The Long Tail And Stock Photography

Posted on 5/28/2009 by Jim Pickerell | Printable Version | Comments (0)

The Long Tail describes a new way of looking at and approaching markets in the Web 2.0 environment. The term was first coined by Chris Anderson in a Wired magazine article in October 2004. It is illustrative of the business strategy of Internet companies like Amazon.com and Netflix which sell a large number of unique items, each in relatively small quantities, to a very large base of customers. This buying pattern creates what is called a power law distribution curve or long tail.

Anderson points out that in 2004 Barnes & Noble limited the books it offered customers to 130,000 titles. During that same period more than half of Amazon’s book sales came from outside its top selling 130,000 titles. In 2004 Blockbuster carried fewer than 3,000 DVD titles but one-fifth of Netflix’s rentals were for titles outside its top 3,000. Thus, we find that when the products offered are limited there is often a Long Tail of customers who want something different and are underserved.

Even Wal-Mart which many believe stocks everything must sell at least 100,000 copies of a CD to cover its retail overhead and make a sufficient profit. Less than 1 percent of all CDs do that kind of volume. If you want any of the other 99% you must go somewhere other than Wal-Mart to find them.



Brick-and-mortar operations find it necessary to limit the items they carry to those in high demand due to display, distribution and inventory costs. To some extent small local specialty shops get around this problem and carry a greater variety of products in their area of specialization, but they are generally limited to serving a very small percentage of total potential customers for the products they stock. Internet companies, on the other hand, can economically justify maintaining a much greater variety of products because they do not have the same display, distribution and inventory problems as the brick-and-mortar companies. This is particularly true when we get to stock photography.

Due to comparatively low display, distribution and inventory costs, Internet businesses can realize significant profit from selling small quantities of very specialized items to many customers, rather than just concentrating on the high demand items which may not be what many customers actually want. Some customers may settle for something they don’t really want because the right item is too difficult to find, but they are happier when they don’t have to make that choice.



Internet companies may also be able to sell a higher volume to a broader base of customers because, given the potential volume, they can afford to offer the product at a price customers who otherwise would not buy can now afford.

The Long Tail does not imply lower pricing, but if the goal is to enlarge your customer base, and a significant portion of potential customers cannot afford traditional prices, then the only way to reach them may be to offer a lower priced product.

In the stock photo business the question is whether you are only interested in B2B sales, or do you want B2Consumer as well? Microstock sellers have demonstrated that there is a huge (formerly untapped) B2Consumer market. And it is pretty clear that the B2B has been exploited to the maximum, and if anything is getting smaller.



Thus, there are two aspects to the long tail. One is to provide a greater variety of products to better meet the needs of a broader base of customers as is the case with Amazon and Netflix. The other is to recognize that there may be a huge group of potential customers for whom price is an important factor, as is the case with those who buy their clothes off-the-rack. No matter how great the product, if it is not within their budget they won't consider it.

The Long Tail also applies to customers with limited budgets. Just using the Internet to make a greater variety of products easy to find may not be enough. The price may be prohibitive. Often there are many more customers who would purchase the product if it were available at a lower price. Traditional stock photo sellers generally ignore such customers arguing that the cost of servicing them is too great. While these customers can be difficult and costly to locate, in aggregate they often represent a significant additional revenue opportunity.

To combat this problem it has become common in the stock photo industry to price items at levels that even the smallest user can afford. Microstock companies focus more on growing traffic and increasing market size - the Long Tail - than in maximizing revenue from any individual customer. A downside to this strategy is that traditional buyers are offered images for much less than they have formerly been willing to pay. But in theory the increased volume of low priced sales will more than make up for any loss in revenue from those customers who could afford to pay more.

Another challenge relative to the Long Tail is how to identify these new potential customers. The idea that “if you build it they will come” doesn’t necessarily work. Low prices are not enough, if you have no plan for reaching out to new customers and letting them know the offer exists. Marketing a low priced product to existing customers just lowers revenue without in any way helping to identify the totally different customer base you’re after. Alamy learned this the hard way when they introduced Novel Use. They had a good product and it was priced at a level a certain segment of users could afford, but they had no plan as to how to tell these potential customers that the product existed. For the most part these customers are not the same people who have traditionally purchased stock photos.

Nevertheless, I believe the power-law distribution curve has some important things to teach those of us in the stock photo industry. Paul Melcher is right when he responed to an article I wrote previously and said “the Long Tail (as Anderson defines it) is about inventory, not pricing.” But, I believe the power-law distribution curve also applies to the universe of potential customers and the value each receives from use of an image.

Anderson’s theory is based on giving things away that are abundant in order to get the customer’s attention and draw him back to buy a scarce, unique and relatively controlled item. The problem with trying to apply this to stock photography is that we have no secondary "scarce, unique and relatively controlled item" to sell to the customer after we've given away (or sold below cost) the things that are "abundant". The photograph is the only product we have to sell.

That’s fine if you have abundant and scare items but it doesn’t work in stock photography because there is no way to determine in advance what is abundant and what is scarce.

For example, if we think about pictures of people using cell phones everyone would have to agree that there is an abundance of them. However, if a specific customer needs a picture of a 25-year-old Latino woman using a cell phone and facing left with copy space on the right that picture may be very scarce and hard to find. With stock pictures you don’t know what is scarce or abundant until you know specifically what the customer wants to buy.

The industry has proved that the strategy of “I will give certain images away to everyone for free, or for low prices, and charge higher prices for different images” doesn’t work The image a specific customer values the most is often the one that is free or low priced rather than the one arbitrarily set aside as being scarce and unique. The right image may be scarce or abundant for every customer and every unique sale. Customers make such decisions based on what best fulfills their needs for a specific project. Price may be one factor, but not the only factor, because each product is different.

But all this doesn't mean we should ignore the Long Tail. There are two types of long tails. One that is looking for a product that is relatively unique as in the case of Amazon and Netflix, and one that is looking for something at a price they can afford as in the case of buying clothes and the customer needs something that is very unique or is willing to wear the same thing everyone else is wearing as long as the price is right.

Stock photography customers fall into this second category. Microstock has proved that there are a hugh number of customers that want to use images, but will only pay a low price. For years the traditional sellers have mined the high end market of customers, but that market is not growing and to a certain extent is contracting because now they can often get when they need for a much lower price.

The power-law distribution curve is applicable when we categorize customers based on the value they receive from use of an image. There are relatively few customers who use images for magazines, books, major corporate brochures or advertising, but they can justify paying much more to use an image than if it were going to be used in a power point presentation for a single meeting. Microstock has shown us that there are a huge number of customers whose planned uses are so insignificant that they can’t afford to pay very much for the images they use. If we look at all customers as a group, we have a classic power-law distribution curve.

So do we say, “I’m going to set aside a certain group of images, only make them available to that small group of customers at the narrow top end of the curve, and price them accordingly?” This way we ignore a huge percentage of the customers. Or do we say, “I’m going to make my images available to everyone on the curve and price them so anyone, anywhere on the curve can afford them?” With this strategy the few customers who would gladly pay more a tremendous discount for the uses they intend to make and the industry as a whole loses money.

Consider some numbers. In 2008 Getty licensed rights to about 500,000 rights-managed images and maybe one-million royalty-free images. This includes the images of all the more than 100 image partners whose images are represented on the Getty site.

Meanwhile, iStockphoto probably licensed rights to 25 million downloads. In addition, I estimate that total downloads for Shutterstock, Dreamstime and Fotolia combined exceeded iStock’s downloads. If that is true more than 50 million microstock images were downloaded in 2008 compared to 1.5 million for Getty and whatever the rest of the traditional RM and RF sellers generate.

Some of that 50 million are the same people as Getty’s 1.5 million and in some cases the uses they make of the microstock image has a much greater value for them than what they are asked to pay. Is it better to say, “I’m only going to offer my images for 3% of the potential uses because they make the uses that command the most money?” Or is it better to say, “I’m going to try to make my images available to everyone who wants to use them, but I’m going to attempt to structure my pricing so the 3% ends up paying close to what they have been paying traditionally, based on the value of the image to them. The rest of the buyers are paying prices they can afford?”

In a power law distribution curve of customers as described on Wikipedia all customers of the traditional sellers will be in the high green part of the graph. Some of them will also use microstock images, but the yellow part of the graph – the Long Tail – belongs entirely to the microstock sellers. Traditional sellers don’t know who these people are and are not even attempting to sell to them.

If the traditional RM and RF sellers want to protect their market, let alone try to expand it, they must begin to address the Long Tail. The following are a few necessary steps to consider.

    (1) Focus on building traffic.
    (2) Give something away (probably free images) to get the attention of new users.
    (3) Build communities. Encourage communication with and among customers.
    (4) Start by offering very low prices until you can figure out how customers intend to use the images and the level of their price sensitivity for each type of use. The goal is to identify future customers and get the attention of a new group of users, not make a profit initially. Look at this activity as part of your marketing budget.
    (5) Develop some system for learning how buyers will use the images, not just the buyer’s name. Many buyers have a variety of ways they use images and a different price tolerance for each use. Eventually you will set different prices for different types of use rather than being forced to rely on across the board price increases. Each use will have a different value for these customers.
    (6) Find a way to maintain traditional prices when the customer is making a traditional use of an image and is receiving a greater value from such a use than is the case with the small, narrow uses many other customers contemplate.
    (7) Make the same images that are available at traditional prices also available for small, narrowly defined uses at very low prices.
The Long Tail is all about constantly adding to your customer base, rather than earning more from existing customers.

What customers should we be pursuing?

Traditional stock photo sellers tend to focus on serving the customers that are easiest to find and those with the biggest budgets. They disregard a much larger and diverse group of image users whose needs are occasional and who cannot afford traditional prices for the images they need.

Part of the reason for their focus is that these small users can be very difficult to identify. Producers have generally come to the false conclusion that the cost of marketing and servicing these customers will be greater than the revenue they are likely to generate and thus they are customers not worth pursuing.

However, the Internet offers those selling stock photography some unique advantages.

    1 – Image databases enable customers to search through millions of images quickly and find something that exactly fits their needs.
    2 – Payment can be made online and a credit system has been developed that enables customers to conduct very small transactions.
    3 – Delivery of the finished product takes place instantaneously online.
    4 – Communities have been developed to provide education and useful information to both buyers and sellers and these encourage participation.
Thus, it would seem that the only barriers in getting customers to use a new site is making them aware of the site and keeping prices competitive.

Some things to think about when looking for new customers.

Marketing this new, cheaper resource to traditional professional users can do more harm than good unless the seller can find a way to maintain prices for large commercial uses and only offer low prices for certain limited categories of small use. The goal is to expand the Long Tail and that means focusing on customers who are only occasional users of photography and those with limited budgets.

One thing that seems to have worked is allowing amateurs to sell their pictures through the sites. Total contributors to all microstock sites combined is probably somewhere between 150,000 and 200,000. The vast majority are making few, if any sales and the advantage is not in the sales they make. But, if they ever need to use a picture they will go where they’re trying to sell their pictures. If a friend asks them where to find a picture the can use they likely direct the friend to the site where their pictures are licensed.

Most teachers and professors need pictures from time to time, but they are not used to buying pictures. How does the seller make them aware of his resource? Chances are that none of these people will ask a graphic designer or photographer for suggestions.

There are more than 480,000 churches and religious organizations in the U.S. today. All of them need pictures at least a few times a year. Some are using pictures in Powerpoint presentations every Sunday. Some have graphic designers on staff or as members of the congregation, but in most cases it’s a secretary or pastor who is responsible for finding pictures and creating the marketing materials and event announcements they need.

Traditional sellers may think they have good contacts with large businesses organizations and the graphic designers they have worked with in such organizations. But how many people in these companies regularly create Powerpoint presentations and never think to ask the professionals in their company where to get pictures for their presentation. How do you reach them?

And then there are social networking and personal web sites.

In one sense the idea of finding ways to communicate with each of these groups seems daunting, but each individual in these groups is also in online communities of some type. If you can identify, and break into, such communities the members will spread the word about your service.

The big microstock organizations have clearly proved that there is a very big (in numbers of units) market out there. Their success may be because they were first to establish a presence. They may have already captured the low hanging fruit. But there are still opportunities they haven’t exploited. There are still people who don’t know where to go to easily find images when they need them. Places where there has been some editing and quality control and where the images are organized so they are easy to find. Like it or not this is the future of stock photography. The future is not in selling more images at higher prices to traditional customers.


Copyright © 2009 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  

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