19 Jan 2011 How to Evaluate a New Microstock Agency

When a new microstock agency launches there’s always a pitch for contributors. Sometimes we jump on board and contribute, and sometimes it works out and the agency eventually starts generating reasonable earnings.

But most of us have also seen the time and energy we spent submitting go down with the agencies that fail. We each develop our own requirements for what we need to see in a new agency before we start contributing. I thought I’d share some of mine.

Pricing

It’s important that the agency doesn’t set their prices too low. It’s a common strategy for new microstock agencies to try to attract customers away from the established leaders by under-cutting pricing. As photographers we want prices to go up, not down and there’s a lot of evidence to suggest that a large portion of photo buyers have low price resistance.

It’s also important that agencies don’t set their prices too high. Doing so makes it difficult to attract buyers unless they have exclusive content, so the agency will be unlikely to succeed. Zymmetrical‘s super high prices for the same content that was available everywhere else in the market likely contributed to their demise.

Royalty Rate

New agencies need to pay a royalty rate that’s higher than the average of existing agencies. If not, there’s no incentive for me to contribute there, potentially losing the sales I might make at a higher paying agency. I know this makes it difficult for the new agencies to build momentum, but it’s the simple economics of the current market. Agency managers that say, “bear with us why we build up the buyer base and we’ll raise royalties later” just don’t get it.

But of course royalty rates can’t be too high either. I don’t want to pick on Zymmetrical too much, but their 70% royalty can’t have helped their profitability either. Successful microstock agencies are able to consolidate their positions by having enough margin in the transactions to fund development and promotion.

I like to see new agencies with a royalty rate above average but still sustainable.

Something Original

In 2004 Shutterstock introduced microstock subscriptions. In 2005 Fotolia did the first submission incentive and StockXpert launched on the back of the popular Stock.xchng photo sharing site. These are the last examples of original strategies that took new microstock agencies to the top of the market, so I’m somewhat forgiving when applying this requirement.

There’s many unique strategies in the smaller and newer microstock agencies. Some fail. Some just survive. But others do well enough to provide a positive return on the investment (and risk) of contributing to a new agency. What I’m yet to see is an agency with nothing original provide that positive return on investment.

I don’t expect original strategies to be enough to take an agency to the top of the market, but I don’t intend to contribute to any new agency that doesn’t have something original.

Anonymity

A disturbing quantity of new agencies launch under a cloak of anonymity. They don’t put the names of owners or managers or even staff on their websites. Many don’t provide a physical address, or use the physical address of a virtual office service. Some even use privacy services to hide the contact details of their domain name registrations. I know some of the reasons why people would want to do this, but I don’t think any of them outweigh the suspicion it creates for both contributors and buyers.

I won’t submit my photos to an anonymous agency because there’s a high possibility the people behind the agency have something to hide – something that they don’t want me to know for fear that I won’t submit. Plus, my content is important to me and I want to be able to take appropriate action if something nasty happens and I want my content removed. PLUS, how is an anonymous agency going to convince a large number of buyers to spent large amounts of money?

Market Knowledge

We’ve seen many examples of new microstock agencies launched by people who don’t understand stock photography, or don’t understand microstock. As contributors we can detect outsiders from that first ‘send us your photos’ email we receive. It’s a clear sign that the agency is destined to make mistakes that the industry has already learned from.

Such agencies either fail or learn from their mistakes. By waiting for either of those things to happen I avoid contributing to agencies destined to fail.

Financing

New microstock agencies that are under-capitalized, bootstrapped, or worse: a one-man band, simply don’t last long in the microstock market. It takes a long time for agencies to build momentum and there’s a lot of very expensive costs to get a serious agency operational. They need to have enough capital to survive and continue to develop until they become cashflow positive. It’s easy to spot these agencies from the design of their website and the information within it.

At the other end of the scale, agencies with boatloads of cash can often overcome the other requirements. Recently launched microstock agencies seem to have overcome the ‘something original’ and ‘anonymous’ requirements for many other contributors. There’s nothing like a fat submission incentive to make microstockers overlook an agencies shortcomings.

What are Your Criteria for New Microstock Agencies?

Looking back over my past decisions it’s clear I haven’t always adhered to these criteria in the past. Some of the criteria were generated from negative and disappointing experiences. Hopefully publishing them here will help others avoid the same experiences.

What about you? Do you use different criteria? Which ones are important for you?