« Web 2.0: Yahoo!360 vs. Imeem | Back to Home | Web 2.0: Bottom-up and Self-Organizing »

April 10, 2005  The Fragmented Consumer Photography Space

Original Post: 10 April 2005
Update: 15 April 2005

I came across the new website for Layers Magazine recently. It's focused on tips and tricks for Adobe's professional products and features an overview of Vanishing Point that's worth checking out.

What does this have to do with fragmentation in the photography space? The world of magazines for design and technology is highly fragmented. There is no de facto standard (at least none that I've been informed of). In fact, when people ask me to recommend design magazines, no single magazine comes to mind as the "right" place to start. At this point the magazines I subscribe to are more related to world events and business than they are to design.

Now back to consumer photography software... Robert Scoble kicked off a debate about whether or not the HeyPix acquisition by CNET this last week was more notable than the acquisition of Flickr by Yahoo!. CNET currently owns Webshots, a photo sharing web service, which has shifted the debate to Webshots vs. Flickr.

Some disagree with Scoble's analysis, while it has also been pointed out that Webshots has been around much longer, and has a much larger user-base.

I've spent some time working in this space. Which do I prefer?

I don't use either. The real question in my mind is not which is better, but if any can be so much better than any other that it becomes a serious player, dominating the market. The consumer photography space in the United States is so fragmented at this point that I would argue that it is actually impossible to achieve a dominant position.

What do I mean by dominant position? If I were to ask you who has the dominant position in desktop operating systems, you could tell me the answer. Or if I were to ask you about online auctions, or a way to e-mail someone money, or the place to buy a book on the Internet... these industries had a company come in early and dominate from the start, preventing fragmentation. That never happened in the United States in the consumer photo space (I mention the US specifically because it did in Japan).

What does this mean for the entrepreneur looking to build a business in the consumer photography software space? Good news and bad news.

First the bad news: You will not build a monopoly here. In fiscal terms that means that if you do build a business that you can monetize either through channel distribution or through a typical subscription/advertising model, you cannot expect to have the kind of market capitalization that PayPal, Amazon, or E-Bay were able to achieve. (I also believe that had Google been started a couple years earlier I could say the same for it, with respect to Internet search... but that's a debate for another time.)

So what's the good news? Well, if you're not looking to start a company with a market capitalization of $5B, $10B, or $50B, then you may not be disappointed. The fragmentation has lead to an M&A flood, with anyone and everyone having a shot at getting snatched up. Because of the fragmentation in the space, no company feels locked out from having a stake. Everyone from imaging giants like Kodak and HP to companies with no direct business in imaging like CNET are looking to buy, not build, software to help them out.

Let's look at some recent activity (the numbers below are estimates):

The small user-bases of these companies is what I was referring to when I talked about the fragmentation of the market. The amount of money is also a direct result. Are all well under $99M, and significantly less than the amount paid for, say, MySimon, or even offered for Pointcast, by at least one order of magnitude if not two or three.

Of course, as with the HeyPix acquisition, if two guys can build a .Net app and sell it to CNET after four months, maybe we all should take this summer off, make a photo website, and laugh all the way to the bank.


I was talking to Ryan Blitstein, journalist at Red Herring, about this topic and he got me a copy of an article he wrote last year about it. (Sorry, this one didn't make it up on the web, so I don't have a link.) The line that I found most important was this: "More than a hundred companies have tried to monetize the online process of sharing photos with friends and family, but only a few outlasted the dotcom shakeout that swallowed their competitors."

In less than two years, Zing had burned through most of the $14M investment from Kleiner Perkins, with little to show.

I guess that's one thing to remember before we rush out to build the next Electric Shoebox, Picaboo or Qurio.

Posted by johnnie at April 10, 2005 10:37 PM


Post a Comment

Remember Me?

Type the word 'Manzari' in to the box below:
(This is to limit spam)

the 9rules Network logo