The archive · Business Models · Product decision · 2000–2009
iStockphoto (2000): $1 photos create microstock — and Getty pays $50M for it
In 2000 Bruce Livingstone priced stock photos near $1 each; microstock was born, and Getty bought iStockphoto for $50M in 2006.
iStockphoto
What it had to solve
In 2000 Calgary designer Bruce Livingstone put 2,000 of his photos online free in exchange for email addresses; friends joined with a credit system, and by 2002 the site hit critical mass — until hosting cost him $10,000 a month.
How it works
In 2000 Bruce Livingstone, a Calgary designer and photographer, put 2,000 of his own photos online and let anyone download them in exchange for an email address. His friends wanted in, and by June the community ran on a credit system — upload an image, earn a download. Around 2002 it hit critical mass and the bandwidth bill reached $10,000 a month.
To pay the bills without betraying the community, Livingstone introduced micropayments: images licensed for about $1 each, with contributors paid per download. This was not a small discount — stock photos had cost hundreds of dollars — it created a market of small buyers who had never licensed an image before.
The industry initially aligned against iStockphoto and the other new agencies, then Getty Images bought the company in February 2006 for $50 million, when iStockphoto's revenue was about $23 million. Sales grew to $72 million in 2007 and roughly $150 million in 2008, with 2009 projected at $200 million.
By then microstock had upended the stock-photo business: a graphic designer could go from paying hundreds of dollars an image to less than $10, and iStockphoto claimed to sell an image every second, paying contributors about $1.2 million a week.
Why it lands
- A $1 price opened the market to web designers, bloggers and small businesses who had never bought stock photography.
- Community-uploaded images created an enormous catalog — 5 million images by 2009 — at near-zero production cost.
- Micropayments kept the site's gift-economy spirit while turning it into a profitable business.
- Getty's $50M acquisition made the industry's biggest player microstock's owner, cannibalizing itself before rivals could.
- Per-download royalties gave tens of thousands of amateur contributors a reason to keep uploading, compounding the catalog.
What it did
Buyers went from paying hundreds of dollars per image to under $10; iStockphoto led the category, was profitable before its acquisition, and Getty Images paid $50M for it in February 2006 when revenue was about $23M — growing to roughly $150M by 2008 and a projected $200M in 2009.
What you can take
A price cut of 90%+ isn't a discount, it's a new market: it finds buyers who never bought before — and if you don't disrupt your own industry, someone else will.
Since then
iStockphoto became Getty Images' microstock arm, and the model spread across the industry as Shutterstock, Fotolia and others raced to copy it; cheap, abundant imagery became the default for the web. Traditional agencies that had dismissed the model saw rights-managed revenues fall — Getty's stock slid 60% by February 2008, and Goldman Sachs projected rights-managed images would shrink to 29% of its revenue by 2012 while iStock kept growing.
Sources
- Microstock Photography Is Getting Big. iStockphoto Projects $200 Million In Revenues
- Book Excerpt: The Canary in the Coal Mine
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