Who Uses iStockphoto?

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July 31, 2006

There probably is no typical iStockphoto user or supplier, but we may be able to get some sense of the appeal of this business model by looking at the experiences of one of its early adopters.

Doug Nelson is a graphic designer who first started using iStockphoto in July of 2003. Since then he has downloaded nearly 450 images for various projects and is currently using about 25 images a month. He received his BA in Graphic Design three years ago, and has focused mostly on web design for the last four years (He worked part time before graduation.).

Originally, his motivation for using iStock was to incorporate the images available into the designs he was creating for customers. But it wasn't long until he bought a 5 megapixel digital camera and realized that he could start submitting images as well. Currently he has 167 images on the site and over 9,345 downloads or an average of 56 downloads per image.

The vast majority of his images were posted in 2003 shortly after he started using iStock. Over the past couple of years he's only added a few new photos. One of the things holding him back from submitting more is that iStock has raised its quality standards in the intervening period and Doug's feels that new images would probably be unacceptable given the low resolution of his camera and the fact that it has a grain problem at certain ISO's. About 50% of the images he has submitted have been rejected by iStock. He's considering getting an 8 megapixel Nikon, but hasn't made that move yet.

Meanwhile the images he put up initially are continuing to be downloaded at a steady rate of about 300 per month. His best selling image is a picture of two hands on a hospital bed sheet indicating someone comforting a patient. It has been downloaded 2,380 times in three years.

Doug's has never tried to submit images to other micro payment sites, or to traditional agencies that license images at much higher prices. He says, "I try to shoot images that would be useful on smaller, quicker projects and can't imagine most of my work justifying a $100+ license fee from a design company." (Editor's note: After looking at his work, in my opinion, many of his images would easily sell for higher dollars if they were a little higher resolution and available to buyers of traditional RM or RF.)

Doug has accepted iStock's "exclusive" and "extended license" options. The "exclusive" option gives him an extra percentage of the price paid for each download, even though statistics show (see Story 856) that he might be able to earn more money by sticking with iStock's normal "non-exclusive" 20% and putting the same images on a number of the other micro payment sites as well.
Currently he is at the "silver" level on iStock and receives a 30% royalty. By the end of the month should reach the "gold" level and get 35%. The "extended license" provision allows his images to be used on certain products and for higher print circulation. Recently, he had one $50 sales as the result of an "extended license."

When he is ready to upload images he can do a batch of 20 or so in about 90 minutes including keywording. Once the keywords have been uploaded he can review, add or delete any one if it seems appropriate.

Doug considers himself a "hobbyist" photographer who only shoots stock while on vacation or bored. As far as making a living from photography he looks at it as only a supplement and passive-income opportunity to his primary source of income.

At one point he shot images for some of his projects, but the current requirements of his regular job, plus some freelance web design, make finding time to also take pictures unrealistic in most cases.

But, while he is happy with his monthly checks of about $200, his primary reason for being an iStockphoto member is to have access to inexpensive images for his designs.

Buying Images

As a Graphic Designer he is happy that he can get most of the pictures he needs through iStockphoto. He likes the fact that iStock has such a huge selection of images to choose from, that the search engine is "very quick", and that the prices are great. He appreciates the time iStock has spent in getting feedback from the forums and fixing the site to work best for customers and photographers. The "community" aspect of the site is very important to him. He says, "Sometimes, I wish I was able to fix the search display order to use a second factor to break 'ties'. Currently, when I search for two keywords, I use 'best match' which gives me an a-z list that's quite long in some cases. If I could then order the results by searching in the results for their star ratings, I'd save some time." (Buyers can rate the images they download and it is possible to have images with the highest number of rating points delivered first for viewing.)

While at school he was given no particular instruction as to how to find images once he entered the professional market place. Students were told that they could use images they found in magazines for their school projects (a legitimate fair use) and not much else.

The company he now works for has a budget of $50 per image for web designs, but is happy to pass on the savings to their customers when they can find images for less. Doug says he knows of competitors who also budget $50 for the images they need, but when they find a micro payment image they go ahead and bill for $50 and keep the difference.

When Doug was hired by his current employer, none of the other designers at the company were aware of iStockphoto. They had been using traditional sources for their stock images. Now they all use iStockphoto from time to time.

Another advantage in using iStock images is that it has reduced the paperwork required on a project. If Doug wants to use a $50 photograph he has to fill out paperwork and get approval in order to pay for the image. With photos from iStock the fee is taken out of a petty cash account.

While the major part of Doug's work is web design, he also produces about 20 ads a month for a local paper. He finds that in most cases iStock photos are perfectly satisfactory for this use.

As a designer he doesn't use the other micro payment sites because he feels they aren't nearly as large as iStock (not really the case, see Story 856) and because he feels a commitment to the iStock community.

Lessons Learned

Now that we know a little about Doug Nelson let's look at some of the issues his experience raises.

1 - As I have discussed in the past, PicScout has discovered that 90% of the online uses of traditional agency images are unauthorized. Let's assume that the agency identifies such users and gets then to pay the normal rate for the usage. What is that user likely to do the next time he needs an image? Will they seek out that agency and pay $159 for a Digital Vision RF image, or $55 for a Photodisc Blue images?

Even if the designer would like to use a Photodisc Blue or Digital Vision image on his project that would probably drive up the price he would need to charge so much that his services would no longer be competitive. Consequently, he really has little choice but to source the images he needs through use of micro payment sites.

In the stock photo industry many of us have tended to argue that the cost of images to illustrate the project are such a minor part of the total cost of design, production, printing and distribution that paying a little more for the photo is an insignificant additional expense. That is certainly true for most printed projects, but the logic no longer holds for web projects because for many there is no cost beyond the cost of design. Consequently, the prices we feel photographers need to charge for photos can be a very significant additional expense for the customer.

2 - If Doug's usage is typical of the average iStockphoto customer there would have about 33,000 customers. Getty says 8% of the iStock customers are also their customers. That would be about 2,640. How many are major users of traditional images?

3 - It's hard to find a $50 Traditional RF image now, but if a designer purchases 25 a year that would $1,250 compared with $25 if purchased through iStockphoto.

4 - Companies may start out using iStock images just for web sites, but how long will it take to discover that some of the images are also very satisfactory for some print uses.

5 - Many photographers think their images aren't good enough for the mainstream agencies and go to the micro payment sites as an easy entry point. Once they get accepted will their loyalty to the company keep them from moving on - particularly if their major motivation is not making money from photography, but finding images for design projects?

6 - Unlike the traditional market, micro payment sites offer photographers an incentive to produce more and better images. The more times a photographer's images are downloaded the higher his royalty percentage goes. This tends to encourage the photographer because his income can go up even if the relative usage of his images remains relatively flat. People who have been participating for a longer period of time, or have fed new images over a longer period of time will earn more than new entrants.

In the traditional market the percentage remains the same (or gets cut) and given the increased competition the average return per image is tending to go down.