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Shutterstock Ready For IPO

Posted on Tuesday, Oct 9th 2012

Market researcher BCC Research estimates that the market for pre-shot commercial digital imagery will grow to $5 billion by 2013. The expansion will be driven by growing demand from organizations such as businesses, marketing agencies, and media organizations. In 2008, the market was worth $2.7 billion. Within the pre-shot market, the microstock market is an emerging market where digital images are collected from semi-professional photographers and designers to be sold at comparatively lower prices to organizations and individuals for commercial use. The market is dominated by three players: Getty Images’ iStockPhoto, Shutterstock, and Fotolia. Recently, Shutterstock announced plans to become a listed company.

Shutterstock’s Offerings
New York–based Shutterstock was founded in 2003 by Jon Oringer to provide commercial digital imagery to organization for use in visual communications. The company earns revenues by selling images for commercial use to single-time buyers or subscribers. As of April 2012, its library boasted of a collection of more than 19 million images. Users can either buy these images on a “Pay as You Go” basis without becoming subscribers, or they can download images through a paid subscription. Pay as You Go images are available for sale at a price of $19 each, going up to $229 for 25 images. Subscriptions let users download up to 25 images a day at a price of $249 a month, going up to $2,559 for the year. Last year the subscriber base increased 71% over the year to 550,000. More than 35,000 approved contributors uploaded images to Shutterstock’s library, and the company reported more than 58 million paid downloads to customers. Shutterstock’s customers are present in more than 150 countries and its site is accessible in 10 languages.

Revenues have grown significantly over the past few years. In 2009, Shutterstock reported revenues of $61 million, which rose to $120.27 million last year. In terms of regional markets, the Americas contributed 43% of revenue and the EMEA markets 46%. Asia Pacific markets are still small and generated just 11% of the year’s revenues. Unlike other digital players, Shutterstock has been successfully reporting positive income. Net income grew from $18.84 million in 2009 to $21.86 million last year.

Shutterstock filed its S1 in May of this year, and it proposes an offering of 4.5 million shares at $13 to $15 each. It planned to raise $115 million through the listing. However, the company recently revised plans, suggesting a pricing of $14 a share to raise $54.2 million. Analysts estimate Shutterstock to be worth up to $490 million. The company plans to list on the NYSE and will trade under the ticker SSTK.

Shutterstocks’ Impressive Search Feature
To ensure that users get just the right picture they are looking for, Shutterfly has invested in and developed a very strong search engine. It continuously monitors users and keep revising its algorithms to deliver improved search results. It uses an internal tool known as “The Creeper” to watch searches in real time. Earlier this year, it launched Shutterstock instant, a search service that displays images while the user is typing out the query. It also released an iPad app that is known for minimal controls and delivers strong search results.

Shutterstock is now said to be working on a new color-based search tool, Spectrum. Spectrum is expected to let users type in a keyword and then adjust the results by color. The company is currently performing a beta testing for the tool.

Analysts believe that the presence of nonprofit organizations such as Creative Commons, which now grants free access to images, and other creative representation of artists is hurting the microstock industry. But Shutterstock isn’t too worried. It is working to expand its offerings by adding alternate media such as video clips to its library. For now, the company is in a good position for its stock listing.

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