Shutterstock’s acquisition of 3D marketplace Turbo Squid is significant for a few reasons, some of which might not be obvious.
The first and well-understood purchase trigger is that the microstock company is under pressure to expand its offering horizontally. There is a known ceiling to the paid licensed still images market, and it is getting close to reaching it. As a reference, Getty Images’ longer lifespan in this space has shown that rising above the $800 million a year mark is a challenging if not impossible task. And Getty has remained pretty much in the “still photo/illustration/video and music” offering during that time.
It is not a surprise.
Not only is there a limited amount of companies that will pay for a license to use audio-visual content but those are mainly situated in regions with copyright legislation enforcement. Expanding beyond this “safe haven” only generates diminishing returns. The cost of new customer acquisition increases while revenue per customer decreases.
Thus Shutterstock’s imperial need to expand its market by spreading its offering. Probably the most evident reason behind this acquisition.
However, this might not be the slam dunk that it appears to be. Shutterstock’s most formidable competition in its space is two well-oiled, efficient, and wealthy tech companies: Canva and Adobe. While they have acquired some vast content pool as part of their offering, it is not what they are selling. They are successfully betting that selling a service that helps transforms audio-visual content into a finished product will reap more benefits. With proven results.
They are not selling the rocks; they are selling the chisels.
If IP is the oil of the XXI century, refinement is its gold. This is why both companies license content as an afterthought, giving most away for free as a loss leader for their core offering. While Shutterstock has tried to mimic this approach via its “studio,” it is so far not a credible threat. The company is still a content warehouse. The acquisition of Turbo Squid confirms it.
A second significant aspect of this acquisition is in the nature of the content. While 3D has been around for a long time, it has yet to become a substantial part of the visual landscape. It has mostly been used in games and engineering, with some appearance in architecture and design—case and point: Turbo Squid’s $11 million in revenue after 20 years of operations. The primary and obvious reason is that unlike 2D still images, it is not a simple format to manipulate. One doesn’t just replace a .jpg image with a 3D image. Like videos, it has suffered from being disseminated via a variety of non-standard formats, readers, and uncooperative browsers. If you don’t know what you are doing, better stay away.
Turbo Squid obviously comes with its customer base, and there is no reason to think that they will not continue using the platform. However, assuming that those will easily be converted to still 2D image buyers or that still image buyers will start purchasing 3D content is a mistake. Like oil and vinegar, the two don’t really mix well.
Emerging development in depth-photography like LIDAR’s availability in the most recent iPhone has many hopeful, including us, that the 3D format will expand into the mainstream. Vulgarising the format will lead to its mass adoption. At least that is the gamble at Shutterstock. In which case, they will be properly positioned for when it explodes. Or will they?
All bets are off
Thing is with audio-visual content creation is that it is rapidly being disrupted by AI. Already we see numerous examples of GAN successfully creating music or high-resolution images from a few prompts. It would be foolish not to expect Adobe, Canva, and even Google to not be currently working on workable solutions. And those are not far away. 3D, very much fueled by the growth of AR, is undoubtedly a prime target.
In a world where all content can be created from scratch and on-demand, what is the usefulness of a content warehouse like Shutterstock? Why purchase a generic version when you can have one perfectly fit? Sure, it will take some time for AI creations to replace human creations completely, and maybe some will never be replaced. But all those images of chairs or toothbrushes, or those brick backgrounds, holiday celebration illustration don’t stand a chance.
Shutterstock is betting that differentiation of content will keep customers away from the competition and close to them. Faithful to their microstock business model of “volume brings revenue”, they are piling up content, covering all possible needs. While that strategy could bring immediate results ( which Wall street loves), it might not be the best route to long-term success. But then again, it might be too early to tell.
Author: Paul Melcher
Paul Melcher is the founder of Kaptur and Managing Director of Melcher System, a consultancy for visual technology firms. He is an entrepreneur, advisor, and consultant with a rich background in visual tech, content licensing, business strategy, and technology with more than 20 years experience in developing world-renowned photo-based companies with already two successful exits.