By James Thomson
iStockphoto has become one of the world's biggest markets for photos, images and video. Chief operating officer Kelly Thompson explains how says the site's loyal and often hard-to-please community keeps it ahead of the competition.
Kelly Thompson is the chief operating officer of Canadian company iStockphoto, one of the world’s busiest sources for online images.
The site is basically a virtual trading house, where photographers and designers can sell their high-quality, royalty-free images at affordable prices.
The company claims an iStockphoto image is downloaded every 1.4 seconds – this is a high-volume business that is extremely popular and very successful.
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James Thomson: Kelly, can you just tell us a bit about the iStockphoto story; how the business got started, and how it has developed?
Kelly Thompson: In the early days our CEO actually wanted to build a classic stock business, and he borrowed some money and went out and shot a lot of images, and realised that he didn’t really have enough money to market it against the big guys.
So instead of just tossing them away (he actually had a web design and hosting company at the time), he thought ‘Well, what the heck? What if we put all these images up and just gave them away?’
And it became quite popular, and designers and people were contacting him and saying, ‘I’d be really interested in donating my images as well’. You know, they couldn’t afford the high price of the stock at the time. So really that was the genesis.
A few years later down the road, they quickly realised they had a good business opportunity, so they started charging 25 cents in the early days, and really that just covered the cost of the hard goods for the company, and almost as a lark gave 5 cents to the photographer each time an image was downloaded. So that was the genesis of the microstock industry, as it’s now called.
And it’s since developed from there into a big business, where not only iStockphoto is a large company, but a lot of the photographers and designers who use the service are substantial small businesses in their own right.
Oh yeah, definitely. You know, it’s estimated now that we sell 55% of all the stock in North America. I’m not sure how that translates in Australia, but we know we have a really good footing here.
But there’s a couple of studies that have been done over there that shows we’re the volume leader for sure, and our top photographers are making hundreds of thousands of dollars a year.
Revenue last year was around $US72 million, but this is really in some ways a grassroots business, in that it was really built by community of people. What sort of dynamics does that bring to the business? I guess you have some very loyal customers and very loyal suppliers, and probably an unusually high level of love for your business?
It’s interesting because you end up with another sort of stakeholder that doesn’t exist in most companies. So we have our customers that we have to deal with, but we also have our contributors and of course they tend to be vocal and they care deeply about the site, so if they don’t like how things are going, they certainly let us know.
How do you manage some of that forthright feedback?
You learn to definitely develop a thick skin, but you know the heart is always in the right place and we do what we can to deliver both what the contributors and the customers need in the long run.
The flip side of getting a lot of feedback though, is that your suppliers would create a lot of new business ideas that you can turn into new product offerings, or new divisions or new businesses.
Definitely. We have a lot of stuff lined up, a lot of great ideas. We’ve always led through innovation, so we do have a lot of stuff coming up. We’re still a small company; there’s 100 of us, but 110 image inspectors that are around the world. We don’t have a huge number of resources, so that means we have to choose really carefully what we are going to implement, but we always have far more ideas than time to do them.
When you are developing an idea, do you use that community to test it?
Even before it gets to the community, we often do beta testing with select customer groups before we put it out. But our community really appreciates if we can sort of give them a heads-up as things are ready – they like to know before everyone else does, for sure.
And they also have to understand though that, you know, sometimes we just can’t say anything or can’t show them our hand, because we do have a lot of competitors trying to knock us off pretty quickly after we introduce new features.
This is a competitive industry; there’s a lot of stock photo sites on the net. How have you dealt with the influx of competition?
Well the good thing about being the company that invented the space definitely gives a bit of a foot up. Almost every other competitor that’s created a microstock site has at one time or another been a member or a contributor at iStockphoto. We’ve been lucky in that when it comes to developing new features, we’ve always managed to come up with cool new things before anyone else has, so as long as we kind of keep focusing on that. As well, we keep our photographers happy by just selling far more than anyone else too.
What are some of the other community management techniques that iStockphoto has developed? I mean, forums are big, but looking at the site there’s a lot of different things, such as discussion papers and competitions and that sort of thing. Is that sort of stuff important for keeping that community engaged?
Yeah, definitely. I think it’s something that we figured out long, long ago. As contributors moved up through the ranks, they could earn little icons that went beside their name; little silver, bronze and gold film canisters, and even something as simple as that can really help engage a community of people. It creates a little bit of competition between them; they want to sell more to move from the bronze to the silver canister, and even that took us by surprise, how it can really bond a group of people together. It’s really, really effective.
One of the themes we’ve explored in SmartCompany is this idea of free economics. Some of your competitors give away stuff for free. How do you compete against the giveaway merchants?
Well, let me put it this way. You definitely get what you pay for, and you have to be incredibly careful as a business with something like that. For a couple of dollars from our site, it’s probably worth the price to make sure you’re getting an image that you can actually use. Every single image on iStockphoto is vetted to make sure it’s legal for sale. If there’s a recognisable human in it, it has a model release, if required it has a property release.
Even here in Australia, there are lots of things you’re not allowed to take photos of and sell as royalty-free stock; from Ayers Rock to the Opera House, right? Like I mentioned before, we have 110 people looking at every single one of those 40,000 images that come through our site, to make sure we can legally sell it.
In 2006, iStockphoto was acquired by Getty Images for $US50 million. Has the ethos of the company changed from that sort of grassroots community spirit? Have you had to work to protect that, or has Getty been fairly hands-off?
We were one of the first companies that Getty acquired that they completely left alone. Getty is known for being an extremely great business company and the companies they had purchased up until us, they had integrated very quickly and very efficiently to stream on the business.
When it came to us, they said ‘we see what you’re doing, we love it, we don’t understand how you’re doing it, so just keep doing it’, and the business was growing incredibly rapidly. It was a completely different market than what Getty traditionally sold into.
We’ve had some great technology exchanges. They gave us what’s called their ‘controlled vocabulary’, which is a huge tree structure of every concept in the English language, and it’s translated into 12 other languages. We have 65,000 contributing photographers from around the world, so that allowed those contributors, most of whom don’t speak English, to keyword and tag their images in any language they like almost. It has been a powerful, powerful thing for us; it’s why we’ve grown in the foreign language countries so quickly.
Now you guys were really doing social networking before anyone had come up with the concept of social networking. Looking into the future, how do you see this idea developing? Will people become more connected or will the really strong social networks rely on a common interest, like photography?
There’s always going to be a place for groups of people with very common interests. That being said, I think sites like ours are maybe going to tie into other sites in kind of unique ways going forward. You’re already seeing this. Is Twitter big down here yet?
It’s growing.
Yeah, so, already in the States you’re seeing some sort of open versions of Twitter that can actually inter-relate with each other, that are going to be quite interesting probably in the coming year.
I guess iStockphoto is looking at these things all the time?
With as many members as we have, and a lot of them being quite technically savvy, we definitely try to keep our finger on that pulse, definitely.
Now you’ve added video to the trading market recently. Could you see yourselves adding more products to the marketplace?
Yeah, absolutely. We’re launching audio in the early New Year; we’ve actually been taking submissions for a while now, so we’ll launch that quickly. It was kind of a logical extension from video; as soon as we started selling video, the same types of people were telling us that audio would be great for them as well.
When you say audio; what sort of things? Sound-effects, jingles?
Yeah, sound-effects, all the way up to compositions of music.
And beyond that, will you still look for other niches to get into?
Definitely. We have a couple of pretty game-changing things that we can’t really talk about yet, but we’re super excited about. I think they stand to fundamentally change the stock industry; not to sound too over-the-top, but some of the things we’re introducing could change the stock industry as much as microstock did in the early days.
Well, we’d better stay tuned for that. Just finally, I noticed that 80% of the images on your site are primarily purchased by small businesses. Have you got a tip for small businesses, when they’re looking for an image for their website or logo? What should they look for? Is there any good way to go to get noticed?
It kind of depends what they’re doing. If you’re doing a PowerPoint presentation or something like that, what we suggest is always look at some of the best people around you; what they’re doing.
So, in that case, maybe it’s Steve Jobs, or something like that, when you’re doing your PowerPoint presentation. Look at how simple and clean and how little text there is on one of his slides, and try to emulate that if you as a small business have to do a pitch or something like that. Find images that are striking, convey a good message and then talk around them. Stuff like that makes you look like a lot bigger company than you probably are.
This is an edited transcript
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