Microstock sellers insist they are focused on developing an entirely new market -- the SOHO (small office, home office) buyer -- that has been, for the most part, ignored by traditional sellers who charge much more for image use than SOHO buyers can afford. There is no question that the vast majority of microstock customers fit this category.
As mentioned in yesterdayâ€™s Selling Stock report, the recent Piper Jaffray survey points to another, possibly unintended, consequence of the availability of quality imagery to everyone at microstock prices. Let's take a more in-depth look at the stock industry's most lucrative buyer segment: advertising agencies.
Piper Jaffray surveyed traditional stock photo customers to get an understanding of how microstock might be affecting their purchasing patterns. Of the respondents, 201 or 47% were advertising agencies. In the past such organizations have had the largest budgets for stock photography and are the last buyers anyone expected to be attracted to cheap photos.
I asked Piper Jaffray to break out the numbers for the advertising agency segment of survey respondents to see if their answers differed markedly from the overall averages.
Of the advertising agencies, 42% said they had increased their usage in the last six month, while an additional 34% also using microstock said their level of usage hasn't changed. Only 23% of respondents still have not used microstock.
Only 59% of the 429 respondents to the survey said they used microstock, so the 76% for advertising agencies is a significantly higher percentage that the overall average for all traditional users.
As to anticipated 2008 microstock use, 46% of advertising agencies expect to increase their use over 2007 levels and an additional 25% will continue to use microstock at their current levels. This compares with 68% of all survey respondents who expect to increase microstock usage in 2008 -- indicating that other categories of traditional image users will increase their microstock use at an even faster pace than advertising agencies in 2008.
When asked if they had decreased their usage of traditional RF as a result of increased usage of microstock, 33% of advertising agencies said Yes, 31% said No and 16% said there was No Change.
Advertising agencies used to pay hundreds of dollars for the images they needed for their projects. Now they can get some of what they need (we have no way to judge the percentage of total use) for $2 to $10. There is no indication that these lower prices are resulting in a significant increase in the number of stock photos licensed. In fact, Getty Images statistics indicate that they licensed rights to 8% to 10% fewer images at traditional prices in the first three quarters of 2007 than they licensed in the same period in 2006. (In 2007 Getty stopped providing average-license-fees for RM and RF, so some extrapolation was required to arrive at these percentage figures.)
If the most discriminating customers can already find much of what they need in microstock, and the quality and variety of microstock imagery continues to improve, the long-term future for images that are only available at traditional prices is not bright.
However, other surveys indicate that overall advertising agency photo budgets have not been declining and are actually increasing slightly. One possible explanation for this is that the agencies have taken the money saved on the purchase of stock photography and are using it to fund assignment shoots. This doesn't mean that assignment photographers are earning more, because certainly the production costs for assignment photography has been increasing and such costs could easily be eating up the savings from stock photography.
Interestingly, traditional sellers are not the only losers. Microstock sellers and photographers are also big losers. Microstock sellers have been unable to structure usage fees in a way that allows them to offer images to their SOHO customers at the low prices these customers can afford while still charging advertising agencies much higher usage fees based on the value the agencies receive from the usage. As a result the microstock sellers have chosen to leave huge amounts of money on the table.