Pinterest Copyright Infringement: Yeah, so what?

The latest hot startup in the photo-sharing space is one that is also creating a lot of controversy about copyright infringement. Pinterest lets users create "boards" of images they find from around the Web. Users “pin up” these images, and share them with friends and strangers.

“Is this copyright infringement,” you ask?

Well, imagine exactly the same website that let's users upload music or movies. Do you think the music labels or movie studios would permit this? Pinterest would be shut down before they could get their first dollar of venture capital.

“But they’re photos, not music or movies!”

Yes, and photos have precisely the same copyright protection.

“Ok, wise guy, then why hasn’t Pinterest been shut down?”

Simply put, there’s no one there to stop them, at least not with the same effect and scale as music labels or movie studios. And the reason is reflected in your very statement: society simply regards photos as “different” from movies; they don’t see Pinterest’s use of imagery as copyright infringement.

And this is a natural feeling to the common person. Everyone shoots pictures all the time; it takes milliseconds; most people don’t invest any thought or intent. By contrast, music and movies require considerable time, effort and expense to produce. So, there’s a difference.

And herein lies the unresolved problem: the law is the law, and photos are copyrighted works, regardless of the time, skill, or anything else necessary to create them. Accordingly, photos are supposed to enjoy the same legal protections as music and movies.

“I see. But, most people want and expect to share their images with others.”

Yes! Their images. Pinterest isn’t letting people share their own photos; they’re sharing other people’s photos.”

“Ah, I see now.”

Very good, Grasshopper.

As a society, we permit this kind of infringement, which explains why there are no large, powerful, influential organizations representing the interests (and the copyrights) of photographers. People simply regard photos as different.

A case in point can be found in this article on chow.com, discussing people’s reactions when they found their recipes were being “pinned” to Pinterest, along with the photos of their foods. The complaint was that their intellectual property (cooking recipes) were being stolen; the recommendation: “Just allow the photo to be shared, not my recipe!”

You see? Never mind the pro photographers whose pictures were being infringed; they’re not part of the conversation.

“Ok, so what about those professional photographers? How are they hurt?”

I’ve been a photo industry analyst since the mid 1990s, and I’ve seen the industry suffer more from “piracy” than the film and music industries combined. Every single publicly traded stock photo agency has either gone out of business or withdrawn from public trade. Getty Images is the last profitable company of any significant size, and even then, its pay to photographers has been drifting lower for over ten years to maintain that status. A series of studies from Picscout – a photo-tracking service for stock agencies and photographers – finds that 90% of commercial websites use at least one photo in a manner considered to be “commercial use” without the copyright holder's authorization. No company whose business model is to sell or license photography has had venture capital investment since 2000.

Yet, the shadow economy for photography is enormous. In a study I conducted in 2007 on contract for a potential investor in a photo-related technology, I found that most photo buying and licensing was done on a peer-to-peer basis, mostly in local markets and exchanges, at a scale that suggested the total economic activity tipped at $25B/year. Yet, none of it can migrate online because of the “perception” that photos don’t count when it comes to piracy, and because there was no possible infrastructure to enforce legal protections.

So, yes, the photo industry has been starved to near extinction, compared to what it could be if it similar legal representation that the music and movie industries do.

“My gosh, I’m getting sad. But I still want to share photos online.”

Don’t misunderstand me; I’m cognizant and sympathetic to the non-professional side of photography and the social value of sharing images, both culturally and economically – including to those photo-sharing sites like Pinterest. There’s no question that people should be able to share images online with others in an unfettered manner that Pinterest provides, as well as every social network.

But to do so in compliance with copyright law would require a series of rights access that cannot be scaled up to serve the public at large without a centralized (and streamlined) rights clearinghouse. Legally speaking, Pinterest should obtain rights from “everyone,” but it’s not possible because people are uploading other people’s photos. If there were a central clearing house open to everyone – say, like the music labels have – Pinterest could enter into a unified license agreement.

Without such a clearing house, the law is the law, and the courts will eventually be forced to reconcile the law with society’s desires. Well, provided cases are brought to court to press the issue.

This is not new. Copyright itself has been a controversial topic for society (and justice) for years, and continues to this day. On one hand, there are many who believe that copyright protection should be lifted, if not severely curtailed, largely in order to avoid this very problem of the social benefit from photo-sharing. Economists, on the other hand, understand that the creative economy only exists because people can earn a living from their efforts—that "human creativity is the ultimate economic resource." (Florida 2002) If they couldn’t economically benefit from their creations, society would suffer more, since the lack of incentives (and hence, resources) would starve an important and socially valuable industry.

The only legal basis for dealing with this dispute continues to reside in the Copyright Act in 1976, which states that “copyright protection extends to original works of authorship fixed in any tangible medium of expression,” including photography, of course. Tightly coupled with the Copyright Act is The Berne Convention, which states that “Copyright must be automatic; it is prohibited to require formal registration.” Yes, the USA provides added protection that permits authors to register their works with the Copyright Office, which then affords them “statutory damages” in legal claims, which guarantees the copyright holder a minimum of $750 per claim, and up to $150,000 if the infringing party “willfully infringed” (that is, with intent). But this registration is not required in order for the copyright to be held by the person holding the camera, and that ownership comes with rights.

So, Pinterest and other social networks are technically contributing to copyright violation by permitting other users to upload unauthorized copyrighted works. This is called “contributory infringement.” This Wikipedia excerpt explains, “indirect infringement arises when a party materially contributes to, facilitates, induces, or is otherwise responsible for directly infringing acts carried out by another party.”

These underlying legal principles of copyright law are subtle, and few are as educated on it as they like to believe—especially corporate law firms that write the legal mumbo jumbo in “terms of service” agreements (TOS). To wit, Pinterest’s own TOS stipulates that when you upload a photo to Pinterest, you are granting it a "perpetual, irrevocable, royalty-free license to use” your photos on its site and "application or services." While this is applicable if you own the photos you upload, you cannot grant this permission for photos that aren’t yours. That is, you are not the legal authority of someone else’s photos. So, Pinterest’s own TOS is unenforceable on photos that the user doesn’t own, which is pretty much all of them. So, strictly speaking, their TOS is toothless, pointless and moot.

But this is also besides the point: the user violated the copyright, not Pinterest.

So again, who’s to complain? To whom? Against Whom?

One could try to sue Pinterest, which is where their lawyers would quickly seek protection under the Digital Millennium Copyright Act (DMCA), which states that websites that host content uploaded by users cannot be held liable for copyright infringement, so long as the site complies with “take down notices” from those copyright holders. Here, the original owner of the copyright notifies the company with a “take down notice,” and the company is off the hook—no TOS necessary.

Many companies – Pinterest, included – very effectively use the DMCA as the “get out of jail free” card, effectively keeping their business out of legal danger.

But once again, we come back to the subtleties of the Copyright Act. As stated earlier, Pinterest could be liable for secondary infringement, which would make them ineligible to seek protection from the DMCA. For matters relating to copyright, courts would have to decide on the merits of such claims solely on case law developments.

This brings us to landmark cases, such as Napster and most notably, Grokster, where courts have established a three-point test to determine if a website “induces infringement”: (1) whether the majority of the content uploaded by users is infringed works; (2) whether the site provides tools that can only be used to infringe; and (3) whether the use of the works are (a) for commercial purposes or (b) harms the commercial interests of the copyright holder.

In the case of “majority of content,” this part is pretty self-evident.

In the case of the site providing tools that are “only” used to infringe, Pinterest’s defense would have to be based on a finding by the Supreme Court in “Sony Corp. of America v. Universal City Studios, Inc,” where the court found that, contributory liability cannot be imposed unless the technology lacks substantial non-infringing uses. Flickr, for example, only provides an “upload” button that allows users to upload images from their own hard drive. This provides “substantial non-infringing uses.” Indeed, the content on Flickr has most of its images uploaded by the original photographers themselves. Pinterest, however, cannot demonstrate this: their tool does not permit uploading photos from one’s own computer; in fact, it encourages users to pin photos from other sites.

The third test –commercial profit– also has roots in the legal doctrine of “Vicarious Liability,” where “courts have extended liability to those who profit from infringing activity when an enterprise has the right and ability to prevent the infringement.”

If someone were to go to the effort of showing that Pinterest satisfies all three tests, the company loses its DMCA protections, and must now face the music. This then re-engages copyright law, where the company could be liable for statutory damages if any of the works are registered with the copyright office. (Many pro photographers whose works are generally passed around the most, actually register their works.) Statutory damages mandate a minimum of $750 per infringed work, although a judge can raise the limit of the claim up to $150,000 per infringement if the defendant was deemed to “intentionally infringe.”

One would assume that if a site lost its DMCA protection because it was “inducing infringement,” then a judge would likely also rule that the infringement was “willful.” Hence, the $150,000 per image claim would be a hefty speeding ticket.

“Sounds troubling for Pinterest! Are they in trouble?”

Probably not. And it’s not because they aren’t in violation of copyright law—they are. It’s back to the basic question of “who’s going to sue them?” Unlike music and movie companies that have hoards of lawyers representing their interests and who aggressively shut down websites and file legal claims perpetually, photographers have no one. As individuals, photographers are too unsophisticated to navigate the difficult and expensive litigation process, so it is highly improbable that many will sue. And even if they did, they won’t be able to do so in a critical mass necessary to materially affect the company the way may music labels can. And even if they could, they’d be up against the same free-speech advocates that defended Grokster. This would not be an easy or inexpensive task, and would probably garner a large push-back from society who already regards photos as “different.”

I don’t mean to “pick on” Pinterest, actually. They are but one of many such sites. Polyvore not only satisfies the three-point test of “inducing users to infringe,” but their volume knob goes to 11: They offer even more sophisticated tools to infringe, including software that specifically designed to copy photos from other sites, while also providing no tools to upload users’ own photos, which flies directly into the face of the definition of Contributory Infringement, and satisfies the Supreme Court’s own language on whether the technology has a substantial “non-infringing use.” Worst of all, they are actually selling products, not advertising, which satisfies “Vicarious Liability.”

And their legal problems go beyond just copyright. Users also upload photos of celebrities to adorn the products sold on the site, which could be in violation of publicity laws if there isn’t a model release. (Cameron Diaz’s picture is one of the most popular.)

Polyvore does provide its own photos, which are legitimately licensed -- namely, from the companies selling the products depicted in the pictures. The test is whether the majority of the content uploaded by users are unauthorized. Other factors that appear to implicate their “knowledge of willful infringement” is a statement warning people not to infringe, and the promise they will take down photos if contacted by copyright owners. While one could argue that they are trying to give notice, this is akin to warning labels on cigarette boxes. No one’s fooling anyone here.

There’s no doubt that Polyvore knows its users are infringing, and it’s certainly possible that they are aware that they are also “inducing” infringement, but they are counting on the same two factors that Pinterest is: society accepts copyright infringement of photography, and more importantly, there are no special interest groups that will sue them for “contributory infringement” on behalf of a class of photographers.

“So, as long as society has accepted photography as a non-threatening step-child in the copyright debate, these sites are safe.”

The force is strong in you, young Jedi.

Still, the risk profile could suddenly spike if there were an unintended rise of those who would intend to assert those copyright protections, which could happen if incentives were to suddenly materialize. For example, a SOPA-like legislation.

“Huh? SOPA? Come again?”

Although the Stop Online Piracy Act is dead for now, the music and movie industries are not about to let it go. Something will eventually re-emerge with new and different terms. We’re already seeing a great deal of anti-piracy legislation coming out of Europe, and Congress and others are under a great deal of pressure to do something (probably after the election season).

What needs to be considered is the unintended consequences that might result if they don’t reconcile the incompatibilities between the social aspect of photography and the fact that it’s a copyrighted work. For, whatever law that has the intention of protecting movies and music just might create a financial incentive for new actors to enter the stage and try to represent the interests of the entire class of photographers, professional and otherwise. And the social networks that use photos are far bigger and vulnerable than the usual targets that music and movie studios attack, escalating the size of litigations that could arise.

A poorly drafted SOPA-like law could affect the internet in highly unexpected ways, akin to the sudden and immediate changes we saw in our political system after the Supreme Court’s decision on Citizen’s United.

“So, do you have a better solution?”

Funny you should ask.

I don’t believe one can ever legislate around this problem. There are two economies at play all the time: a legitimate one and an underground pirate economy. The best you can do is create so much incentive for people to participate in the legitimate economy, that the efforts to pirate become less interesting and less profitable, yielding a progressively smaller proportion of that industry’s total economy. Steve Jobs pleaded with the music industry to remove music locking in song files using the argument that people don’t want to infringe, so long as they can get access to what they want at a fair price. When the music industry finally agreed to remove those locks, online music sales spiked. But the music (and film) industries haven’t kept up with cultural and technological trends in how they handle the business side of their industries. They are still trying to solve 21^st century problems with 20^th century attitudes.

It’s not that I disapprove of litigation – it’s the music and movie industries greatest advantage. The legitimate marketplace exists because music and movie companies have the infrastructure to enforce copyrights; this is the stick that gets people to seek the carrot, benefiting the entire marketplace financially and fairly.

When it comes to photography, there is no infrastructure for enforcing copyrights, so there’s no viable marketplace. I mentioned that there needs to be a central clearing house for photo rights management: My solution to that is here.

________________________________

On Fri, Mar 16, 2012 at 4:15 AM, wrote:

When a person makes a board and posts other people's photos, isn't it just like sharing a link on a blog? When you click on the photo it goes back to the original website that it was found, doesn't it? I don't understand how that constitutes infringement, to me it's like a beefed-up hyperlink. Are you saying that they are literally taking photos and uploading them somewhere?

Literally copying content is one form of copyright infringement, but that's not what we're talking about here. The fact that the content is merely "displayed on a website not authorized by the copyright holder" is technically an infringement.

To illustrate, let's take your text, and change the word "photo" to "movie":

When a person makes a board and posts other
people's movies, isn't it just like sharing a link on a blog?

In this case, let's say that those "other people" are movie studios. Here, the the public that views this movie is able to see it on a site that has not been authorized to show the movie. The movie studio doesn't care that the movie also happens to link back to their site, or iTunes, or amazon, or anywhere else. The content itself is displayed on another website without authorization. That is an infringement.

Your question of "link" should not be conflated with "text links," which do not display original content. For example, the text link "click here for this photo" is not an infringement because content is not being displayed.

You may say that "photos are different" because photos aren't like movies, or that movie studios charge money, or anything else. Copyright law does not distinguish between media formats or financial intent or even who the owner is. Copyright law is there to allow copyright holders to choose how their content is used.

Many people think that content can be used unless the copyright holder objects, but that is not the case. Technically, the copyright holder must grant consent first.

I realize this would suddenly make everyone aware that every social network in the world is suddenly in gross violation of copyright, and that's why the legal system and the copyright "process" needs to be updated to reconcile this.

Selling Stock: it's about search rank, not price

Yesterday, I reposted an article I originally wrote in 2007, discussing the misconception that microstock pricing is what's driving down overall license fees.

I got a few emails that still challenged my assertion, and it appears I haven't emphasized strongly enough the most compelling arguments supporting this thesis.

All of my research supports the premise that the primary cost of licensing images is not the license fee, but the overhead associated with finding and acquiring the right image. The overhead and administration of a project that would involve photo licensing shows that the actual license fee ranks very low on the budget -- hence, low on the buyer's priority list. My 2007 surveys of buyers showed that.

If the person responsible for finding images for a project is paid $60/hr, and this person spends 2-3 more hours looking for a photo just to pay $1 vs. $50, this translates to paying someone $120-180, just to save $50. People who control budgets know that the license fee for photos is negligible to the total cost of production, even at the traditional stock photo rates. The bigger the project, and lower the proportion of the license fee for the image(s).

Those who sell images are dropping their prices because they're looking at their competition, not the buyer. Further, there is absolutely no evidence to show that sites that have lower prices sell more images. There is definitely a perception that there's a correlation, but that's because people are comparing apples to oranges. Getty sales vs iStock sales are not apples-to-apples because the two entities vary dramatically in search engine results (and other important factors). People talk about microstock sites more, and they link to them (in blogs, discussion forums) and the quantity of images on microstock sites is rapidly growing. So naturally, these sites get higher rankings in search results. Search engines don't rank sites because they have lower prices. They rank sites by size (content), links, and a black magic formula that is best described as "dispersion of discussion in and around the net." In short, microstock sites have more content and get more attention. Hence, better rankings, which translates to more traffic, which attracts more photographers to submit images to them, perpetuating the feedback loop.

In my 2007 survey, those who indicated they were aware of--and use microstock sites-- most don't go to them because the prices are lower; it's mostly because those sites ranked higher in search engine results, where the buyer starts.

Because search engine ranking drives traffic -- especially the untapped (and unaware) segment of the global economy that doesn't use stock agencies -- and because the greatest cost in photo acquisition is time, not the license fee, 90% of the time-savings is the image results the user gets on that initial search. If it takes the buyer to a stock agency site -- microstock or otherwise -- then the deal is nearly done. Price notwithstanding.

This is primarily why I have advocated for years that stock sites should focus their entire effort towards optimizing search engine rankings. While they could have done something about it in the past, the rise of social networks and the plethora of image-related websites and apps has made it impossible for agencies to rank highly on image-search rankings on their own. In today's market, they have no choice but to either partner with, or acquire/be-acquired-by a social-networking site.

The Getty<->Flickr combination is a very pragmatic example. Yahoo is circling the drain, and it needs to shed its non-performing assets and focus its attention on ... something. Whatever that is, it isn't Flickr, and there aren't a lot of buyers that would be interested in that asset, except for Getty or Corbis. The combined product would involve retooling Flickr to be far more socially active (to keep up with modern social networking trends), and to integrate licensing/acquisition into the user/social experience. Most importantly, to provide incentive programs for photo submitters to participate economically. (I've written a great deal about this in the past.)

Of course, perhaps Yahoo should just buy Getty. Facebook is getting into the game, which tends to lead one's eyes towards Google, but they are still struggling to play catch up in the social-networking arena, and their photo division is not run by someone with a disposition towards stock or an awareness of the economics of the photo industry. The company is more interested in building assets that support their advertising model. There's no evidence that "licensing" is on their radar--a pity because they would be on the forefront of the Web 3.0 economic model, where images would play a huge role. (See here.)

In the meantime, there's a $25B shadow economy in peer-to-peer photo licensing that's up for grabs. (See here.)

So, you ask, "how do you convince agencies of this?"
I've been trying since 1998.

(For fun, see this web archive of my site from 1999 discussing this topic.)

Getty and Flickr: Prophesies Coming True?

People have been emailing me copiously, asking for a statement in response to the new relationship between Getty and Flickr, where Flickr members and visitors can work with each other through a new program with Getty Images called “Request to License”. The details of this program are listed here. From that page:

When a prospective licensee sees an image marked for license, they can click on the link and be put in touch with a representative from Getty Images who will help handle details like permissions, releases and pricing. Once reviewed, the Getty Images editors will send you a FlickrMail to request to license your work, either for commercial or editorial usage. The decision to license is always yours.

Why are people asking me about this?

For years, I've been proposing that precisely this model be implemented. Most of my blog entries in 2007 and 2008 articulated this very model. The first was on Feb 13, 2007, in an article titled, "The future of photo sharing sites and agencies". There, I predicted the inevitable convergence between companies like Getty and Flickr:

I believe it will invariably happen that major photo agencies like Getty and Corbis can (and should) move into the consumer market. Consider what would happen if major stock agencies expanded their businesses by opening the flood gates and letting everyone in. By removing the barriers that require photographers to "submit images," and having a separate portion of their sites be entirely open, much like other photo-sharing sites are, they would give more options to buyers, and provide more opportunities (and greater incentive) for photographers to join at all levels. Getty owns iStockPhoto.com, which is a microstock agency that sells images for much less, but this is not a consumer-based, social networking style photo sharing site like flickr is.

The key here is in italics: microstock agencies are not social networking sites, they are therefore limited by both buyers are sellers than the social-networking sites. My premise for this logic is based on my years of research showing that 80% or more of licensed images is peer-to-peer, directly between buyers and photographers, not among agencies. You can read this research in the article, "The Size of the Photo Licensing Market"). The summary of that research is this basic truism: Most buyers find images on non-stock agency websites.

On Feb 18, 2007, I wrote how the photo-sharing and social-networking sites can capitalize on this opportunity in an article titled, "Two-Phased Approach to photo-sharing/licensing model". I said:

Phase One of this business will be where a photo-sharing site merely allows visitors to license images directly from the site. Phase Two will involve the distribution of the same photo assets to other sites, much the same way online ad sales are hosted (or "published") on other websites. ... For the sake of discussion, I'm going to assume that the approach ultimately adopted is the one I've suggested in the past: make it pure and simple by giving the user a toggle for setting whether his photos are (or aren't) permitted to be "sold".

And that's exactly what Getty and Flickr are doing now. Over four years later.

You may note that I said there was a two-phased approach. That second model will eventually become part of more photo-licensing business models. (In fact, it already exists, but among companies too small to get anyone's attention--partly because the technology and business models they've adopted do not properly understand and implement the true nature of photo licensing, copyright issues, and potential target markets. This is an aside for the moment; it may come up again when larger players eventually begin to consider the opportunities.)

Speaking of predictions, I remain steadfast in my opinion of the inevitability of what happens next:

In July, 2007, my blog post titled, "The Solution to Getty's Woes" explained how Getty can get out of its financial troubles by simply buying Flickr directly from Yahoo and using it as the main stock licensing engine. The article got into exceedingly detailed analysis of Getty's financial model (and troubles) combined with the explosion of available imagery on sites like Flickr that make this solution not only obvious, but inevitable.

On a directly related note, I called into question the life expectancy of the Creative Commons in this article (2008), where I again proposed that Flickr allow users the option of choosing between allowing their images available for free via CC, or to get income from their images. I said,

...it begs the question about whether enough people would choose the option to "make my images free"(CC) if it were next to the checkbox that says, "pay me a quarter if someone's dumb enough to buy it."

And then there's the buyer. If they were given the choice between "free images, with disclaimers and risks" and modestly priced images without such risks, it wouldn't be very likely that the "free" versions would be chosen very often.

The concept of CC would never survive under these two conditions.

Without getting too far afield, I have no qualms with the CC, per se. It's more about how simplistically it's been designed and deployed. It's just not sustainable in the real world business market. The problem is not the "license terms" and the structure of the legal contracts--those are all just fine. It's the fact that the system can be gamed so easily by both buyers and sellers, that it's too unreliable to be sustainable beyond a small handful of casual users (by comparison to the larger market of stock imagery). The true protections for both buyers and sellers is to leverage the copyright registration mechanism. That is, creative commons images that are also registered with the copyright office lowers the risk both both buyers and sellers, as explained in that article. Since no one is building copyright registration into their online business models, and the CC itself has a fundamental objection to the concept of copyright in the first place, the CC will be relegated to an historical footnote , bringing strength back to the for-fee licensing model. And which brings us back to why I'd always argued that Flickr should have enabled image licensing.

So, why is this all good for the photo licensing industry? I articulate this answer in the blog entry I wrote on March 15, 2007 in the article titled, "Photo-sharing-licensing sites leveling the playing field."

As more companies engage in the business of licensing images, photographers with credibility will gravitate to the sites that offer a better return on their money... In a way, this is how photo agencies started in the very beginning, only better: because photographers don't have to be "accepted," the playing field is much more level, and the market forces can be more free to let the money flow to those who really do merit the higher earnings (rather than at the whim of photo editors). The buyer, it turns out, is the best photo editor, and it will be pretty clear in short order which sites are hosting good, honest content.

I summarize with another excerpt from that article:

...the most basic, fundamental truism about photography remains: there are more people who have it as a hobby than as a profession, and the barrier to entry is low... the honeymoon period for Getty will end once photo-sharing sites become new outlets for photographers where the open market can decide their rates."

2009 Year in Review: Web Optimization

In this second segment of my series, "2009: Year in Review," I discuss issues related to managing my web presence. Some of these methods directly result in income, such as advertising dollars, whereas others indirectly affect income, such my ranking in search engines or by directing traffic towards monetizable content. Nothing discussed here addresses my actual sales and licensing methods, which was addressed in Part 1 of this series.

Web Traffic and Advertising

Traffic to my site has marginally increased by 16% from the same time last year (2008). More specifically, I averaged about 15,000 visitors a day in 2009, but the number would have been much higher had it not been for a technical mis-decision I made during the summer months that dramatically dropped my rankings, which had to do with "keyword stuffing", discussed later. Normalizing for that, my traffic has been pretty steady at around 16-18K unique visitors a day, compared to 14-15K/day in 2008. (Stats can be seen here.)

While that may sound impressive, it's not that simple. There are a number of devils in the details, and sifting through the data is only half the battle. For example, the bounce rate (the rate at which people leave my site after viewing the first page) rose to 8.5%, and the average time on site dropped by 11%. In other words, people are leaving my site sooner than before.

One would think that this is a bad thing, but there's other data that suggests otherwise. For example, advertising revenue more than doubled; in some cases (some pages and topics) tripled and quadrupled. All those people "bouncing" away without spending time on my site are clicking on ads. For 2009, advertising revenue jumped to represent 17% of total income.

One might say that I'm losing potential buyers to advertisers, but that's not what's going on. Most of the ads on my site are not for photography prints or licensing, which is the lion's share of my online transactions. That is, people are clicking on ads because they decidedly do not want anything I have to offer. I don't care that they leave; it just so happens that they're paying me a effective "exit tax." Or rather, the people who are getting my traffic are paying that tax.

Indeed, this turns out to be mutually beneficial: advertisers whose own sites don't rank well for some search terms, actually get a lot more relevant traffic from my site than they would if they paid to get onto Google's search page directly. That is, they'll pay ten cents to a dollar per click to put an ad on my page (through Google's adwords program), compared to twice or three times that much to put the same ad on Google's search results page. They may not quite get the same number of total traffic, but they'll get much more relevant traffic that converts to revenue if they place those ads on my site (or any of the other top-ranked sites). This kind of advertising-indirection costs them less, they get better bang for the buck. Best of all, I get a cut of it. :-)

I should point out that this isn't always so straightforward for advertisers, because targeting a specific site can be costly (in the form of lost opportunity, not necessarily money) if that site isn't consistently well-ranked. That is, if they target a site that appears to rank well sporadically (because their content changes), they could get a boost of traffic for a short time, and then go dark. Since my site has been around for a long time and is generally stable, this risk is not a concern.

In fact, many advertisers come directly to me and pay me to put their ads on my pages, rather than going through Google. There are advertising aggregators that have clients that pay them to do this analysis, and my site is coming up more often in their radar. My advertising rates are not based on clicks or impressions; they're flat fee rates, which advertisers like a lot for a high-traffic site like mine.

This then begs the question: what was the actual end-user looking for that they landed on my site, even though I didn't have what they were looking for? Why am I ranked so highly for them? Isn't that a problem with the search results?

First of all, the bounce rates are still quite low. Google does accurately put users on pages that match their searches. Of the low number of people who bounce, it's usually because they used the wrong search terms in the first place, and Google couldn't possibly know that ahead of time.

Take the Olympics in Vancouver, for example. If you search for "photos of vancouver", I'm currently ranked #8 on Google. (Before the Olympics, I was ranked among the top three.) So, I get a lot of people looking for olympics photos, even though they didn't use the term, "olympics" in their search query. When they don't see such images on my Vancouver page, users click on an ad that gets them where they wanted to go.

Vancouver is only one of a long list of examples. At the moment, I score very highly for phrases like:

1. "black and white pictures" (Google Rank: #4)
2. "what kind of camera should I buy" (#6),
3. "learning photography" (#2)
4. "photography business" (#1)
5. "model release" (#1)
6. "star trails" (#1)
7. "fill flash" (#1)
8. "photographing people" (#1)
9. "selling prints" (#1)
10. "photography marketing" (#3)
11. "sahara desert" (#5)
12. "stairs" (#6)
13. "photos of doors" (#1)
14. "photos of new york city" (#3)
15. "photos of san francisco" (#1)
16. "photos of kids" (#1)
17. "photos of united states" (#1)
18. "photos of patagonia" (#3)
19. "photos of cuba" (#1)

These are but a few among hundreds of phrases that Google ranks my site and/or pages among the top-five. But the key is that these terms are generic and they themselves do not bring traffic that can be attributed to a single dime of sales revenue.

While they are good for generating advertising revenue, there's an even better benefit to ranking high for generic search patterns: Non-buyer traffic out-strips buyers by orders of magnitude, and any traffic--buyers or not--contributes to the overall ranking of my site. When people search using more specific terms (for content that they do want to purchase), my site will rise in those search results, yielding sales.

So the objective is to have as many pages rank as highly as possible. One key strategy here is that I don't particularly care to rank highly for any single or small set of search terms--that doesn't necessarily benefit me. It's just having my site itself be indexed well for whatever content the search engines deem appropriate. And therein lies the question: how do they determine what search terms should send users to my site? Since they cannot determine what's inside of a photo the way a human eye does, search engines look for other clues to determine the content of a page that otherwise has very little text: metadata.

Keywording

I've blogged before about keywording; it's a huge topic. I'm not going to reiterate points I already made, but to appreciate how and why I employ my keywording methods, you need to at least understand this very basic set of truisms:

1. Most image buyers use search engines first, stock agencies second.
   Search engines act like "metasearch" for all the stock sites, as well as many other image sources, including mine, yours, everyone else's. It's best to use keywording techniques advised by search engines, not stock photo agencies.
2. Search engines are intelligent about search queries.
   Unlike days long ago, they know all the synonyms that are related to a common root. So, you do not need to include the singular and plurals, all the variants of "dog" (canine, puppy, pooch, etc.), and so on. What's more, intelligent search is becoming more common, even among stock agencies. The need to stuff your images with synonyms and other related keywords to make your list "more thorough or complete" is gone. In fact, attempting to do so can backfire on you. (More about that later.)
3. Controlled Vocabularies are a complete waste of time.
   There was once a time when such lists were useful, because it made the job of image search much easier for unsophisticated (brute force) search algorithms. Controlled vocabularies helped you use a small, consistent set of words, which kept you from using dozens of similar words that might come up with different search results when the user input search queries.
   
   While that premise was useful, it only addresses half the equation: the weakest link in search is not you, it's the end-users. Or rather, the search queries they submit. These people are not going to conform to controlled vocabularies. So, in order to map their queries to your images, their input text has to be converted to root words anyway. If the search algorithm is going to do this to end-user queries, it can (and should) also do it with your keyword list. Forcing you to conform to a list becomes a waste of time.
4. Keywording should take only a few minutes and minimal thought.
   It's very easy to over-think how people might find your images, or to worry that your images might not be found if someone uses a series of queries that you didn't think of. But this kind of over-thinking can negatively affect if and how your images are found. End-users learn very quickly to be very conservative in their search queries, or they will get a lot of irrelevant results, rapidly wasting their time. They may experiment with creative, conceptual, or "refined" queries to see what they get, but it doesn't take long to learn to "keep it simple." So should you. Keywords should include only the most basic, obvious, and prominent items in the photo. Search engines also rank the quality of photos (and the sites that host them) on their brevity. More than ten keywords will diminish a photo's rank because it usually means that someone is going to stuff the keyword list with unrelated words in an attempt to game the system. This is a common technique among photographers who submit their images to dozens of microstock agencies who do not enforce such restrictions, and who use brute-force (letter-for-letter) search algorithms. Keyword stuffing--also known as "keyword pollution"--has proven to be effective for such photo sites because it allows those images to be found ahead of other, potentially more relevant results for any given search.

In fact, I fell victim to "keyword stuffing" myself midway through 2009. In my automated keyword algorithms, which normally strips redundant or "similar" keywords, I had thought I was being clever by adding in location information (city, state, country) into the keyword list. Yet, what I found was that because the IPTC data already had these keywords, which search engines tap into, and because my keyword list grew (unnecessarily) by three more words, this dropped my rankings down by several notches, which kept me out of the "top fold" of search engine results. It's a huge deal dropping from #3 to #6 or #7 for a given search term, and you can see the results of this in my site traffic data over the summer of 2009.

Needless to say, this cost me quite a bit in traffic, which affected every other aspect of my business, from sales to advertising rates.

You can imagine, therefore, that "effective keywording" (so that images and website are deemed "credible" and ranked highly) is a hotly debated issue in the photo community. It's also one where entrepreneurs try to come up with solutions--some good, some not so much.

One example is a product "imense annotator" (annotator.imense.com), which has some interesting ideas, such as an image-recognition algorithm that tries to guess keywords that might describe the people in an image. It will do a reasonable job in ascertaining the ages, sex and ethnicity of people in a photo, and then attach those keywords to your images. Clever, and possibly quite useful more to a stock agency than an individual. This is because agencies have millions of images to process, none of which have been (or will be) seen by company staff. On the other hand, original photographers that shot the images could do this task quite easily on their own. One can only shoot so many images in a day, and since one has to eventually go through a manual (if not minimal) keywording phase anyway, one can assign the keywords associated with the "people" photos as part of that process. This shouldn't be all that time-consuming for reasonably well-disciplined photographers. And human analysis on such things is always going to outperform a computer. (Yes, I say this as an active programmer.)

(Note: The annotator only does people/facial recognition.)

All other aspects of annotator look and sound cool, but are considerably less effective in practicality. Again, these include "commercial vocabularies", "crowdsourcing" and "controlled vocabularies." As noted earlier, these ultimately contribute to the perils of keyword stuffing that search engines don't like--and which only serve to confuse stock agencies' less sophisticated search algorithms.

Another thing to keep in mind is keywording is often done once, and then you never touch those particular images again. Therefore, whatever you use as keywords today are likely to stick with your images long into the future. But technology doesn't sit still--especially image-recognition and search algorithms. For these, time has a tendency to speed by rather quickly. Before you know it, most search engines will be incorporating the same sort of algorithms like the annotator above. In fact, Google's own image recognition features are rather well developed, and can be seen in action if you use their Picasa image management solutions.

In any event, the point is that keywording is a classic case where "less is more." Images should have minimal base tokens in the keyword list; the search "intermediary" interprets the uncontrolled end-user queries and maps them to the minimal keyword list in your images. This is and will always be the most effective way for images to be found.

While I don't necessarily fault software companies for coming up with creative ways to "enhance" keywording, I draw the line when companies actually recommend methods and behaviors that are wholly counter-productive. An example is Cradoc Software's latest product, fotoKeyword Harvester, a product that does a form of semi-automation of keywording your images. While I am a fan of the company in many ways because it tries to also be the photographer's "coach" on many vital business matters, it has never been on the forefront of the photo business--rather, they seem to be stuck in the 1990s with many of them. Alas, most of their advice, while applicable 10-15 years ago, is well behind the times today.

In the case of the Keyword Harvester, the company sent out an article titled, "best ways to keyword images using concepts and attributes." A quote is: "You'll need to start paying attention to how images convey messages in advertising." They say:

One of the most valuable types of keywords for an image are things called Concepts. A concept is a term that describes non-concrete aspects of your image, an abstract idea. Concepts are used by advertisers to sell their product with the use of your image. They want the consumer to think of something specific when their product is thought of. (...) For example: Wells Fargo Bank uses images of cowboys, wagon trains, horses, and the wild west to promote their business. The concepts for these images are: excitement, freedom, trust, historic, strong, powerful.

There are several problems with all this. First is one I highlighted above in my bullet list: photo searchers (commercial or not) do not use conceptual search terms very often--at least, not with much success as they once did when the stock industry was far smaller, before digital images, and before the internet--a time when almost all stock sales were dominated by Getty Images. Back then, yes, conceptual keywords worked. And this was because Getty internally controlled all keywords for all images. Also, they had their own intelligent search, and they controlled the images in their databank.

Today, images are found in many places, are keyworded by arbitrary staff--or worse, photographers--and the consistency is impossible to centralize and manage. The direct result is that photo buyers don't search the way they once did. (This is an example of Cradoc seems to be stuck in the 1990s.)

It's easy to put this to the test: go to images.google.com and search for the "conceptual keywords" that Cradoc said represented the kind of themes Wells Fargo uses in their imagery. I tried every word on their list, as individual search terms, in pairs, in triplets, and as the entire group. Not one single set of results from these queries contained images that would ever be used by Wells Fargo. They are totally unrelated to all their business models. This is not unique; it's rarely ever the case that conceptual keyword searches yield desirable results. That's why most searchers don't use them anymore.

By contrast, if you search for images based on the actual elements used by Wells Fargo imagery -- cowboys, wagon trains, horses -- image search results show many images similar to those the bank actually uses.

Again, the lesson: keep it simple. Don't get clever. Do not try to anticipate what the searcher might use as search terms. Photo researchers are more afraid of you than you are of them. They are going to keep it simple, too.

I can verify this with my own statistics: My site gets about 19,000 search queries a day on my own search pages. Of the search terms I get, 99% are for very specific items. Furthermore, when someone actually licenses an image from me, and I track their search patterns that lead up to the sale, it is never the case that people use conceptual terms.

In preparation for this article, I interviewed one particular client about how he tends to search for images. He said, "I found that sites are so inconsistent about search terms, that I've learned not to use big words. Just be as specific as possible to the actual things I want to see in a photo."

When I asked him how he chose the particular photo he licensed from me, and what search terms he used leading up to it, he said he wanted a "futuristic landscape." When he tried that phrase (and derivatives, such as "future" and "cityscape") on Google, Getty and Corbis, he got nothing like what he wanted. So, he just got specific: "glowing buildings", which lead him to the image he licensed from my site, which can be seen here.

Keywording Methods

So, let's get to brass tacks: how should you keyword your images? Google has a document called, Google's Search Engine Optimization Starter Guide, which includes tips on optimizing your images for search. It all boils down to:

1. The image's filename should include the most relevant elements of the image.
   For example, if it's a photo of a boy and a dog, use "boy-dog.jpg". If you have many such images, use sequences: boy-dog-1.jpg, boy-dog-2.jpg, etc.
2. Use keywords sparsely.
   The more keywords you try to associate with an image, the more you dilute it, bringing down its "rank" and relevancy (and credibility) with search engines, or with given search queries. This is because search engines use two key metrics to determine how well a given image matches a search parameter: the ratio of matches between an image's keyword list and that of the search query, and the filename of the image. For example, if the user entered the query, "boy and dog", the search engine sees two words: "boy" and "dog." (It throws out filler words like "and.") Here, the image named, boy-dog.jpg has a 100% hit ratio of query terms with keyword terms, and the keywords were in the filename. Note that the actual photo itself may very well be that of a fish and a boat. (Google doesn't actually look at that, because, well, it doesn't know how.)
3. Avoid using synonyms and other "related" terms in keyword lists
   That is, do not attempt to be thorough in describing images with keywords. That's not your job. Search engines already know how to do that. They've got thousands of programmers with PhDs doing that for you (and for the end-user). The more you try to "help," the more you're actually interfering with the process, which reduces your relevancy and ranking.

The good news about keywording is that proper and effective use of keywords is extremely simple and shouldn't require much (if any) thought or time. Using myself as an example, my workflow involves two phases: the edit phase (where I rename all my photos so that their filenames reflect their content), and the keywording phase, where I apply individual words to images--usually in very large batches.

For example, let's say I'm on a photo shoot of a boy and a dog. After editing out the stuff that gets tossed, I'm left with several hundred images, where I then name them just as recommended by Google: boy-dog-lake.jpg, boy-dog-bridge.jpg, boy-dog-1.jpg, etc. In order to assure the highest ratio of search queries to keyword terms, I try to limit filenames to two to six words, though most are either three or four. This is a difficult decision because if I use too many words, I may "match" more queries, but the ratio will be diluted. If I use too few words, I will rank highly for very narrow searches, but may miss more opportunities. This trade-off is a zero-sum game, so rather than try to game the system, I just be honest: determine what's in the photo, and use that as the filename.

Any words that may be "in" the photo, but seems to be less relevant are then added to the keywords list in the image's metadata. And even then, I rarely add more than two or three words, usually modifiers such as "young" or "funny."

Naming files is often very quick because most are batches of similar images. One only needs to browse a given gallery on my site to see the number of similar images that are shot together. The keywording process is similarly fast, also involving mass-assignment of specific, unambiguous words to large batches of images. My rule of thumb is that keywording thousands of images should take no more than 30 minutes.

Most any image-management software can add keywords; I happen to use Adobe Bridge, which is bundled for free with Photoshop or any of the creative suite products.

Note that if you inspect the images on my site, you may notice that they appear to have lots of keywords. Most of these keywords aren't actually in the images that I process--these are added later by an automated post-production algorithm that generates all my static html pages. I do all this to present hints to the end-user for suggested related search terms to stimulate new search ideas.

Maps

The newest addendum to my website is the use of Google Maps. Essentially, each of my web pages incorporates a google map to represent where every photo was taken. While it may seem frivolous, there's been great advantage to the maps. (It also wasn't entirely easy; Google set up the whole mechanism for the sole purpose of presenting maps based on specific street and/or mailing addresses. I have no interest in that level of detail; I just wanted to generate maps for generic locations, like city/state/country. Well, that isn't quite so easy because there are many streets named after cities, states and countries, and there's no way to tell Google maps that I'm not interested in street addresses, just general city maps.)

Though I instituted maps onto my site late in December, the effect its had on my traffic and ranking has been a surprise. Search engines seem to give extra boost to web pages that are geo-tagged--that is, they indicate location. When people search for images where the search parameters include a location, my pages get an additional bump. I've seen about a 10% boost in traffic two months after having introduced geo-tagging onto my web pages, and I look forward to seeing more data to quantify the extent to which geo-tagging has long-term benefits.

Might Picscout Ultimately Cause Yahoo to Acquire Getty?

I realize the title of this blog is rather provocative. But let me lead you through this.

It all starts with David Sanger's blog on picscout's new Image Registry and Image Exchange, which is the system that Picscout uses to index images and bring buyers and sellers together through third-party licensors. David makes insightful comments on three critical points.

First, his point #2:

Picscout aims to take a percent of sales, noting on their site: “ImageExchange acts as an online affiliate program, sharing image-licensing income between PicScout and licensors.” This will reduce the percent that goes to the photographer.

David is not the first to observe this, but it illustrates how the big picture is being missed. The premise begins with the fact that the universe of images users (some of whom are active buyers, but most of whom are not) use applications that produce documents (digital and print). Those applications are developed by third party Independent Software Vendors (ISVs), such as Adobe or Microsoft. If the applications that ISVs produce adopt the Picscout API to hook into the registry to identify images the user is using in his document, those users will not only be automatically notified they are using copyrighted images, but will also be given the opportunity to license them. This concept isn't far-fetched--exactly the same thing is done when users try to view movies or listen to songs on some devices.

However, because such a thing is not yet done for images, it has the potential to transform the stock licensing industry. If enough ISVs adopt the API and hook into the registry, a critical mass of users will be invariably recruited into the photo licensing economy. The more ISVs that adopt this API, the more applications will be using them, which casts a wider and wider net of users... who themselves become image buyers.

Here's the hitch: those ISVs will not adopt the API unless they have a stake in the game. That is, a cut of the license revenue. Unless someone has another carrot to wave in front of those ISVs, that's the only way to get them to participate in the program. If ISVs don't adopt the API, this whole discussion is moot. No one uses the registry. Game Over.

Therefore, the game is to capture the ISVs. And the only financial incentive they can possibly have is to participate in the licensing model--that is, a rev-share. This has the even greater advantage of giving the ISV even more incentive to get their own users to license images. The more they license, the more money the ISV makes. The ISVs will not just promote these features, but they may make it pretty darn difficult for users to avoid these features.

Imagine what Adobe would do if they had the ability to get a cut of a $10B economy if they just added a feature into InDesign that assured that the photos being used in any given document was properly licensed.... much the same way an iPod assures that the movie it's about to play has been purchased.

This is the same model I've described in my article, The Economics of Migrating from Web 2.0 to Web 3.0: convert the vast majority of image users into image buyers, and sales volumes go way up.

So, that David observes that photographers' percentage of royalty goes down is a true statement, but one that clearly misses the big picture. Obviously the ISV rev-sharing cuts the pie into smaller slices, but a smaller slice of a much larger pie.

David then makes another keen observation in point #7 about Picscout's underlying technology:

Evaluating an entire page of thumbnails is time-consuming. Each thumbnail must be downloaded and analyzed by the PicScout servers before returning index comparison results...

Though David only cites the Google search as an example of how users expect "speed," this is only the tip of the iceberg. Picscout's web browser plug-in that examines google searches is merely a prototype to demonstrate how the API works. Once again, the real goal is to capture ISVs.

But David's observation is more prescient than he may have thought, for performance is probably even more important than rev-sharing by ISVs. If their apps degrade in performance by using the Picscout API, they won't use it, irrespective of rev-share.

The technology Picscout has introduced is clearly first-stage prototypes to introduce the business model and be the first on the map. Yet, it's also Picscout's Achilles Heel, as there is a race about to ensue.

Let's not be naive: Picscout is not the only company on this track. Image-recognition is a science that's akin to text search: there are many ways to do it--some better than others--but it only needs to perform to minimal threshold for the business model to succeed. Many other factors dictate success or failure. Sure, though Picscout may have superior image-recognition algorithms, that part isn't the crowned jewels. Indeed, there are many companies with image-recognition algorithms, Google being one of them.

The real challenge is to build a network protocol that can communicate image information between a client and a server as quickly as possible, using as little network bandwidth as possible. Then, this mechanism needs to scale up to service huge volumes of requests from huge numbers of applications on the net. Picscout may be the first to introduce the proof-of-concept and a prototype, but the real race is on the back-end... as David pointed out.

On the surface, this would seem difficult -- and it is -- but it's hardly new. All large-scale social-network sites do this on a regular basis, from twitter to facebook to Flickr. Though cloud-computing is mature, the real barrier to entry here is the costly capital investment necessary to run such a service. There are many players in the field that already have this infrastructure. By comparison, Picscout would have a harder time ramping up to that level of computing resources than it would for a larger company to find some sort of image-recognition technology (if they don't already have one).

For now, the game is Picscout's to lose, since they're first. But "first" players often find themselves in catch-up soon thereafter. If they even moderately demonstrate viability in the concept, much larger players (such as photo-sharing sites) who have such resources already will be quick to swoop in.

Lastly, David notes in his point #3:

If buyers find it easier to find images through web search they will move away from distributor sites for search, and only use the distributor site for the final licensing.

Yes. Exactly. But that's nothing new. It's been that way since about 2002 now, a fact that I've been pounding on since that time: The vast number of licensed images are done on a peer-to-peer basis directly between buyers and photographers. Stock agencies have suffered because they've missed this point, and have since struggled in trying to figure out how to fight their way out of the paper bag.

But that struggle will end without their having to do much about it. With the combination of image-recognition and web-crawling, the emerging business model Picscout is attempting is now a Fait accompli. That is, David is correct to say that stock agencies of today will become nothing more than hosting sites and clearing houses that supply inventory to other middle-man sites (like Picscout) that do the real job of pairing buyers and sellers.

But is this really a bad thing? He says it in a way that suggests that agencies somehow preserve stock prices. Let's not forget that if ISVs and others realize there's money to be made, they don't want to under-price inventory too. If you want to preserve price stability, convert the social-networks from photo-sharing into photo-licensing businesses.

I've nothing against agencies, but their future will require them to do two things they never did before--in fact, that they avoided: rank well in search engines (so that end-users are more likely to find content in the first place), and attract as much content as possible. That is, stop being editors. Let any and all images in, and let the natural ranking abilities of search engines and social-networks be the real editors. To date, stock agencies have neither sufficient content volume or web-ranking in search results, nor do they employ social-network aspects to their sites to attract users in high volumes. (Again, their head was in the sand for too long.)

So the question is, who can do this? Answer: Photo-sharing social networks.

Back in 2008, I posted an article titled, Stock Photography, the Consumer, and the Future that forecasts this very phenomenon. Once the realization that there's lots of money to be made by creating a streamlined and automated image-licensing mechanism, the sleeping giants of the photo-sharing social networks will awaken and bulldoze over the traditional stock agencies in ways that no one would have believed.

Indeed, I wrote in January, 2008 in an article titled, Pulling the Flickr sword out of the Yahoo stone:

Flickr is one of the very few photo-asset powerhouses on the web that could monetize its content in ways that would exceed even modest expectations.

In fact, I also wrote in an article titled, The Solution to Getty's Woes that Getty should acquire Flickr for this very reason.

But times have changed considerably since then -- Getty has shrunk in size, and Yahoo! has recovered handsomely. Getty could never acquire Flickr now... but if this whole business model of using image-recognition as a vehicle for licensing images shows promise, then I wouldn't be surprised if Yahoo! starts casting devious stares towards Getty.

Hmmmm......

Stock Photography, the Consumer, and the Future

Preface

I apologize in advance for the extreme length of this article. I hardly expect anyone to read it in one sitting, or to even finish it. Those who do read it may be eligible to win a free pizza. Or better yet, to improve their understanding of the photo industry.

This article was pieced together from the results of several consulting contracts I've done for particular clients looking at various investment options in the photo licensing space, most of it written in the last six months. I've removed the specific citations of particular companies that I was asked to research, but in the end, I've manage to maintain cohesion in the overall message.

Synopsis

In this article, I will be addressing: Stock Photo Price Erosion Historical Trends of Stock Photography Is the Stock Photo Industry Growing or Shrinking? The Consumer and The Long Tail Market Efficiencies and Effects on Pricing Long-term Industry Prospects (expand, contract, or remain flat) Market-Maker Model for Optimizing Prices How and Why Pros Benefit from Consumer Involvement

This coming October, I'll be presenting a talk at the Photo Expo Plus conference in New York City, called, "Stock Photography and the Consumer". You can find a link to the list of sessions here. Search for my name to get the specifics on the talk.

The abstract of the session presents the premise for this article:

Licensing stock has yielded lower financial returns in recent years, mostly because the target audience are the companies familiar to photo industry veterans. While this audience tends to buy in larger volumes, they represent a small fraction of overall purchasing for photos online. The largest growth curve for photo buyers is the consumer.

This article is a sort of primer for the session I'll be presenting at the conference, but it gets into depth on auxiliary information that may not be covered due to the two-hour time constraint. This article wasn't written just for those attending my session, but rather, for anyone interested in understanding the broader economic impact that consumers have on the stock photo industry.

Current Business Strategies

With a few exceptions, most pro photographers would agree that their incomes from licensing stock photography has dropped over past ten years. Finding a way to reverse this trend has been a top goal for photo trade associations and de facto industry leaders. They have come up with a variety of proposed strategies, but the one that continually remains at the top of everyone's list is characterized by the following populist quote from a discussion forum frequented by stock photographers:

Stock photo industry is on the decline. And the reason is because microstock agencies are driving prices downwards, and pros and semi-pros are not being consistent or cohesive in their pricing structures. The solution is to create a standardized pricing system that everyone adopts.

NOTE: A prior edit of this article mentioned that the Stock Artist's Alliance (SAA) and the PLUS coalition supported a pricing standard. This was erroneous -- they advocate standardizing certain terminology to be used in licensing agreements, an aspect of this article that I had originally included, but later removed.

The rationale for believing this approach will reverse price declines stems almost entirely on the premise that pro photographers see themselves as the primary (if not sole) suppliers of images to buyers. In other words, industry groups believe that, while the consumer's role in stock sales has been destructive in pricing, they actually contribute very little in the overall supply of licensed images. Therefore, if at least the pros cooperate on a price structure, buyers have no choice but to pay them, because pros really are the market-makers of their own products.

Believing that this strategy will work is rooted from a historical and cultural bias that dates back to the pre-internet era, when it was true that the supply of images was controlled by stock agencies and a smaller, limited set of pro photographers. Indeed, pricing stability was not only achieved, but optimized. Cohesiveness among agencies and photographers was not difficult because very few controlled the entire photo channel, allowing them to regulate how much supply entered the market. The thinking today is that such a model can be brought back.

Why cooperating on price doesn't work.

The "Nash Equilibrium" states that no matter how much competitors agree to maintain price stability, the ones who benefit the least will betray the others in order to win business. And this act will force others to follow suit just to stay competitive, thereby bringing equilibrium to the group. In other words, "market rates" will ultimately prevail. While there were few enough players in the industry in the pre-internet days to control the channel, there are just too many people involved right now to sustain compliance, as dictated by the Nash Equilibrium. For more information and discussion on this topic, see my article, The Photographer's Dilemma: to cooperate or not?.

But today, with the internet and digital photography, a huge amount of inventory has entered the supply chain from a variety of sources, mostly consumers. Therefore, adopting "price structures" will fail simply due to supply and demand. Worse, it could actually cause more harm to pros who vow to adhere to these prices charts because they would price themselves out of the market, as dictated by the Nash Equilibrium (above).

So, if photographers don't accept that consumers photos are not disrupting the natural balance of "supply and demand", nor do they accept the principles of the Nash Equilibrium that voluntary price adherence won't work, what do they need to see that will help them change their fundamental business strategies to be more in line with current economic realities?

Perhaps we should start looking at a global picture of what's going on in the stock photo industry.

Is the Stock Photo Industry Growing or Shrinking?

It's a simple question, one that you wouldn't expect to be asked seriously. Rather, you more often see it as a rhetorical question used to underscore a different point, as illustrated by the quote at the top of this article: The stock photo industry is on the decline. And the reason is because microstock agencies are driving prices downwards..."

Yet, I seriously ask, Is the stock photo industry on the decline?

Here are the pivotal questions that can help address that problem:

1. Do most published images come from pro photographers?
2. Are most photo buyers consumers or traditional media companies?

As I'll illustrate in the following sections, the data I've been collecting over the years (in particular, the last six months) shows that even though per-image pricing has dropped, it has been more than offset by volume, resulting in a net increase in dollars spent industry-wide on photography. The bulk of that extra money is being spread thinly and broadly to millions upon millions of suppliers that are not traditional players in stock. Who are those non-traditional players?

Do Most Images Come From Pros?

To find out, I examine two data points: the rate of growth of the publishing industry, and that of the stock licensing industry. For publishing, we examine the rate of growth for print and online mediums that use photos, where growth is estimated to be between 20-50% per year since 2000, depending on various metrics used to determine the size of the internet. (Google ad rates along with other agencies that sell online advertising that use photos are example reference points.) Even using a conservative growth estimate of 10% per year, the past 8 years would yield a compounded increase of more than double the size it was in the year 2000.

This kind of information is consistent with other data I've found in prior analysis I've done on the size of the photo licensing industry. I've estimated the size to be between $15-20B, which I've published (along with my analysis) here, here and here.

When more photographers try to stuff into a VW Bug and things get tight, it doesn't mean the car has shrunk.

By contrast, reports generated by stock photo industry trade associations and financial analysts who follow publicly traded companies, such as Getty and Jupitermedia, do not show any growth at all since 2000. It was a $2-3B industry then and remains so today. Also consider that there are also 10-20x more "traditional pros" as there were 10 years ago, as measured by the increased number of photo organizations and their aggregate membership numbers. Distributing the same $2-3B revenue to 20 times more photographers than before means that pro photographers are not just earning less per sale from falling image prices, but they have to share their piece of the pie with more people.

If traditional pros and agencies are only getting $2-3B of a $15-20B market, are consumers somehow earning and spending the remainder? To a degree, yes. But not entirely. There is a great deal of money that is also lost due to "economic evaporation", due to pricing and distribution inefficiencies discussed later. First, I'm going to address the portion of the sales pie represented by consumers.

The Long Tail

In a phenomenon coined in 2002 called, "The Long Tail," a reporter for Wired magazine noted that the huge revenues generated by amazon.com came from the sales of millions of little-known books to millions of consumers, who, prior to the internet, were never even aware of such books, nor had they the means or incentives to find them. In quantities of one's and two's, these unknown books were sold to random people on the web in a manner that added up to billions more dollars of unexpected market potential than industry analysts and economists had anticipated. Though all eyes tend to look at the mega-blockbuster hits, the real money is in the really small sales of one's and two's to inconsequential buyers. The top 100 books that sold in the millions only represented a tiny proportion of amazon's revenues in comparison to the millions of these tiny sales of little known books.

Is it the same story with photography? Is the vast proportion of sales between consumers, not directly with stock agencies and established pros? If the estimate of the market size is $15-20B, and pros only account for $2-3B, then the gap must be accounted for. Unfortunately, showing where those sales are coming from using precise numbers (as can be done with amazon.com sales) is not as simple; amazon is a monitored sales channel because it is a public company, so we can examine their financial results. Ad-hoc sales by consumers is not.

Deriving information about the broader market from a monitored sales channel like amazon.com is possible using symmetric analysis because sales figures correlate with the information we seek. That is, we can look at amazon's reported earnings and derive that most products sold are not the "big hits" of best-selling books, but rather, millions of smaller sales in one's and two's. If you were to graph this, these small sales would represent a very long tail of bumps along the bottom of the X axis.

Photos by consumers, on the other hand, are not sold through monitored sales channels, making such "peer-to-peer" sales difficult to track. We don't have direct numbers we can analyze from public companies or trade groups (because consumers don't join trade groups).

Therefore, to find the information we seek, we need to examine asymmetric information, or rather, data that doesn't directly correlate to the information we want. Because of the indirect nature of this data, we need to find more data sources than just one, and then extrapolate information from the aggregate. This is similar to how GPS systems locate you: they get data from a number of satellites, and derive your position from that aggregate. The more satellites there are, the more accurate the estimate. So, the more data we collect from "indirect" data sources that hint at consumer sales potential, the more accurate our estimates will be.

One such satellite in our search for data is the historical sales trends of pro-level cameras. Up till the year 2000, there was a direct correlation between pro-level camera sales and those of stock photo sales, as compiled by industry trade associations for both cameras and stock photo trade groups. After 2000, the trends went out of parity: pro-level camera sales spiked, but official (industry-provided) stock photo sales figures remained flat.

What caused this breakdown of symmetry? Either one of the data sets is wrong, or there is another element in the equation that hasn't been factored in. Since the "official industry figures" on the size of the stock photo industry does not include peer-to-peer sales, there's a strong chance that this is the missing data. The traditional industry analysis failed to recognize non-traditional contributors to stock licensing.

A strong contributor to this is the proliferation of pro-level digital cameras after 2000, which made pro-quality photos more easily available online, and for sale in general. In other words, if consumers were buying pro level cameras prior to 2000, they were mostly film-based cameras, and consumers never went to the bother of scanning their images. Digital images, on the other hand, are easily and instantly made available for distribution, which is the beginning of when consumer's role in photography licensing began.

Another satellite providing data is the rate of growth for photo-centric media, such as magazines, web sites, general advertising, to name a few. According to data mined from those industry trade associations and trade magazines (such as "Advertising Age"), growth to the year 2000 also remained symmetric with official industry data for stock photo sales, just like with data for pro-level camera sales. After 2000, the graphs go out of parity; media growth continued, but the stock industry numbers remain flat. Again, this asymmetry suggests that the industry data is erroneous. When you factor back in the peer-to-peer sales, again, the symmetry between the graphs returns.

The more data you collect from this asymmetric information, the more it supports the notion that the size of the stock photo industry is much larger than what most people had thought. Thus, the unaccounted for sales must be coming from non-pro photo photographers. The question is, who?

What is a "Pro Photographer?"

Is it the consumer? Perhaps, but we may have to step back a second to define our terms. What's a consumer? How do you define a "pro photographer?" What's the difference?

For example, Lifetouch Inc is a private company with over 22,000 employees, and they do one thing: portraits (in many forms). They have an annual revenue of over $1B. The company provides model releases for subjects to sign, permitting the company to license the photos to others. This is classic "stock photography licensing." Whatever revenue the company may generate from these sales is not calculated into the "size of the stock photo market" by industry trade organizations. And Lifetouch (and their competitors) represent a very small niche in the overall photography business segment.

Are the photographers that work for LifeTouch "pros"? For that matter, what about others who also shoot portraits? For example, in this article from The New York Times (April 2007) looks at stay-at-home moms generating extra income by shooting portraits of their neighbors' kids. Are they consumers? Or pro photographers? And they aren't the only "consumer/photographers" doing the same thing. How do we categorize these people? Some are part time; many happen to be hobbyists or enthusiasts who don't really earn that much money with photography. But, the pictures they shoot are ending up in the stock photo supply chain as potentially licensable pictures.

Imagine if we expanded this research to include photo-based business units from all possible sectors, not just portraits, like LifeTouch is. We'd see a great deal of additional photos (and money) going into the "stock photography pie" that has traditionally been dismissed as irrelevant numbers by the stock photo industry. To them, they were consumers. But now?

You can't have it both ways -- if you call them pros, you have to factor in their contribution to the stock photo industry. And since photo trade organizations don't, nor do people who calculate financial data (such as "the overall size of the stock photo industry"), then we have no choice but to call them "consumers."

No matter what you call them in the end, the size of the stock licensing market is enormous, and the suppliers of images clearly include millions more people than had been counted before. And those new members represent a much larger percentage of the economic activity than the traditionally-defined "pro photographers" and stock agencies. By failing to recognize this group, photo industry trade groups and companies that profit from stock photo sales are mis-managing their businesses and missing out on a great deal of opportunity.

Do Consumers Buy Stock Photography?

To answer this, we're faced with a similar question just posed above: How do you define a "consumer?" When someone licenses an image, how do we characterize the sale? By the use of the licensed image? That is, whether it is used for business purposes or personal use? Are the two so easily separated? The IRS reports that 80% of employed people work for a "small business." If you sell an image to a handyman making a small brochure where he advertises fixing people's plumbing and light fixtures, is this a consumer-sale? Or a traditional stock license that would be included by photo industry trade groups in their analysis?

For purposes of the data we seek in this article, I consider a buyer to be a consumer if he is not familiar with the stock photo industry, does not go through normal channels, and most importantly, makes purchasing decisions as a consumer would, not as a business typically does. Consumer purchasing decisions differ from businesses in stock photography because they don't understand traditional license rates, are unfamiliar with license terms, don't know what model releases are for (or how they apply), or even that photos need to be "licensed" in the first place. In fact, many who license photos from me usually start the process with an email that says, "I'd like to use a photo of yours, but I can't download the high-res version (because it's not there to download). How can I get it?"

I then have to explain what photo licensing is, and why they need to pay for it.

Example uses of recent photo licenses I've sold to consumers:

1. Self-employed handyman's business card
2. Wallpaper for a bedroom
3. Wedding invitation
4. Set of place mats for a large family reunion
5. Cover image for a local musician's self-produced CD

Most of these uses are clearly for non-commercial, personal uses. Others could be considered in the middle. Either way, the people buying the images are not part of what most photo industry trade associations consider the traditional photo buyer. Thus, they do not consider this demographic a group with strong purchasing power. Hence, it's not a viable market.

I disagree with this. Given that I'm one person, and I license photos almost entirely to consumers on a regular basis, it's clear that there's a market out there. Furthermore, I do not consider my experiences to be merely anecdotal. They represent viable market conditions for these reasons: First, my traffic statistics are not insignificant, ranging from 12,000 to 28,000 visitors a day (summer and winter traffic on my site varies in parallel with industry averages). This in itself is considered to be a viable sampling of the general population at large. And since my web traffic runs in parity with my sales figures, it's fair to say that the general population acts consistently over time, given the same conditions. I've spoken to other independent photographers who sell on their own websites in the same manner, and they report similar patterns as well, though their ratios of traffic-to-sales differ from mine. (See here for my web traffic stats.)

Speaking of traffic-to-sales ratios, most people "stumble" onto my site, rather than go there specifically for the purpose of acquiring images. My ratios would be much higher if I were a more commonly known resource. (I do no advertising of any sort.)

Yet, even with my statistics, if the same traffic-to-sales ratios were to scale up to the broader market, sites like Flickr.com could be generating revenues in the $3-6B range annually. I would venture to say they'd earn even more because the site is a destination for people to look for photos. Flickr would also attract more of the traditional media buyers as well, a target audience I don't attract (because I'm not a known entity for traditional media buyers). People who license my photos never heard of me before they landed on my site--they got there by happenstance, the result of search engine results (for which I tend to rank highly). That wouldn't be the case for Flickr.

And therein lies the magic hen for laying the golden eggs: search engines. That's how most consumers find photos, whether it was their intention to license them or not. Traffic to google's image search far exceeds the traffic on every other photo-related website (by huge orders of magnitude), that even if only .1% of those searches results in a sale of any kind, this would generate revenues that far exceed the combined revenue of all stock agencies combined. And the use of search engines for photos is growing as the need for those them increases, while the photo industry continues to ignore the consumer by not promoting themselves in the mainstream as a consumer-oriented resource.

So, now we get to the most obvious of questions: If Flickr "could" get that revenue, but isn't (because they don't offer users the option to license photos), nor are there many other sources where consumers are aware of licensing, how does that affect the total dollars consumers spend on stock photography? That is, if they never heard of stock licensing, and if there aren't enough sites that service the consumer's need to license images, how do we know consumers are generating economic activity?

Inefficiency and Evaporating Money

This brings me to a critical component of the stock photo industry: unrealized revenue. That is, much of the money spent on acquiring images is actually not going to anyone at all due to inefficiencies in the system itself. Think of it as energy lost when you're driving with one foot on the brake. You waste a lot of gas because the brake is siphoning potential speed from the car. You've spent the money to buy the gas, but that investment isn't being used.

Similar inefficiencies in the stock photo industry creates a condition I call economic evaporation. The money is spent, but it doesn't go to anyone. I think of the stock photo industry as being more like a gas guzzling 1975 Buick than a Toyota Prius of today. It's outdated and wasteful.

Analogies aside, what are these inefficiencies in the stock licensing system? The greatest of them all is the one I cited in the prior section: people search for images using non-licensing search mechanisms (like google). As a result, they either don't find the images they want, or they have no way to (legitimately) acquire the images from the supplier (because the site they landed on doesn't license images). This often leads to either intentional or inadvertent copyright infringement. (I say "inadvertent" because most consumers are unaware that using photos in certain ways violates copyright. A condition which I'm finding more and more frequently of my own photos.)

Some economists would call copyright infringement a form of unaccounted economic activity because it really does represent value, even though it's harder to value it, or know how to mark it on a spreadsheet. This "mark" has to have a value, and there is no "market rate" to assign it. This is called "mark-to-market", and is something like the mortgage crisis we're dealing with in the US today: there are mortgages tied to homes, but it's impossible to place a value on them because there's no market (or credit) to actually buy them. The lack of liquidity means that there is an enormous amount of dead capital that's keeping the economy from moving forward.

The difference is that with homes, the problem is lack of confidence in the market. With photos, however, the problem is more lack of knowledge. People just don't know that photos are licensable assets. Because there is no market-maker for photos in the general public, the general public doesn't participate in the economics of it. At least, not to their greater potential.

That's not to say that everyone is unaware of licensing, as evidenced by my business and website. People are made aware when they try to acquire an image from an informed source who knows that the asset has value. The fact that they are willing to buy is evidence enough that the market is viable. But the amount of "dead capital" in the form of illiquid photo assets is what's keeping the photo licensing industry from moving forward.

So, while the first problem to tackle is that of public awareness, we are still faced with the problem of sales inefficiency. Just because a buyer may now know that the photo is to be licensed and is a willing payor, it doesn't itself create efficiency. In fact, the buyer licensing directly from the seller (a "peer-to-peer" transaction) is the most inefficient of all. While one would assume that the lack of a middleman should create efficiency, the problem is that most people are not business savvy; neither the buyer nor seller do this very much, and hence, they either don't care, or price their products randomly or arbitrarily. Not to say that pricing is easy -- finding the right price points for licenses is hard for everyone. There is no pro out there today that can come up with a confident price quote for every photo usage he's presented with by a prospective client. I get email from pros all the time asking for advice on this subject. (I send them to this page.)

Imagine that if pricing is hard for pros, consumers must be entirely in the dark, as are the buyers! So, the economics of their exchange, whatever it is, will be very unlikely in realizing its potential value.

What's missing in the photography sector is an efficient sales channel like an auction-based model like EBay or the stock exchange. The photo industry needs market-makers.

To understand how this inefficient exchange can be turned around to an efficient one, consider trying to sell an old microwave oven you no longer need. Ten years ago, you'd have either thrown it away, given it away, or placed an ad in the local newspaper. Any of these choices would have resulted in an arbitrary valuation for the oven. Randomness would dictate whether you'd get more or less than its genuine worth; the mere inefficiency of the system meant that such things were grossly undervalued. People just didn't want to spend the time or money trying to optimize their oven's net worth.

Today, you'd just snap a few digital photos and put an ad up on EBay or craigslist. Regardless of the price you got, the market is efficient because such sites are well-known entry points for acquiring such things. Better still, the auction-style exchange means that the "best" price is obtained, even if it's not the one you were hoping for. The net result, however, is that the sheer efficiency of EBay and craigslist has infused more money into the economy by permitting the buying and selling of "stuff" that would otherwise not have a market at all (or, a poor one).

Similar economic observations have been made by economists who study the consumer's affect on other economic trends: trading stocks and bonds, auction websites, telephone calling rates, music, and publishing, to name a few. In each industry, the "traditional suppliers" for these commodities has been displaced by wider choices and less expensive options, largely because the consumer has gotten involved in one way or another, and their numbers are enormous. Everyone has seen per-unit prices drop in their respective industries, but companies that remained efficient have benefited from overall economic growth. Examples would be Ebay and securities trading websites. As the consumer started to trade stocks, commission rates for transaction dropped from $300 to $7. Many firms sprouted up, while the larger stalwarts suffered. Those who accepted and embraced the consumer ultimately did very well.

Industries that didn't adopt became inefficient and have since been harmed. Examples include the music industry (by resisting adopting of the internet in its early days, and trying to maintain sales of physical CDs through traditional retail stores), and the telephone companies (who tried to hold onto lucrative land-line fees rather than adopt VOIP telephony and other more efficient calling methods). In these industries, consumers choices moved in new directions. Successful industries (and companies within them) are those that moved with the consumer.

This model is precisely what is missing from the stock photo industry. Existing mechanisms for buying and selling photos are so inefficient, that prices are essentially random, therefore making the photos grossly undervalued. It's so bad that many people shoot their own photos, not necessarily because they want to, but because the "costs" (real or perceived) of acquiring images online (if such photos can even be found, let alone licensed) makes self-production a less-expensive option.

Here, the problem isn't dead capital (photos that can't sell due to consumer unawareness) so much as it is "dormant economic activity." That is, a willing buyer doesn't buy because he has neither the means nor the mechanisms to buy. He needs a mechanism to find the desired images faster and easier, and to license them as easily as purchasing a song from iTunes. Until then, this economic opportunity remains dormant, and the consumer self-produces the photos he needs.

Mining that dormant revenue requires understanding the psychology of the consumer. If that person starts doing general photo searches on the net, and within ten minutes starts thinking, "Aw, forget it; I'll just shoot it myself," the photo industry is inefficient. It's a "brake" working against the gas pedal.

Odd as it sounds, this inefficiency is costing the consumer money, too. The wasted time in fruitless internet searches, plus the having to self-produce a photo, both cost the consumer more than if he were able to easily find and acquire the desired image for a market-rate price.

The Future of the Stock Photography Universe

Can the photo industry evolve from the inefficient media and large-company focused niche market it is now, to a more streamlined consumer-oriented industry? As I'll address later, it's not a matter of technological barriers--that part's easy (and already underway). The challenge is effecting political change among industry leadership. Historical and cultural biases have prevented them from recognizing that economic truisms of an open-market system apply to the photo industry today, and they should shed the "protectionist" posturing of yesteryear.

Such change may or may not come about, leaving the future open to three potential outcomes:

1. Expansion model: They get it!
   The number of licensing agencies and other photo sources shed their inefficiencies and optimize pricing models that grease the wheels of financial growth, benefiting everyone in the supply chain.
   
   
2. Contraction model: They don' get it.
   Photographers and agencies don't change their business models, allowing the existing inefficiencies to force prices even lower still, eroding profitability, and ultimately collapsing the prospects for an economically viable licensing industry. Photos become penny commodities, further perpetuating informal peer-to-peer ad-hoc licensing. Most sales are done by consumers and hobbyists who don't depend on (or care about) minimal financial compensation. Specialized photography for news and advertising remains in the hands of a few select groups of photographers and agencies that have shielded themselves from the broader effects by the nature of their specialty niches.
   
   
3. Flat model: Some get it, but not enough.
   Higher demand is offset by market-correcting lower prices, allowing most companies to sustain only minimal life-supporting profitability. But, not enough players participate in the new model, causing a revolving door effect, where new companies enter and exit the industry, yielding no fundamental economic growth or contraction.

As will be addressed in the next section, it's impossible to predict with enough clarity which of these three outcomes will likely result. As more stock agencies find it difficult to compete, and the inefficiencies in the system prevent prices from rising, the sheer need to survive may eventually push analysts to look more closely at the consumer, thereby forcing the hand of industry leaders to change their outlook.

Another distinct possibility is that the industry is merely absorbed by other more successful industries that license creative content as a sub-component of much larger business objectives. In this case, it could be that enough business savvy consumers start their own organizations that react to economic realities more adeptly, which attract far more photographers than current organizations are able to do.

Market-Marker, Market-Maker, Make Me a Price!

If there is ever going to be evolution in the stock licensing industry, the first order of business is to shed the inefficiencies discussed here. And that can only happen when the system allows for uniform access to all buyers and sellers, and when the system is agnostic to who is buying or selling. This may seem obvious, but such a system is antithetical to the stock photo industry as we know it. There are currently stock agencies vying to be the central access point for licensing, and that model prevents industry-wide growth. If the market remained as small as it used to be prior to the internet, that would be fine. But, such a model can't possibly scale up to meet the needs of the global consumer population. Unless and until the industry recognizes the consumer's role, the systems they try to build will not work. And we're seeing it today in the form of poor price performance.

The easiest way to understand how an efficient system works is to think about the New York Stock Exchange: the exchange itself doesn't buy or sell securities; rather, it provides an open mechanism by which others trade. As such, everyone has incentive to be a part of it, because it's where the best opportunities are: buyers go because there's efficiency in pricing and safety in the process, and sellers go because that's where the buyers are. As more people join, the pricing mechanisms for the assets themselves become more efficient -- valuable products are priced higher, and less valuable ones are priced lower.

To those who think this is impossible for the photo industry, think about the history of online advertising. Prior to Google, online advertising was as chaotic and inefficient as the photo industry is today. Finding highly trafficked and particularly targeted sites was not only difficult, but they would change rapidly. It didn't make sense to invest dollars in an ad campaign for a website that may not remain well-indexed for the same keywords over time. In fact, most industry followers thought the internet would never be able to support a viable online advertising infrastructure -- neither buyers or publishers of ads were happy with results, and many predicted online ads would eventually just go away.

Google's novel approach was to use the same sort of auction-based system to redefine the advertising market. The "search" technology was the vehicle necessary to quantify the value of any given internet-based property; the business model underneath is to sell advertising based on the value of that real estate. Google also made a smart decision by not setting advertising rates, as was the custom back then; they merely provide a mechanism by which participants set market rates through auction. Different websites are valued differently based on their rankings for certain keywords, which can change a moment's notice. Rather than have advertisers pay to be on a particular page, they instead paid to be on whatever page was the most popular for a given keyword. As long as google's ranking is considered useful by both visitors and advertisers, market rates set by auction are deemed uniformly acceptable. And as long as the distribution of those advertising fees are considered equitable and competitive by the publishers who host the ads on their websites, the market is "efficient" and business is done.

By contrast, Yahoo's attempt at the same thing was inefficient, thereby less profitable. The lesson here is not just to create and participate in an efficient system, but to implement its various components properly.

How does this translate to stock photography? Can the same sort of model be replicated for photo licensing? It's not unrealistic, but it will require certain technological developments that, to date, no photo-centric company is willing to tackle. This is largely because the parameters that matter for photo licensing don't correlate directly to advertising, or to trading financial instruments like stocks. New parameters need to be established, and photo assets then need to be categorized automatically into those parameters. For example, "lifestyle", "sports", "travel", "artistic", "porn", "wildlife" and thousands of other top-level categories need to be devised.

I envision a sort of genome sequence tuned to photography attributes that can be applied to any photograph. Characteristics such as "black and white" and "empty space" and "vertical/horizontal" would be another set of parameters. And then there's a matter of a universal keyword architecture, which is another technology that doesn't have enough attention. (I've addressed that in the past, and will continue to do so in future articles.)

And then once these parameters are defined, an automated auction system can take them into account, and combine existing site ranking mechanisms to produce an infrastructure capable of supporting a market-maker system.

Will the photography world get around to these? Not unless anyone realizes the financial opportunity for it. But it is possible. After all, the fact that Google, being a heavily driven technology company, would build a business around advertising, a traditionally non-technical business (in fact, a culturally anti-tech industry), suggests that anything is possible.

The good news is that the need for an auction-based licensing system can be applied to other creative assets as well. There are already developments currently underway in some of the more basic levels. The first is a set of public registries that users can sign up for to store information about themselves, for example. The "iNames" project allows people to look up information about individuals, products or services, where you can make certain information about yourself public or private, depending on who's asking, and what's the use. Facebook and MySpace both employ similar-but-proprietary servers that allow developers to build applications build new businesses and websites that draw upon these information using data feeds.

In fact, the Orphan Works Act calls for the Copyright Office to create an openly accessible registry of registered works. Once the database is live, it's easy and quick to glue together a few simple protocols that exist today to create a mini stock-photo licensing system:

1. tineye.com, picscout.com, or xcavator.com can be fed a photo, either by upload or by reference from a URL.
2. The photo is then matched against images in the copyright database registry to determine who the owner is.
3. The owner's information is accessed through an iNames registry, where the user's preferences point to a license server for photo licensing.
4. The photo is then licensed through whatever agent is authorized to sell it to the buyer.
5. Payment is made and the user's commissions are wired to his account.

This all would take place as quickly as it currently takes to download a song from iTunes. If such a system were available, anyone and everyone would want to participate because it doesn't require any additional work. The only thing missing from this becoming a reality is the copyright database coming online. But that doesn't mean that other photo databases couldn't do the same sort of thing -- Flickr, for example.

Web 3.0: crowd-sourcing intelligence, not just content

In the above example, I assumed the person who wanted to license the photo already knew which one he wanted -- it was just a matter of licensing it properly. But a more challenging problem is finding the photo in the first place. This is where the Web 3.0 will be useful. To explain how that fits into this, I need to step back and review Web 2.0.

People associated the "Web 2.0" buzzword with "crowd-sourcing." That is, sites like Flickr, Facebook and MySpace are all social networks where people generate their own content and put them online. Revenue was generated because of the existence of this content; it attracts traffic, and traffic increases online advertising revenue.

What people aren't aware of, however, is that there is information being annotated to that content. Valuable information. People are doing things like rating songs, voting their tastes for things, and providing information on wiki websites. Currently, no one is leveraging that information for financial gain; they're just relying on its existence to attract visitors, which bolsters online ad pricing.

Web 3.0 is where that information's untapped value is released. Crowd-sourced content then becomes crowd-sourced intelligence. That is, information about information can be used to quantify value for that information to be monetized. For example, photos can be keyworded, classified, annotated, modified and otherwise "prepped" for a new form of monetization. As long as these user-driven behaviors are done within open-system protocols and development platforms -- and they will be, or people won't bother to use them -- then automated web robots can crawl these websites and begin to build hierarchies of this information that can be utilized by others in countless ways.

As for the photos in this system, they too can be found, filtered, and analyzed, which makes it perfect for a system that helps people find what they need and sell it to them. This then paves the way for market-makers to create an independent platform by which buyers and sellers of photo assets (or any other kind) can trade. By combining existing technological developments with search/query protocols, one can envision a search-ranking mechanism akin to google, but specifically engineered for licensed content (such as photos and video).

This may seem far-fetched, but there are billions of images online that have already been viewed, ranked, keyworded, and otherwise "prepped" for sale, yet are lying dormant because no one is laying the last mile of wire to connect it all up to a trading system.

Why and How Does the Pro Photographer Benefit?

Most pro photographers see the consumer as a threat, partly because they are large in numbers, but more because they are "cheap" in what they are willing to accept in pay. So, how and why would the pro benefit if there was an open system that embraced the consumer, rather than kept him out?

Simply put, the more level the playing field to everyone, the more likely it is that the better players will win. This is because like search engines that find the "best" matches for peoples' search queries, a future image-search-and-license environment will also feed photos that are considered "highest ranking" by data derived from millions of sources. In that environment, pros will invariably win over consumers.

By contrast, in today's environment, stock photo agencies either pick what a few individuals think are "the best results", or provide arbitrary search results. This is inefficient, wasting visitor's time, and benefiting no one -- especially the pro. Moreover, pricing is similarly arbitrary, which is also inefficient. In short, today's online stock industry does not provide a level playing field, meaning pros have an uphill battle to fight against the consumer, whose photos are "found" more often than pro's photos are. There are billions upon billions of them and no one is automating a ranking system, so the pro's photos lose due to overpopulation, chaos and randomness.

If an intelligent market-making ranking system were in place, pros are more likely to benefit not just because they are more likely to produce better content, but because they will go to extra efforts to include more useful/appropriate metadata and keyword info, and to position their images at properly targeted websites (whose ranking affects photo placement). Sure, consumers may do this, too, and some of those who do it well will be the "pros" of the next generation. Either way, buyers will invariably find and buy images produced by those who do better in this system, and pros are currently better equipped to get that running start.

Lastly, a market-maker model for selling images would expand the buyer base to include millions of more people than it does now, allowing pros to leverage the above benefits to an even greater degree. They would sell volumes more images not only to existing markets, but to new markets that never licensed photos before.

What should pro photographers do today?

The best thing for pros to do to prepare for the emerging landscape is to establish themselves using the same "search engine optimization" (SEO) techniques everyone else uses today. Create a domain name and populate the site with photos, and follow the well-accepted guidelines I discuss in an article I originally wrote back in 1999, here.

It is also important that photographers employ efficient workflow methods for how they manage their images and their metadata. I discuss this in the article, here.

Pro photographers' futures in stock photography will be highly dependent on how well they promote themselves today, not tomorrow. This is true, even if they join other stock agencies. Agencies don't promote photographers, photographers do. So photographers need to treat their photo businesses as if they weren't in a stock agency at all. (If the agency produces any revenue, think of it as a lucky bonus, not as a primary source of income.)

Summary

As photo suppliers, pro photographers are outnumbered by consumers by many orders of magnitude. As photo buyers, traditional media companies and others who buy stock photography are outnumbered by consumers, even though these sales are harder to see because they occur in such small per-unit sales. Either way you look at it, consumers are affecting everything about the photo business, especially at the pocketbook.

The best way for pros to strategize their future is to stop fighting the trends and to start adopting business practices that reflect modern economic principles. The first step in that direction is to always have the awareness that the consumer is there, both as a buyer and as a competitor.