Photo app EyeEm announcement today that it will be opening an image licensing database made of photos submitted by its users brings an interesting though to the photo tech space. Considered by many as the gentle Instagram’s – its ToS does not attempt a copyright grab- it has managed to carve itself a respectable area in the very crowded space of the phone app with a sharing network.
Being a free app, it is now trying to find a revenue model that preserves its photographer/contributor friendly image, a difficult task faced by all its peers.
In the phone app world, once you have successfully created a large network of contributors freely and happily creating, posting and sharing their creations, you are faced with the Herculean task of turning it into a profitable operation, something no one has yet successfully achieved.
The issues are numerous but the main one remains how to do it without alienating your community. After all, others are more than willing to quickly welcome your users.
There are two ways to turning photography into valuable assets. You either sell what is in the image or you sell the image itself. The first one is advertising, the other is image licensing.
Instagram, it appears, has decided to go the advertising way, selling the content of the images rather than the images themselves. EyeEm, true to its anti Instagram image, picked the other route and is licensing the images themselves. Facebook, Twitter, Pinterest are also picking the content value side and are hard at work to monetize the content of the images, rather than the images themselves, while photo hosting site 500px, or Flick via Getty Images, have picked the value in the vessel side, image licensing.
Which model has a better chance ?
Traditionally, any image database was harvested for its licensing value, offering customers around the world, a source of highly professional and curated images for professional use. All the way to micro stock, UGC managed by tech companies ( Shutterstock being its most successful example), it has proven a successful model ( Getty Images yearly revenue is flirting with the billion dollar mark, Shutterstock has a 30 to 40% yearly growth). However, it doesn’t come easily. It is human labor intensive both because machines cannot yet select the best images to license and the sales channels still need a lot of human hand holding. It is financially expensive because growth comes only driven by costly marketing expenses.
Selling the content has never really being done. While the advertising world has always used photography to showcase products and services, it has never mined UGC content to do so ( mostly because of mind bogging rights issues), especially outside traditional media. Social media networks have no known editorial direction and have somewhat unpredictable reactions. However, they are much better defined and users’ reaction can be very closely quantified and monitored. And with 500 million images shared daily on the top networks, it’s a river full of gold waiting to be mined.
Which way to go ?
Image Licensing seems like a safe and established business route. Everyone knows where it has been and has a pretty good idea where it’s heading. As long as people will publish ( books, magazine, website, blogs), there will be a need for images. However, it is a very crowded space, where prices have been sinking rapidly and dominant companies have a very strong hold on the top clients. There is always options to break in, but it will come with a lot of effort, both financially and human. It is a costly path that is not guaranteed to succeed. The price to pay for failure is not only the companies financial health but mass contributors defecting because of unmet expectations.
Advertising the content comes with upfront resistance. A lot of people are not comfortable with the idea that you might use their creation as a tool to sell what is inside. The risk here is that as soon as you announce your plans, you experience major defection and backlash. It has happened to Instagram a year ago when it changed its terms of service to allow them to use images for advertising ( helping in the process the growth of EyeEm). However, once passed, the potential is expected to be massive. Already we see , thanks to recent reports by UGC mining company Olapic, that using Instagram pictures to sell product increases conversion rates 3 folds. That is only the beginning. Using social media networks, instead of traditional media, to advertise, can also be much more rewarding, because you have a very captive audience, as proven by Twitter and Facebook success in that field. When you combine both, like Instagram does, you are sitting on a gold mine. The downsize is that when everybody does it and all images eventually come with an ad, you create “banner blindness” like currently experienced with the Youtube pop up ads. You turn off those you want to convince.
The choice should be clear.
It all boils down to your intentions. Do you want to create massive revenue at the risk of alienating your contributors or do you want to survive while keeping a thriving community of happy contributors ?Is you app about changing the world a smile at the time or is it about creating the next Fortune 500 ? Depending on the overall business direction, either options can be valid as long as once committed, you do not vary. While image licensing can protect from contributor backlash, it is certainly the less profitable of the two, thanks to the cost of the infrastructure. And if advertising appears to be the bigger payout, it can also come with user defection and long term lassitude, both lethal networks killers. At the end, it’s all a question of strategy.
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.