Under the headline AI Lovefest Fuels Massive Bets On Meta, Tesla, Google And Beyond...

"Companies as disparate as Palantir (PLTR), Adobe (ADBE) and Workday (WDAY) all have tapped into the AI zeitgeist while sparking interest among leading money managers....Just last month, Adobe expanded the availability of its generative AI tool to support text prompts in over 100 languages. On July 6, ADBE stock was featured as the IBD Stock Of The Day as the company took aims to monetize generative AI.

https://www.investors.com/etfs-and-funds/mutual-funds/meta-stock-tesla-google-panw-lead-ai-stocks-to-watch-as-best-mutual-funds-fuel-artificial-intelligence-lovefest/?src=A00220

Also this morning:

https://www.fool.com/investing/2023/08/04/3-ai-stocks-that-are-screaming-buys-in-august/

"Over the past decade, Adobe transformed all of its flagship desktop applications -- including Photoshop, Premiere Pro, and Illustrator -- into subscription-based cloud services...

Earlier this year, Adobe expanded its older Sensei AI and machine-learning framework with a new generative AI platform called Firefly. The integration of Firefly into its Creative Cloud will streamline the production of digital media by enabling its users to create images, videos, and digital models with simple text-based prompts.

...These sweeping upgrades could spark another multiyear growth cycle for Adobe as the AI market expands."

On the subject of SS adding 300k contributors in Q2 - what they said was "...the largest uptick we have ever had in contributors in the 20-plus year history of Shutterstock"...

I had a look at new uploads on SS and saw a lot of work I'd bet was genAI created. Here's one example of a new portfolio with a small number of items, almost all labeled "oil painting" (a couple are "acrylic"). They don't appear to be oil paint on canvas to my eye, and hands (Queen Victoria and the dancing girl in orange) look very genAI.

https://www.shutterstock.com/g/Nida+Artist?sort=newest

Perhaps they are really naive enough to believe they aren't getting any genAI content uploaded by contributors. Perhaps they want it, but want plausible deniability in case they're sued.

Look at these fingers - SS has contributor-uploaded genAI content in the library...

Thanks for providing that access.

I thought it was interesting that they will now be providing details on money earned from their (contributors') data:

"In addition, beginning today we will be breaking out the revenue derived from our data engine. As a reminder, our data offering is driven by our ability to monetize our unique repository of metadata which customers license for model training purposes. This includes our multi-year partnerships with large tech companies such as OpenAI, LG, Meta, NVIDIA and now our newly announced transformational partnership with Google. With this new disclosure, we believe that investors will have greater visibility into the scale and trajectory of a major growth driver of our business."

I've looked at both Alphabet's press release page and Shutterstock's; done a Google search and looked on Yahoo Finance. I cannot find anything recent about a Google partnership (there were earlier deals in 2016 and 2021). The only detail comes from the transcript:

"In the second quarter, we signed a strategic partnership with Google that includes a five-year content and data partnership across Google products and services. Google selected Shutterstock for our global coverage of digital media to enhance product, and user experiences across Google."

Getting back to revenue. Their Q2 revenue was $111.903m from E-commerce, $79.637m from Enterprise and $17.3m from data. In other words the E-commerce segment (stock licensing via the web site) is their primary business, at least for now. Hennessy was careful to sound optimistic about future AI-fueled growth, once the photo-realistic content was good enough "...we strongly believe Shutterstock is positioned to be a winner in this new content type"

As you said, lots of chat about Giphy, but no detail about how SS could "...monetize [the] massive mobile audience base". I don't doubt the size of the audience, but his blather about "... moment marketing with real time conversations..." as a future growth area seems very vague and more wishing than planning. In any event I don't think contributors would benefit from this business at all unless content is used to create GIFs

Hennessy said that "...Shutterstock [is] benefiting from a dramatic uptick in customer demand and accelerating data supply from our contributor community." I watched a YouTube video this afternoon explaining how to upload AI generated content to SS even though it's not allowed and get it accepted - something the person claimed (he showed screen shots) to have done. Not sure how good it is if your increase in supply by contributors is of stuff you've explicitly said you don't want.

Later on Hennessy says " We went from 2.4 million in Q1 to 2.7 million contributors in Q2. This is the largest uptick we have ever had in contributors in the 20-plus year history of Shutterstock." I think that must be a flood of new contributors with AI stars in their eyes - where else would there be that many new illustrators, photographers, videographers wanting to sign up?

Apparently data licensing customers are coming back for more "Customers are also consuming refreshes of our training data, and there is an opportunity to provide them ongoing Metadata enrichment." Hennessy says "Looking ahead, we have a robust pipeline of data partnerships for the second half, also we have won over $85 million in bookings in calendar 2023". I assume the $17.3 million they declared for Q2 is part of that $85 million?

The CFO mentioned the softness in the E-commerce segment "While our E-commerce channel has been softer than expected, our rapid growth in data partnerships is more than making up for it..." From a contributor perspective, I think the problem is that they make much more money from licensing content than from the contributor fund. And the CFO also said "Our guidance assumes no recovery in E-commerce revenue growth rates this year"

As far as the data revenue, he explicitly said that the Q2 data numbers did not include any Google revenue, so that will come in the second half of the year

One of the analysts asked about future revenue from data licensing - if you make money this year, what does that mean if anything for recurring revenue in 2024 and beyond. The answer was long, circuitous and pretty vague:

"...our ability to grow this business year-on-year is really going to be a function of our ability to, one, expand our existing relationships and, two, bring new clients into the pipeline."

The investors want to know where the growth will be coming from and appear not to be sure if that can be data licensing if stock content isn't it any more.

https://investor.shutterstock.com/news-releases/news-release-details/shutterstock-reports-second-quarter-2023-financial-results

I haven't found a freely-available transcript of this morning's earnings call, but I'll update this if I do.

This article gives an overview of why investors weren't happy with the results:

https://stockstory.org/nyse/sstk/earnings/shutterstock-nysesstk-misses-q2-revenue-estimates

"Stock photography and footage provider Shutterstock (NYSE:SSTK) missed analysts' expectations in Q2 FY2023, with revenue flat year on year at $208.8 million"

"Shutterstock's revenue growth over the last three years has been unremarkable, averaging 9.53% annually. This quarter, Shutterstock reported rather lacklustre 0.95% year-on-year revenue growth, missing analysts' expectations."

" In addition, the company's gross margin also deteriorated."

Bear in mind that the crowing about subscriber growth omits mentioning what's noted in the detailed statements: Pond5 numbers were included for the first time in Q2 2023. I also think there's been conversion of existing customers from credit packs to subscriptions, which means it can be counted as subscriber growth, but it isn't really customer growth.

See all the charts in the appendix at the bottom of this investor page

https://content.shutterstock.com/investor-report/index.html

One number that stood out to me was the number of paid downloads had dropped 38.5 million, down from 42.7 million in Q1 2023 and 43.4 million in Q2 2022. Enterprise revenue was up, but E-commerce revenue was down - 12% lower than the same quarter in 2022.

"The decline in E-commerce revenue was primarily driven by continued weakness in new customer acquisition"

Enterprise revenue is still smaller than E-commerce and includes "...$17.3 million and $2.2 million, related to our computer vision data partnerships, for the three months ended June 30, 2023 and 2022..." Not sure what those partnerships are, but if they aren't royalty bearing activities, then contributors don't benefit from that type of growth.

"The increase in Enterprise revenues was primarily driven by growth in our computer vision data partnerships which generated $17.3 million during the second quarter..."

So I take that to mean that income from its stock licensing business was essentially flat and paid downloads were declining - hence the stock price dropping, I guess.

The problem is not new with stock photos. ...Unless it is editorial, people always have to be careful.

It's true that bad keywords are completely ignored by agencies and that  inaccurate descriptions have resulted in trouble for buyers. More often though it's careless staff not paying attention to accurate descriptions and using content based solely on looks. At its very worst, it was at least a photo of somewhere on planet earth, even if the keywords said Bahamas, Aruba, Guadeloupe, Jamaica, St Thomas...

Comparing problems with photographs to the dumpster fire of photo-realistic (ish) genAI is like comparing a gentle stream to a raging flash flood - the difference in degree is so great it's really a difference in kind.

In six months the genAI collection has ballooned and is full of things that aren't what they claim to be.

The image has been taken down now.

Yesterday there was even one more picture added, but this morning, I'm getting 404 errors if I click on anything in this guy's portfolio, so I think it's imploding.

And I thought it was totally out of line that they continued acceptances of new work after the reports of theft. It went from 905 to 999 to 1,103 to 1,104

Here's what I'm seeing this morning

I know that there will always be rejections and that contributors won't always agree with them, however with all the tales of rejects, I find a totally different story looking at recent genAI acceptances.

I would give a batch reject to all 5 images of a child holding out an empty bowl as not one image has a total of 10 digits. One could be explained by how the bowl is being held - maybe. The portfolio is small and new:

https://stock.adobe.com/contributor/211451045/lordrul

There are also two iMacs with logos in the portfolio (not in this morning's acceptances) which should have been rejected.

If you look at the other (not hand-related) details of several of those child-with-bowl images, they're a mess - focus in very odd places, stray lines above a tee shirt edge, lots of reasons to reject.

As I was falling asleep last night I realized how recent those two articles (in the laptop screen) were. I just checked the dates - July 22 and 23. Yesterday, July 28th, was when I saw the giant laptop image.

That image was less than a week in the queue.

Haven�t those of you uploading been waiting 3-4 weeks?

If I was looking for evidence of a two-tier system, this would be very convincing�

It is beyond belief that this image was recently approved - this content puts Adobe Stock and anyone licensing this image at risk. Getty is notoriously tough with misuse of its images.

I first noticed this item because of the comically gigantic laptop in front of the mannequin-like worker



Seeing photos on the huge screen - and, surprisingly for genAI, readable text - set off warning sirens in my brain (I've been editing stock images for way too long!)

A google search found the two articles and the image credits. Both are credited to Getty - senior couple and laptop hands

https://fortune.com/well/2023/07/23/how-to-stay-fit-as-you-age/
https://www.cnn.com/2023/07/22/tech/ai-jobs-efficiency-productivity/index.html

The contributor has several other laptop images with photos on the screen, but they're harder to track down (so I didn't). I expect none of them are licensed.

If anyone who can post on the Discord thread about "oops" genAI images wants to post this - or a link to this thread - go ahead.

I realize it's a bit childish of me, but I am so angry to see any pretense at reviewing standards tossed aside in the frenzy of AI madness. I defy anyone to convince me that a non-AI image like this could ever get approved without property releases for the on-screen content. I've had to provide releases for use of my own images (on walls and screens) so many times...

Quote from: Jo Ann Snover on July 28, 2023, 09:48

It's all really depressing - instead of celebrating the strengths of genAI images, we're getting cheap and wonky knock-offs of real world places and things. I'm hoping the market (buyers; Adobe clearly loves welcoming this stuff into the collection) speaks and ignores things that aren't useful. Or which get them articles in the Guardian

I think that's the real question: how will we all, as customers, accept these images that are meant "to illustrate" a product or a service?
The burger advertised by McDonalds doesn't look like the burger you get at their counters. ....

After all, on every advertisement there's a small notice: real product might differ from advertised product.

Point taken - I've been licensing stock and looking at ads/marketing materials for decades. "Authentic" in stock isn't real life - and if you look at all the "shiny-happy people" pictures, genAI or old-school, they're better lit, tidier, posed and typically younger/prettier than most people's everyday life.

However, there's a huge difference between cleaning up, polishing and giving a sunset glow to real life and making things up that sort-of look like the real thing.

Here's an example. Below is a genAI image of Sheffield town hall, Yorkshire, UK. This link will, courtesy of google, show you a large set of pictures of the town hall you'd see if you went to Sheffield.



It's not just the autumn trees or the warm color tone. The genAI image has the clock tower in a different place with respect to the other buildings; the windows and floors are different from the real building. Just about every architectural detail in the genAI building is wrong, although it has a similar feel overall.

I have many hundreds of examples from Adobe Stock of this sort of problem - the town hall image isn't an exception. There are images from cities all over the world; of objects that are impossible or defy the laws of physics (but which are presented as real life not fantasy); human or animal anatomy, vegetable/fruit structure that are wrong (not ironic or artistic or fantastic; just wrong); flags or other emblems improperly rendered.

As long as this type of work is clearly labeled as genAI, buyers can choose. IMO Adobe would be well served by removing the obvious "oops" images. Although perhaps the aircraft carrier with wings should stay

I have a large folder of Firefly experiments. It's still in beta. I haven't produced a single usable image (for the things I was interested in working on), and the workflow seems awkward to me -not sure how I would use it if it was out of beta.

Earlier in the week I tried the generative fill option on an image I'd created with firefly and it was funny - not intentionally. I wanted to replace the floor surface in an interior shot. It couldn't automatically select the floor, or even automatically extend my manual selection. The perspective and scale on the fills wasn't right. A mess.