While the industry raves about the possibilities of in-image buying, none of its major players seem to gain any traction. In fact, after Stipple last spring, it is UK -based Taggstar‘s turn to close its door on this model.
In a very brief, cold email sent out today to its users, image tagging company Taggstar announces that it is permanently shutting down its service on November 14. No reasons given. In fact, the email finishes by saying : “We are not able to talk with individual users about this topic. ” Interestingly enough, its website makes no mention of its impending closure and seems to still accept new sign ups. The company itself is not shutting down. They are migrating ( pivot ?) to what they call their ” social proof messaging product” which appears to be a tool to publish real-time information on the products you are seeing in an effort to convert users into buying. A bit as if you had a salesperson whispering in your ear as you shop that the handbag you are looking at is selling very fast, that there are only 2 left, and that in another store, 2 other people just bought the same one.
Taggstar had seen some success in the UK for its in-image tagging solution, mostly because until recently, they had the first mover advantage on their market. Taggstar’s model, and probably the reason for their failure, was exclusively focused on affiliate revenue. A user would tag an image with a “buy” option linked to an e-commerce site who would in turned send pennies to the dollar if a sale was executed. Divided by 2, Taggstar and the publisher, earnings must have been very small. Furthermore, lacking any kind of image matching technology, each similar image needed to be re-manually tagged if published on another site. No possibility to scale. They claimed a 40% impression but offer no information on CTR.
Competitors like Luminate ( recently acquired by Yahoo) had already switch away from this model a few years back, realizing that the manpower needed to manually tag all these images was detrimental to a viable business. Instead, they moved into GumGum ( and now Znaptag) space of automated in-image banners. While Gumgum seems to enjoy some level of success, mostly due to their vast network of publishers and an aggressive sales strategy, it is still unknown if this is a successful model. Thinglink, a Swedish based company, who recently launches a video version of their solution, also seems to have moved away from trying to monetize images via affiliates links and instead if heavily focused on the educational market.
Thus, it does appear that although it seems like an incredibly good idea, in-image purchasing tags just doesn’t work. People just don’t shop that fast. In other words, it is not because we discover products we like in a photograph that we will pull out our credit cards and buy it immediately. Customers are more in control, as well as more budget conscious than the tech world would like them to be. Online impulse buy is just not a big enough to support businesses like Taggstar . They need to offer more, or rather, be more attuned to current online buying patterns.
Stipple had a ‘Save for later” option which would have permitted users to purchase later ( after review) and for brands to offer Groupon-like high volume discount to those who had selected their products. Others, like Thinglink, offer the possibility to include ads, whether on video or banner format. In those cases, revenues are based on impression or engagement, rather then CPA, giving the companies alternative revenues. But then again, without an efficient scaling ability, it is useless.
Unless one of the still existing companies still offering this service show a clear success path, we are probably seeing the end of this technology, at least in its current format. After Stipple and now Taggstar, investors will not likely fund any company in this space, making it almost impossible to start up.
Photo by JD Hancock
Author: Paul Melcher
Paul Melcher is the founder of Kaptur. 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.