760 million U.S. dollars to interpret the world's largest picture trading website Shutterstock

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Shutterstock is a business image online trading website, founded in 2003 and headquartered in New York, USA. October 11, 2012 Landing on the NYSE listing, up to the current market value of about 760 million U.S. dollars.

First from some intuitive data to understand the Shutterstock Web site:

10:shutterstock website supports 10 languages;

150: More than 150 active users in the country;

10,000: The number of new pictures per day more than 10,000;

35,000: content (including pictures, illustrations, video, etc.) suppliers more than 35,000;

550,000: Paying customers more than 550,000;

20,000,000: Picture total more than 20 million;

250,000,000: Total download times more than 250 million times.

This article will be from the Goodwill model, competitive advantage (moat), investment risk, growth strategy, financial interpretation and valuation of six aspects, the main viewpoints include:

Business model: Contact the electronic gallery of supply and demand at both ends, become the platform of online trading, and the supply side revenue;

Charging mode: To subscribe and on-demand customization for the characteristics of the bulk profit model, customers need to pay in advance, for the operation to provide a stable cash flow;

Competitive Advantage: Content accumulation and cash flow called adequacy;

Investment risk: Homogeneity competition, localization challenge and price increase space narrower;

Growth strategy: Strengthen the localization, expand the organization big customer and the new type electronic content and so on;

Financial interpretation: Increased customer and paid downloads have led to rapid revenue and profit growth;

A business model

Shutterstock Essence is the use of Internet channels to do the platform, contact the supply and demand at both ends: Picture supplier (photographer, illustrator, cameraman, etc.) upload content (including pictures, illustrations, video, etc.) to Shutterstock, picture demand side (commercial customers, marketing organizations, Media organizations and long tail users with picture requirements) to Shutterstock to find the pictures they need.

Shutterstock attracts suppliers with a worldwide range of paid users, efficient image uploads and real-time feedback and online communities; the means to attract demand side include high-quality licensed images, excellent search experience and results, and easy, affordable payment methods.

The entire online trading chain can be divided into four steps: Image supplier upload photos in Shutterstock and audited → picture demand side in Shutterstock search and find the desired picture → demand side through the prepaid plan download pictures →shutterstock and photo suppliers to cooperate 。

1, Charging mode

Shutterstock offers a variety of charging models, including subscription and on-demand customization characteristics of the bulk profit model, this model can reduce the price of a single payment, which is conducive to increasing sales, on the other hand, customers need to pay ahead of time, so that the site can provide a stable cash flow.

--subscription service: Up to 25 downloads per day, with 1 months, 3 months, 6 months and 365 days in advance to pay subscription fees. Revenue from subscription services accounts for about 50%.

--On-demand customization: This type of photos can be downloaded at any time within a year, depending on the size of the photo. Revenue from such services accounts for about 40%

--Others: In order to meet the diverse needs of customers, Shutterstock can be based on the different needs of users to develop different payment schemes. Revenue from such services accounted for 10%.

Comprehensive Shutterstock Charging mode, the user for each picture average payment of 2 dollars, it is this low-cost strategy makes its commercial electronic picture market demand and trading volume is expanding.

2, divided into patterns

The supplier's revenue derives mainly from the number of authorized downloads of content (including pictures, illustrations, vector art, video, etc.), most of which are downloaded according to the Shutterstock standard licensing mode, that is, each picture is downloaded (or authorized to use) by the supplier for $0.25 USD ~2.85.

The supply side's income-sharing depends on three factors: different model of profit plan, supplier's contribution in Shutterstock and user's purchase plan.

In the advanced licensing mode, the picture supplier can obtain 28 dollars per picture for each download, and in other purchase schemes and licensing mode, the sales revenue of 20%~30% can be obtained according to the Shutterstock contribution of the supplier.

The video supplier also receives revenue based on the number of downloads of the content authorization, earning 30% of the sales per download.

Two competitive advantages

Shutterstock Competitive advantage is mainly embodied in the accumulation of content and more abundant cash flow.

1, Content accumulation

The cumulative number of Shutterstock images grew from 2.6 million in 2007 to 17.4 million in 2011, up to the present total of more than 20 million pictures.

The accumulation of content is like a snowball, the more content, the greater the visibility, the more can attract more content suppliers to upload works, and a large number of works to meet the customer's use and download demand, thereby creating more value.

Do a random small experiment, October 17 I in some High-profile gallery website search "Cycling" all relevant pictures, search results as shown in the following figure, where Shutterstock results are 46,000, Corbis followed by 45,000, Getty to 25,000 row third.

In addition, the work of the Shutterstock website for trading, including quality, commercial, and related, has undergone a rigorous qualification review of 100%.

First, Shutterstock will strictly select the supplier of content. To be a supplier, you must submit an application to Shutterstock, which requires a detailed profile and portfolio. According to the statistics of more than 375,000 applications, but less than 40,000 people through the rate of less than 11%.

After the application to become the supplier can upload the image independently. However, the Shutterstock audit team will review each image uploaded and use the Patent review technology to filter photos and other works to improve the efficiency of the review. At present about 38 million pictures were submitted, but only 20 million pictures passed, through the rate of 50%.

In addition, the supplier needs to post a keyword for each work that is reviewed, with an average of about 30 keywords per work, up to the current Shutterstock database with more than 650 million keywords.

After a series of reviews, Shutterstock ensures that each picture is fully licensed and commercially available, and provides a maximum of USD 10,000 guarantee for customers using the picture (such as legal fees or other losses that may result from the use of the picture by the customer).

2, Cash cow

At the end of 2011, cash was increased from $4.94 million in 2009 to $14.1 million, mainly due to growth in net profit and deferred income (Shutterstock).

Operating cash flows were increased from $27.15 million in 2009 to $39.55 million in 2011, with cash from net profits increasing from 18.84 million U.S. dollars in 2009 to $21.86 million in 2011; Cash from deferred income increased from $3.94 million in 2009 to $8.82 million in 2011, and deferred income comes from a purchase fee that is paid in advance by the user through a payment plan or on demand.

Three investment risks

The Shutterstock risk mainly manifests in the homogeneous competition intense, localization challenge and the price increase space is narrow.

1, homogeneous competition

Shutterstock's electronic library industry has a relatively low threshold, from the content supplier's point of view, the fact that most of the content suppliers (photographers, illustrators, cameramen, etc.) that live by the library will upload content in multiple galleries, and make more profits by selling the pictures and sharing the gallery website.

Take a look at a photographer in June 2012 revenue from different galleries (as shown in the following figure, source), the photographer's income from different galleries is related to the amount of content uploaded, the pattern of site partitioning, and sales.

2, the price increase space is narrower

Shutterstock mainly take the bulk profit model, the user for each picture of the average payment of 2 U.S. dollars, this low-cost strategy allows customers to its demand and volume expansion, but the price increase space is narrower, so the future development of space is mainly to improve the number of galleries and download.

However, when the content of the major galleries more and more homogeneous competition, the original has been meager profit picture online trading mode How to maintain sustained growth is worth thinking.

3, Localization Challenge

With more than 550,000 active paying subscribers and more than 150 countries and regions, Shutterstock is increasingly becoming a global company, with business areas expanding to stimulate revenue growth by stimulating picture supplies and paid downloads.

However, because of the lower threshold of the industry mentioned above, business globalization will inevitably encounter the fierce containment of local companies in various markets. Moreover, in the competition with local companies there are more than two disadvantages: first, the lack of local content accumulation, the second is the lack of good local suppliers and customer relations, both of which require a longer period of accumulation.

Take China as an example, image library sites such as CFP, panoramic pictures, Oriental ic and so on, in the content and customer resources have accumulated a considerable number of advantages, the world's largest gallery company Getty Images into China to take the Chinese company Vision China (VCG) joint venture to establish a company canopy creativity, The joint venture company can in China agent Getty Huge Library resources, on the other hand with the Asian and China's local excellent photographers close cooperation, continue to supplement a large number of high-quality elements of Chinese content, to meet the diverse needs of customers.

At present Shutterstock website also has Chinese service, but the advantage is not obvious.

Four growth strategies

As can be seen from the above analysis, Shutterstock small profit picture trading model of the price increase space is narrow, then the future growth strategy is mainly in improving the size of the picture transactions, strengthen marketing, improve user experience and strengthen the localization of the goal is this; In addition to the development of video and other new content and media organizations such as major customers.

1, to enhance online and offline marketing: The current Shutterstock of customer growth mainly from interpersonal communication, and active SME (SMB) customers in the world accounted for a small share of the future plans to expand the library supply and provide special services to continue to create a good reputation, In addition, through increased online and offline marketing input to expand the brand's visibility.

2, improve the original user experience: through the accumulation of library materials, user browsing and downloading habits, as well as the market and user needs to grasp, Shutterstock continue to improve the quality of search algorithms and user experience, in addition to the library to provide more tools, Enable them to better manage and track their own production content, release new products to increase the relationship between the supplier community, and constantly attract new users.

3, strengthen localization: Shutterstock increasingly become a global company, the content of the supply and demand side of the world more than 150 countries and regions, the site's language version of 10, the plan to improve user experience, deepen the global penetration rate. In addition, considerable local demand has not yet been developed, and plans to increase the availability of content and regional richness to meet the growing needs of global users.

4, expand the media organizations and large enterprise customers: up to now, Shutterstock most of the revenue from the online purchase of small and medium-sized enterprises, and from large enterprises or organizations of less than 10% revenue, the plan is to provide flexible payment solutions for large enterprises direct sales, thereby increasing revenue.

5, open up new content types: At present, in addition to electronic pictures, video clips or video and other market demand is growing, Shutterstock will continue to expand the field of electronic content, to provide users with more content.

Five Financial interpretation

With financial interpretation to counter the business model, the key to Shutterstock income sharing and batch particle model is to increase the amount of paid downloads, which can be seen from the results of the past years, and its paid users, downloads and average revenue per download to achieve growth, thereby promoting revenue and profit growth; And the United States and Europe, from the development of the image Library industry more mature market revenue accounted for over the years, respectively, 30% and about 40%.

1, revenue and profit growth drivers: Paid customers, downloads and average revenue growth per download

Revenue from 2007 to 120 million U.S. dollars from 30 million to 2011, to maintain a 41.49% annual composite growth rate, the first half of 2012 revenue year-on-year growth of 43.78% to 78.199 million U.S. dollars.

Revenue growth over the years is mainly due to the number of paid downloads and the average revenue growth per download, and the increase in paid downloads is mainly due to the increase in the number of customers, and the average revenue growth per download is due to the growth in demand customization.

Shutterstock Cumulative downloads increased from 33 million in 2007 to 204 million, of which downloads in 2010 and 2011 were 44.1 million and 58.6 million respectively, with an average revenue of $1.88 and $2.05 per download.

In addition, Shutterstock's reliance on large clients is low, with the top 25 of the 2011 contribution revenue accounting for less than 2% of the total revenue.

Gross margin, since 2007 has been maintained in more than 60%.

Operating profit, from 2007 to 5.92 million U.S. dollars to 2011 of 22.89 million U.S. dollars, to maintain a 149% annual compound growth rate, 2012 in the first half of the year down 7.7% to 10 million U.S. dollars. Net profit, from 2007 to 1.91 million U.S. dollars to 2011 of 21.864 million U.S. dollars, to maintain a 227% annual compound growth rate, 2012 in the first half of the year down 5.8% to 9.782 million U.S. dollars.

Careful friends will find that Shutterstock's operating margins and net profit margins are falling. 2007 to 2011 were 1.97%, 39%, 32.32%, 23.86%, 19.03%, and the net profit margin was 2007 to 2011, 0.64%, 37.25%, 30.84%, 22.82% respectively. Net profit decline is mainly due to sales and marketing costs and research and development costs rose, the former revenue accounted for from 2009 of 18% to 2011 of 26.5%, the latter from 4% to 8%; the market is very competitive, and SSTK sales marketing mainly by Word-of-mouth transmission, Therefore, the latter will also expand online and offline marketing, estimated that the cost of this piece will continue to rise in recent years.

The rising cost of research and development means that Shutterstock is aware of the importance of the site's user experience, with the goal of continuing to attract suppliers and customers. The user experience includes how suppliers can better manage their content libraries, monitor their gallery browsing times and transaction times, and how customers can quickly find what they want by searching; In addition, SSTK also operates network communities to promote communication between suppliers and enhance stickiness.

2, Revenue region composition: The United States over the years of revenue accounted for about 30%, Europe about 40%

2011 North American revenue accounted for 34%, South America accounted for 9%, the entire Americas region was 43%, Europe's revenues accounted for 2011 from 41% in 2010 to 40%, the Middle East and Africa accounted for 6%, the entire EMEA (Europe, Middle East and Africa) accounted for 46%; Asia and the Pacific Rim accounted for 11. %。

In 2009, 2010 and 2011, the United States accounted for 32%, 31% and 30%, respectively, 30% and 32% in the first half of 2011 and the first half of 2012. In addition, no country contributes more than 10% per cent of its revenue.

VI. Valuation

Shutterstock on October 11, 2012 on the NYSE listing, the issue price of 17 U.S. dollars, higher than the previous 13~15 U.S. dollar issue price range cap. IPO on the day the opening 22.50 U.S. dollars, the closing price of 21.66 U.S. dollars, more than 17 U.S. dollars IPO prices rose 27.41%, the market value of 738 million U.S. dollars, p/e about 49 times times.

As of October 18, the shares closed at 24.36 U.S. dollars, the market value of 758 million U.S. dollars, P/E is about 55 times times. (The author of this article is snowball Finance, I stock analyst Li, please specify.) ）