That's a pretty healthy profit but I still would love to know what they spent the $100M on. They have no inventory, don't have a ton of employees, no massive support call center, or anything else like that.

Maybe $40M on commissions, 150+ employees (about 18 months ago when they were "recruiting like mad"), marketing, internet, NY office rental, etc, etc. Maybe massive bonus for JO? I'm surprised that they're not more profitable though.

Increasing the bottom line through cost-cutting is what a desperate company does toward the end of its game.  It's certainly not the strategy for a company that is about to do an IPO.

But what happens AFTER the IPO?

Quote from: gbalex on May 14, 2012, 15:32

http://in.reuters.com/article/2012/05/14/net-us-shutterstock-brief-idINBRE84D0N320120514?feedType=RSS&feedName=internetNews

For the year ended 2011, Shutterstock earned 21.8 million on a revenue of $120.2 million. More than 550,000 active, paying users contributed to revenue in 2011, representing an increase of 71 percent compared to the prior year.

That's a pretty healthy profit but I still would love to know what they spent the $100M on. They have no inventory, don't have a ton of employees, no massive support call center, or anything else like that.

  I think one of the largest costs for these websites is the cost of online advertising. Driving customers to a website is expensive, but the pricing on keywords like "stock photo" is huge. The last time I looked it was in the $2.25 per click range. that's just to bring in a viewer, not a sale. Look at the placement of shutterstock in the google paid ad search and you will see that they are at the top. You have to buy that kind of exposure.

Now we know for sure the agencies read MSG!   

From the Prospectus:

INDUSTRY AND MARKET DATA

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our products. These sources include BCC Research, Zenith Optimedia, BIA Kelsey, Microstock Group Forum, Cisco, IBISWorld, Netcraft and MagnaGlobal. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. While we believe the market position, market opportunity and market size information included in this prospectus to be generally reliable, such information is inherently imprecise and we cannot give you any assurance that any of the projected results will be achieved. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

Some numbers in here don't match:

"For the year ended 2011, Shutterstock earned 21.8 million on a revenue of $120.2 million. More than 550,000 active, paying users contributed to revenue in 2011, representing an increase of 71 percent compared to the prior year.
"

"In 2011, the company delivered more than 58 million paid downloads. The average cost per image on the site in 2011 was around $3."

All quoted from some of the quotes in this thread. Either the revenue number is wrong (I doubt it...) or the cost per image is not $3 but closer to $2.
For those who want to take their own RPD to calculate their overall percentage....

It looks like the quoted article rounded up, there is more information located in SS's SECURITIES AND EXCHANGE COMMISSION FORM S-1 REGISTRATION STATEMENT

http://www.sec.gov/Archives/edgar/data/1549346/000104746912005905/a2209364zs-1.htm#da47301_business

Section 72

"We are the beneficiaries of significant network effects. As we have grown, our broadening audience of paying users has attracted more images from contributors. This increased selection of images has in turn helped to attract more paying users. The success of this network effect is facilitated by the trust that users place in Shutterstock to maintain the integrity of our branded marketplace. Every contributor in our marketplace and every image we make available must pass our proprietary screening process and meet our standards of quality. In addition, and unlike the significant majority of free images available online, our rigorous vetting process enables us to provide confidence and indemnification to our users that the images in our library have been appropriately licensed for commercial or editorial use.

We make image licensing affordable, simple and easy in order to encourage a high volume of purchases and downloads. Our customers' average cost per image in 2011 was less than $3.00. We are a pioneer of the subscription-based usage model in our industry, whereby subscribers can download and use a large number of images in their creative process without concern for the incremental cost of each download. The majority of our downloads come from subscription-based users, who contributed 59% of our revenue in 2011. We also offer simple and easy-to-use On Demand purchase options for users with less consistent needs. As a result of our simple and affordable licensing models, we believe that we have achieved the highest volume of commercial image downloads of any single brand in our industry. In addition to driving revenue, this high volume of download activity allows us to continually improve the quality and accuracy of our search algorithms, as well as to encourage the creation of new content to meet our users' needs.

Our revenue is diversified and predictable. More than 550,000 customers from more than 150 countries contributed to our revenue in 2011, with no single customer accounting for more than 1% of our revenue. We have historically benefitted from a high degree of revenue retention from both subscription-based and On Demand customers. For example, in 2009, 2010 and 2011, we retained 82%, 96%, and 102%, respectively, of the prior year's revenue from the same set of customers. Customers typically pay us upfront and then use their downloads in a predictable pattern over time, which results in favorable cash flow characteristics and has historically added predictability and stability to our financial performance.

We have achieved significant growth in the eight years since our company was founded. In 2010 and 2011, we generated revenue of $83.0 million and $120.3 million, respectively, representing year-over-year growth of 35.8% and 45.0%, respectively. In 2010 and 2011, we generated Adjusted EBITDA of $21.8 million and $26.5 million, respectively, and Free Cash Flow of $27.6 million and $36.1 million, respectively. See "Summary Consolidated Historical and Unaudited Pro Forma Financial Data�Non-GAAP Financial Measures." In 2010 and 2011, our net income was $18.9 million and $21.9 million, respectively. In 2011, 34% of our revenue came from North America, and 66% came from the rest of the world. "

Now we know for sure the agencies read MSG!   

From the Prospectus:

Quote

INDUSTRY AND MARKET DATA

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our products. These sources include BCC Research, Zenith Optimedia, BIA Kelsey, Microstock Group Forum, Cisco, IBISWorld, Netcraft and MagnaGlobal. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. While we believe the market position, market opportunity and market size information included in this prospectus to be generally reliable, such information is inherently imprecise and we cannot give you any assurance that any of the projected results will be achieved. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

Cool! Where can we find the prospectus?

The company will use money from the IPO for operational purposes, as well as possibly acquiring other companies that are strategic to its current business."

Hooray! They're going to buy iStock! There'll be lots of money left over, too, once all iStock's debts are factored into the deal.

http://www.sec.gov/Archives/edgar/data/1549346/000104746912005905/a2209364zs-1.htm

This is fascinating stuff. It's the first time we've ever seen the financial details of a microstock agency.

Last year SS generated revenue of $120M and the 'Cost of revenue' was $45.5M. Assuming that that is the commissions paid out (and possibly referrals too?) it means that SS are paying an average commission of almost 38%. That's up from 35.7% in 2009.

I'm staggered just how much they spend on 'Sales and Marketing'. At nearly $32M it was 26% of their entire revenue. It's $2.7M every month!

I think this could be excellent for contributors and I will certainly be hoping to re-invest some of my earnings into SS stock. Might as well share in the profits of the business we are helping to build.

Quote from: stockmarketer on May 14, 2012, 17:10

Increasing the bottom line through cost-cutting is what a desperate company does toward the end of its game.  It's certainly not the strategy for a company that is about to do an IPO.

But what happens AFTER the IPO?

One of two things happen...
1. SS is successful in the growth strategy it promises to investors.  The investors are happy and tell Jon to stay the course... keep the growth coming!  Contributors stand to benefit greatly in this scenario through increased sales and commissions.
2. SS is unsuccessful in its growth efforts, and its investors are unhappy.  Then it turns to Plan B, which probably combines a different growth strategy with some cost cutting, which could negatively affect us.

Let's just stop being paranoid about an IPO automatically being bad for us.  Think about that logic... Jon raises (pick your number) $X million and says, "Great, now I can contributor commissions"?   That makes no sense.

Step 1 is SS raising a nice sum of investment capital... Steps 2-99 are SS hopefully putting that money to great use in growing the business in ways that benefit them and probably us... Step 100 is when everyone looks back and says "It worked" or "Didn't work" and "What now?"   Let's not all jump to Step 100 AND assume it will be a negative outcome.

The marketing figure makes perfect sense. Why do we rely on agencies to represent us? Because as individuals we don't have the clout to market ourselves. Agencies are firts and foremost a marketing tool for photographers/image producers, the accounting function is secondary.

I guess so. From what I've heard marketing costs of 26% are comparitively low compared the expenditure on fizzy drinks and 'designer goods' which apparently can be 40%.

I'm nervous but hopeful. At the very least, I figure we've got at least a year before investors will try to put any pressure on the company to show a return on their investment. Meaning there's still plenty of time before we would even begin to see any possible negative effect of this.

So in the meantime, it's just business as usual for me, with fingers crossed that SS never has to take anything away from us to make investors happy.
[/quote]

[/quote]

That is it exactly, SS was successful because it maintained low prices and overhead. In the last year we have seen a change in that overhead policy and the type of people SS is bringing into the company. Check out the stock options the new CFO was pulling in before SS brought him on board. And then there is the timing of the new search engine changes.



A best case scenario would be that SS is looking to further the growth of the company and they are using the IPO as a way to generate the cheaper capital needed to expand. The upside is that IPO's can also generate publicity by making the company known to new groups of potential customers.

I guess we could take a look at the track records of the board members and key new employees for a clues into where SS may be headed.
[/quote]





This is funny.  SS only product is  "low prices" the only reason SS has not raised prices is they can't.  When you have no exclusive products and only compete on price you can't raise your price without exposing your flank. 

The definition of a public companies "mission statement" is to maximize shareholders profit.  Once they go public it is the only mission.  There will no giveaways here.  Only cutthroat capitalism on display.  That unfriendly Getty feeling will be at SS very soon without the high commission payouts.

The marketing figure makes perfect sense. Why do we rely on agencies to represent us? Because as individuals we don't have the clout to market ourselves. Agencies are firts and foremost a marketing tool for photographers/image producers, the accounting function is secondary.

You seem to like to promote this myth. It doesn't really cost that much to open up a shop and compete. When I say compete I mean my earnings on my site versus my earnings on a particular agency.

Quote from: BaldricksTrousers on May 15, 2012, 06:03

The marketing figure makes perfect sense. Why do we rely on agencies to represent us? Because as individuals we don't have the clout to market ourselves. Agencies are firts and foremost a marketing tool for photographers/image producers, the accounting function is secondary.

You seem to like to promote this myth. It doesn't really cost that much to open up a shop and compete. When I say compete I mean my earnings on my site versus my earnings on a particular agency.

Are you saying that you make as much per image selling on your own site as you make from either iStock or Shutterstock? Or is the "particular agency" something like Canstock? And do you have clients who you can direct to your site or are you relying entirely on search engines?

I really do not see how simply through SEO someone can match the returns generated by Shutterstock. But, of course, I might be wrong, and if I am I would like to know how to perform that particular trick.