Shutterfly, an online site for storing, editing, disseminating and printing digital photos, went public at the end of September, seven years after launching in 1999. Coming to the party a little late in the game, the VC-backed startup had to weather the early 2000s as the economy was dragging and competition was fierce. I've blogged before about this market and how the acquisition of competitors Ofoto and Snapfish by big players forced Shutterfly to compete on price here and here. Now, as this NYT article describes, other online photo sites aimed at dissemination have popped up, such as Flickr. In addition, big retail outlets such as Sam's Club, Wal-Mart, Target and Walgreens offer photo editing and printing and have even started to offer other photo products, such as mugs, calendars, mousepads, etc.
The lifecycle of Shutterfly would make an interesting study. It could have folded either by going to IPO too early in 1999-2000 and then going bust or by not having enough cash flow to survive the aftermath of the technology bust. However, because of the huge competition in this area, success is still not assured. Since its IPO, the stock price has declined below Shutterfly's opening price.
One way that online photo companies could really shake up the market is by creating a way to transfer albums from one service to another. An admitted archiver and scrapbooker, I have 102 albums on Shutterfly, probably representing about 8000 pictures. Even when other sites were cheaper, I didn't switch because I didn't want to orphan those pictures or pay for archival CDs, which I think would cost me about $350. If photo sites were like cell phone companies and could make it easy to take your stuff with you when switching, the market would really be different.
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1. Posted by Scott Moss on October 31, 2006 @ 9:21 | Permalink
Your post poses an interesting broader question: which of today's success stories are built to last? Many dot-coms or other hot companies seem to have 100% replicable business models, so I wouldn't bet on them to be success stories ten years from now.
Switching costs (shutterfly) and network benefits (AOL) can maintain the success of a company with an otherwise replicable business -- but only for a time, if the switching costs and network effects aren't that permanent. You and I can't readily switch from the sites where we've uploaded hundreds of "look at our cute kid" pictures -- but this is a market that lives on new entrants who aren't tied to Shutterfly. So I think the market is getting more competitive and inevitably will get all the more competitive, and that's a good thing; I think there eventually will be some way to transfer easily.
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