Case study: How to transform a free community into a successful business model

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Why study this case

iStockPhoto is both a photographer community and a huge picture library of high quality and low prices. By October 2006, iStockPhoto had about 1.1 million photographs and 23,000 photographers. 2006 iStockPhoto is expected to sell 1000~1200 million images authorized, each authorized price between 1 U.S. dollars to 40 U.S. dollars. iStockPhoto's success has opened up a new picture library segment that provides services to users who are unable to withstand the expensive price of traditional picture libraries such as Getty Images and Corbis. iStockPhoto's success drew the attention of Getty Images, who in February 2006 paid 50 million dollars for its income.

Interviewed by: iStockPhoto's founder and CEO Bruce Livingstone;istockphoto and executive director Patrick Lor; Independent consultant in digital media and picture library market Paul Connolly. Special thanks to iStockPhoto's Kara Udziela and Yvonne Beyer for helping with this case study.

Success factors

Provides a free choice for high-value service areas

By offering a high quality picture library at a very low price, istockphoto has built a market for miniature photo galleries. iStockPhoto's innovation is to keep the copyright of the picture free and easy to download. The free concept of the picture library market began in 2000, istockphoto the first opportunity for junior photographers to have access to the huge picture demand market, but also to a large extent, reducing the cost of picture spending for ordinary users (designers, small companies and non-profit organizations).

As iStockPhoto's reputation grew, the cost of servers and bandwidth soared, forcing Bruce to find a way to pay 10000 of dollars a month for maintenance, Bruce launched a discussion in the community and eventually the community presented an acceptable solution. In February 2002, the community decided to charge 0.25 dollars for each picture to cover the maintenance costs of the site, and 20% of the charges were returned to the photographer.

iStockPhoto's business model has changed a few times, but always keeps picture prices at a lower level. 2004 iStockPhoto officially became a profitable entity. iStockPhoto Collect 1,2,3 "point" fees (0.5 USD/point) for pictures of different sizes and pay 20% commission to photographers. Today iStockPhoto offers more price combinations, such as 1,3,5,10,20,40 "point" (1 USD/point), and offers more commission models for photographers ranging from 20% to 40%, depending on sales and whether exclusive authorization is given to istockphoto.

Foster a loyal, active community

iStockPhoto, a hobby of his founder Bruce Livingstone, is in fact one of the key factors in iStockPhoto's success, not being a venture capitalist. In many ways, iStockPhoto's beginnings are very much like another online community Craigslist,craig Newmark's personality affects Craigslist,bruce's personality and passion for photography also affects the istockphoto community. Bruce has been the core user of istockphoto and is always trying to explore the needs of users.

At the beginning of the founding, istockphoto through the forum, e-mail, talks and other means of consciously cultivate its community, iStockPhoto has many active online forums, new users can post to get the help of old users. These forums make the istockphoto community very friendly to new users and attractive to old users. Second, istockphoto attaches great importance to the rapid response to user issues, even as CEO, Bruce himself will regularly send users to provide encouragement and help. Third, Istockphotos established a travel website (called istockalypses), where users can shoot interesting places and share picture trading experiences.

The iStockPhoto site itself offers many features that allow users to discover themselves. For example, the website user activity level data is public, especially the user's picture uploads the number and the paid download number, this lets the new user can learn from the advanced user what kind of picture is most popular. iStockPhoto also established a user-psychological standard, only a certain level of images will be included, which helps users improve their photography skills, and make them feel the rewards of effort.

The advent of low-priced digital SLR cameras

In the winter of 2003, 6.3 million-pixel canon Rebel digital SLR camera prices fell to 1000 U.S. dollars, both Bruce and Patrick think this is a turnaround for the istockphoto, the emergence of a civil SLR to make high-quality photos of a large number of emerging, iStockPhoto's idea is catering to this trend.

Establish the standard to ensure the quality of the picture

As istockphoto become more popular, pictures are being submitted more and more, and users want to maintain a certain level of istockphoto images. So istockphoto developed a detailed picture submission standard, istockphoto that this is both the quality control mechanism of the picture, but also provide feedback for the photographer. iStockPhoto spend time explaining to the user why their pictures were rejected. Patrick said that sometimes new users of the picture pass rate is only 25%, and through constant feedback and guidance, the six-month pass rate can become 75%-90%.

Start policy

iStockPhoto started with Bruce Livingstone's May 2000 personal website, Bruce built the site to share and publish his work, initially 1600 pieces of Bruce photos for free download, as the site became more popular, 6 months later, Bruce began to open up to other photographers who intended to offer his work, gradually nurturing a thriving photographer community.

Bruce initially promoted the site through Word-of-mouth, such as email to friends. Bruce's friend, senior designer Jeffrey Zeldman in Macworld and other magazines using istockphoto pictures and in his blog to introduce iStockPhoto, Zeldman's influence in the designer and photographer community is an important factor in iStockPhoto's rapid popularity.

With the development of iStockPhoto, its large photographer group has gradually become the main media, in order to promote their own pictures, photographers are happy to promote istockphoto, iStockPhoto also provides photographers with interesting tools (such as free customizable cards) to help them sell their work. Today iStockPhoto has 23,000 photographers, who are the cornerstone of iStockPhoto's spread.

Since then, iStockPhoto has begun to advertise on the Web, print and exhibition, and to maintain a long-term relationship with influential book writers to help istockphoto gain wider visibility.

Exit policy

The revenue generated by the sale of the pictures will keep istockphoto for years, but at the end of 2005, after the business plan, the company realized that they needed 10 million dollars to support future development, including 3 million of dollars in hardware inputs. With this funding requirement, the iStockPhoto team first started contacting the Venture fund, and after acquiring a venture capital agreement, management began to hesitate that it was not the best option, fearing that it would lose control of the product and influence the community ethos it had been striving to build. So Bruce decided to look for other options, and he contacted Getty Images's CEO, Jonathan Klein. After several active meetings on corporate strategy and culture, iStockPhoto sold $50 million in cash to Getty in February 2006. Images. This price is higher than the valuation of venture capital, and it is a good choice for Bruce and other istockphoto employees to sell Getty Images Both financially and in corporate culture.