Times are great – yet tough – for sellers of stock photos.
The lure of what is projected to grow to a $6 billion industry next year is just too enticing for some to pass up. And there’s a low barrier to entry, so competitors are jumping in.
But as a result, some are hurting. For example, Shutterstock Inc., the only public company among the leading stock photo businesses, saw its shares severely downgraded earlier this month to a target price of $39 from $90 by a Jefferies analyst; he thought the company is particularly vulnerable to the increased competition.
Marina del Rey’s Twenty20 has decided to join the fray. It was born as a business that printed Instagram photos on canvas, but this year the company completed a pivot to selling digital photos.
It might seem like the company is diving into a shark tank, but Twenty20 believes it is getting into a niche that Shutterstock and other recent entrants, including photo software maker Adobe Systems Inc. and high-definition action camera maker GoPro Inc., have missed: photos from people’s cellphones.
The company has already amassed about 46 million of these often personal images from regular users, which are far different in all respects from the professionally composed or studio-shot photos that constitute the bulk of stock images.
A big segment of today’s customers want photos that are realistic, said Matt Munson, chief executive and co-founder of Twenty20. “People want to connect authentically with their customers. In order to do that, they need to post content that looks real.”
Twenty20’s catalog, which was initially seeded with images from Instagram during its first iteration when the firm was known as Instacanvas, is filled with images that look like they belong on Facebook, Instagram or Twitter. And Twenty20 is getting some traction despite, or perhaps because of, the amateurism of its content.
New market
Founded in 2012 and incubated at Santa Monica’s MuckerLab, Twenty20 dropped its print business and pivoted to digital image licensing in February as it came to believe the revenue opportunity from selling stock images looked stronger. Since it wanted to distance itself from Instagram, the company changed its name to one denoting clarity of vision.
“People were looking for more authentic and original imagery,” said Munson. “With digital image licensing, there was so much more opportunity.”
The 30-person company, backed by $9.7 million from venture firms such as Santa Monica’s Mucker Capital and Canaan Partners of Menlo Park, now presents itself as a photo-sharing website, such as Instagram, where users can be followed and photos they post can be “loved.” The big difference, though, is that these images are for sale.
“It feels the closest to other familiar platforms. You kind of get that social feedback, of people who are liking photos,” said Darby Simon, a Twenty20 user from Phoenix who said she has sold 92 photos, mostly of her family, since joining the platform in March.
Twenty20 claims more than 270,000 users have uploaded about 46 million photos to its platform. Users put their images up for sale on its app and website by uploading them from their cellphones and agreeing to license their work royalty free for unlimited digital editorial or commercial usage.
Typical customers are ad firms or companies looking for photos to illustrate advertisements, marketing materials or informational postings. Brands and publications search Twenty20 for photos by category and can license them for up to $50 a photo.
Most customers buy photos à la carte, said Munson, and the company takes 20 percent of each of those sales. It also offers monthly subscription plans ranging from $199 for up to 25 downloads (less than $8 an image) to $1,499 for up to 500 downloads (about $3 each). Photographers keep just 20 percent of the sale price of images sold under that model.
Virtually all of the photos uploaded to Twenty20 come straight from contributor’s phones, said Munson, and a majority of new users sell at least one photo in their first month. Though he wouldn’t disclose specifics, he said the platform has thousands of customers, including Google, Uber and Salesforce.
Standing apart
But Twenty20 is up against some tough competition in a crowded field.
Getty Images, the biggest player in the industry, is creaking under the weight of nearly $2 billion in debt it carries, a result of the firm’s leveraged buyout by Washington, D.C., private equity firm Carlyle Group. Still, it is a formidable foe. Bloomberg News reported last month that it generated revenue of nearly $202 million in the second quarter.
Shutterstock, notwithstanding its softened outlook, is expected to generate revenue of $425 million to $430 million this year.
Add to the mix Corbis, chaired by Bill Gates, newcomers Adobe and GoPro and the specter of Instagram itself tapping its cache of some 30 billion images to build a photo-licensing operation that could upend the stock photography sector.
These players are drawn by an exploding market for digital imagery that is projected to hit $6 billion next year, up from $4 billion in 2011.
Despite this increasingly crowded field, Twenty20 thinks the social media look of its photos gives it an edge and puts it more in line with changing tastes.
“It will give them a competitive advantage over other competitors who are trying to compete on price,” said William Hsu, a managing partner at Mucker. “It’s about finding the right content for whatever project you have and price becomes less of an issue.”
Millennials expect a certain aesthetic, said Patrick Mulford, executive creative director of theAudience, an L.A. company that creates social media campaigns for corporate clients.
“They are very cynical of stock photography,” said Mulford, a Twenty20 client. “No one wants to see another woman laughing in a call center with a headset on. No one wants to see another man atop of a mountain with his arms out. They want to see images that are real.”
Twenty20 argues that its ability to deliver such photos is core to its value.
“What we need is stuff that looks natural. The kind of imagery that looks like someone who’s taken it for social media,” Mulford said. “We probably use less images on Twenty20 (than other stock galleries), but they are the more crucial images that we can’t find on the other libraries.”
Challenges
Despite Twenty20’s large gallery, Rohit Kulkarni, vice president of Internet equity research at RBC Capital Markets in Toronto, isn’t surprised by the company’s rapid rise in the stock photography industry.
“The technical-side barriers are very small,” he said. “We see a lot of new entrants into the marketplace. Vertically focused or geographically focused or focused on a specific niche, (startups) can evolve very quickly.”
The bigger obstacle, he said, isn’t building a massive stock photography catalog but managing legal issues around all those images.
“There are legal and indemnification hurdles they need to ensure get taken care of,” he said. To build a stock photo marketplace brands can rely on, Twenty20 needs to ensure against copyright infringement, protect against image theft and manage model releases.
The company tries to tackle legal issues through a combination of human and software compliance protocols. The platform has SMS and email systems that users can use to ask photo models for releases, it hand-checks images for compliance and insures images against lawsuits up to $10,000. It also uses proprietary photo review technology.
“Images are vetted by our software to make sure the image hasn’t been stolen from social media and the Web,” said Munson.
