s in their best interest to do so because they get paid per each download of the assets they contributed. This is a great motivation to let others know what they produced on the company’s website. The more downloads they receive, the more they get paid.
The company also supports an affiliate program. When done right, this can be a great way to have an army of affiliates driving traffic to the website. The affiliates get a commission on any sales made from that traffic. The company benefits by not having to spend any money or time for that traffic.
Shutterstock now also licenses music which is a largely underserved aspect of content distribution. This is a big play and one that will likely be popular with users.
There isn’t much available on leaderboards or ratings for the company, at least not directly from users. The Better Business Bureau rates the company at A+ which is its best rating. There are complaints on the website, but they are all closed out. One user rated the company 3.68, but it’s difficult to put much weight on just one rating.
On workers working for Shutterstock, according to Glassdoor.com, employees are generally happy with the company. The biggest complaints seem to be that the company is growing too fast and as such, management is not attending to their needs as quickly as they would like.
Lessons Learned By The Business
- The company looks for gaps in content, meaning businesses or locations that could use their type of content but don’t currently. This is an ongoing pursuit, and they have been expanding the search globally.
- Finding quality people that share the same vision as the company is not an easy task. Always anticipate that it will take much longer than you had planned. This means you or your current resources will need to fill in the gaps until you find those people.
- Oringer is a big fan of staying as independent as possible. While the company has gone public, he still has controlling shares of the company. He started the company with no seed capital and hence, was not required to answer to anyone. This type of thinking is unique for tech start-ups.
- Oringer believes in learning from mistakes. He takes this a step further by using iteration in learning from failures. This means to change one step and see how that works and do that again.
- When you solve problems that seem impossible to your competitors you create a barrier to entry that gives you a strategic edge.
How Other Businesses Can Learn From This
Keep up with trends in technology. While this may be important for technology companies, it should be heeded by every company, regardless of type. Technology affects the way everyone lives and how they do their work.