22 Mar 2007 Long-term Future of Microstock
As someone who’s investing considerable effort into building an online microstock portfolio, I’m curious about the longevity of my earnings. The market is new and very dynamic. What’s going to happen in the next year to affect my revenue? What about the year after that? The temptation was too great and I had to blog a list of predictions for the microstock market. I resisted the temptation to research other market predictions until after writing mine out entirely. I didn’t find too many, though I did find this interesting list of predictions specifically for 2007. So, here’s my list. This is a long-term collection of predictions, more general than specific. They are also arranged in the chronological order in which I predict they’ll occur, though I’m not yet brave or insightful enough to include dates.
Microstock Market Consolidation
The first thing I observed when entering the microstock market was that there were a lot of ‘players’ on website bench. That is, there were a lot of websites selling images and accepting contributions from the public. I assumed this was therefore a young market, which was obviously later confirmed. The reason I made this assumption was because I’ve seen this characteristic before in other markets which were young at the time. When was the last time you read in the mainstream media about Looksmart, AltaVista, Lycos, or Overture/Goto. They all still exist in one form or another, but the industry has consolidated and now the focus is on the dominant three: Google, Yahoo! and MSN.
I predict there will be a market consolidation and only three websites will survive profitably with their current model.
The three that survive may include sites that don’t currently exist, or existing sites boosted by acquisition by bigger fish. Other existing microstock websites will be acquired and integrated into larger operations, and yes others will close due to lack of profitability. I’m confident enough to state that I expect iStockphoto and Shutterstock will be two of the three that survive, even though iStockphoto has been acquired by Getty Images.
There are a lot of people contributing images to the microstock market but I suspect these are the Early Adopters. They are:
- professional stock photographers
- a dissenting minority of non-stock professional photographers
- competent photography hobbyists
- the occasional entrepreneurial stay-at-home-parent
- Internet-aware designers
I suspect we’ve started to see the start of the Early Majority in 2006. These are people such as myself any my wife with complimentary skills that are easily turned to microstock. The proposition is financially sound to those with time to invest, and the barriers to entry are constantly falling. Many microstockers state on their blogs and profiles pages that as former hobbyists and enthusiast their microstock income has enabled them to quit their day jobs. Microstock has actually created a new level of professional photographers.
There will be a dramatic rise in the quantity of contributors, the number of images submitted, and the quanity of images available on microstock websites.
This will have impacts on other parts of the market. The inspection queues will grow, forcing companies to increase their quantity of inspectors. The inspector remuneration methods of paying only a few cents per image inspected will come under serious strain and the sites using this model will have to reconsider. Other sites will be hoping the upside of increased sales (see directly below) will come in time to compensate for the increase in staff required to keep the inspection wait time under control.
The emergence of microstock has opened up a new demand side of the stock photography market. Graphic designers, website designers, small & home businesses, freelancers. All are new customers of stock photography that previously existed only in small numbers. I’ve recognized images from the microstock websites out on the web and in print. Citations in forums on the microstock websites appear at a rapid rate. This product is clearly being adopted. From my observations I expect it has already ‘crossed the chasm’ from Innovators & Early Adopters to the Early Majority. Though entering the peak of Early Majority and entering the Late Majority is where it gets interesting. I noted above in Market Consolidation that I expected some (more) buyouts of the top microstock companies by bigger fish. Unlike the Getty Images acquisition of iStockphoto, I suspect that other big fish may include more mainstream media and/or Internet/software companies such as Yahoo!, MSN/Microsoft, Google, News Corp, or even Adobe. This will take microstock from the realm of media designers and providers to public consumers. I verbally introduced a friend to iStockphoto in 2006. She is an avid blogger and runs an online custom fashion accessory business. She scolded me the next time I met her for causing her new addiction to downloading photos. She wasn’t using the images for her business’s website. She just wanted to have them because she liked them. Microstock is very cheap so why wouldn’t general consumers purchase nice images? Stock photography has been the realm of businesses in the past due to the prohibitive prices. Now that images can be purchased for a dollar, there’s nothing in the way of it becoming a consumer product.
Microstock demand will continue to grow at an increasing rate and that big media and Internet players will take microstock to the consumer marketplace.
Some of the top microstock websites have already reached a critical mass as evidenced by their creative marketing activities (e.g. roadshows) and investments in new developments (e.g. disambiguation). I’m less convinced the market as a whole has reached critical mass.
When we started out in microstock we had access to multiple data centres. A data centre is a room created to house servers – most of the Internet is fed from servers located in data centres. We noticed that there were only one or two pictures of data centres on the top microstock websites, so we set about dominating this niche. We succeeded, and a handful of our better images were each being downloaded more than 20 times a month on the top sites. We enjoyed this boon for almost a year until we were trumped. A new contributor with access to a better looking data centre and superior photography skills uploaded a large number of data centre images. Our revenue for this niche plummeted. Images of business meetings and people wearing telephone headsets are well represented. Niche categories still remain under-represented, but they’re filling quickly, as my data centre example illustrates. The growing quantity of contributors are padding out fringe categories.
As we move through the Early Majority and start picking up the Late Majority of contributors revenue distribution will start to flatten out.
I expect that the top contributors will continue to earn excellent revenues with microstock. Their skill means their images are better quality, and their dedication means they have lots of images.
The top microstock contributors earn excellent revenue. They can live from their microstock income even if they choose not to. This affords them time and equipment to create a lot of images and increase their image quality. Hobbyists and enthusiasts on the other hand are taking advantage of their situation and the young market. They’re currently able to create for themselves a respectable income from images that aren’t necessarily the highest quality in the category. The quantity of images on the top microstock websites is rising faster and faster. The quantity of contributors is also rising at an increasing rate. The part of the equation that’s not rising is the quantity of image categories. As categories fill up the distribution of revenue will flatten out and gravitate towards the higher quality images.
The rising quantity of images will squeeze out lower quality contributors returning the stock photography market to the realm of professionals.
Microstock has created a new level of professional photographers – the former hobbyists and enthusiasts who are now paid for their photos. Many will leverage the current opportunity and make the leap to top microstocker level and survive the shakeout. The return of the market to professionals will not be ‘business as usual’. Microstock has already created permanent impacts on the way professional stock photographers make a living. In the past a stock photographer could earn a living from 100 quality images. The quantity required for the same quality of images to sustain a photographer in microstock is much higher.
All of these predictions so far have been leading away from the youth of our current microstock market towards a mature market model. To summarize, I expect the microstock market will go through these changes:
- Drop in the quantity of microstock websites
- Involvement of larger companies
- Rise in the quantity of contributors
- Rise in the quantity of purchasers
- Fall in opportunities for new & niche contributors
- Drop in the quantity of lower quality contributors
This mature market will look and feel very different from what we’re experiencing now. I expect that microstock buyers will be happier, and the surviving contributors will be less happy.
The Next Breakthrough
Microstock itself is a breakthrough. It’s had a massive impact on the photography and design industries. Interestingly it’s not a breakthrough in technology. The technology to create websites, upload photos, and perform online payments has been around a lot longer than the microstock industry. However, it’s technology that has caused microstock to exist at this time:
- broadband required for upload and download of high quality images is now common-place
- digital camera quality has increased and the price decreased making quality photography more accessible
- consumer confidence in transacting online has finally been achieved
- micropayments are now a proven method of making descent money online
- mass money distribution facilities (PayPal etc) are now reliable and accepted
Most microstock website companies are still focusing on technology development. During the search engine wars the players improved their systems and features until Google emerged the hands-down winner. Then attention turned to vertical expansion and we were introduced to Gmail, Adwords, Adsense, Maps and Google Earth. At the same time they integrated, producing browser toolbars, Google Desktop, WAP search, and Blogger. I expect from this time forward in the microstock market we’ll see wars in website features and technology before we see any vertical expansion or integration. I also expect that we’ll be waiting at least three years for the next significant breakthrough.
Phew! Now I can relieve my anticipation and go out searching for other people’s predictions. In my research I really enjoyed reading this article considering the sustainability of microstock from the perspective of contributors and microstock websites.