Tuesday, February 20, 2007

Follow-Up on Commercial Communities in Photos

Following up on an earlier post that I discussed here, Dan Heller has some further thoughts on the possible evolution of photo "community" sites, such as flickr, to something that's more suited to selling photos. The whole post is well worth reading but I wanted to highlight a couple of points that I think are particularly worth pondering.

The first is that the technical barriers to entry are not that great. That's not to say that there aren't other barriers to entry. In particular, there's a very real difficulty of creating community critical mass. (Metcalfe's Law in action.) However, to the degree that there is a "correct" approach to blending community and commerce, the point that someone will hit on it seems very credible.
So, what is that "investment?" Oddly, not much. To get a sense of this, one of the start-up companies that emailed me is a two-person team, only one of which is a programmer (whose 18 and never had a real job). You'd never know it by their site, as it looks and acts surprisingly professional, looking as though it were managed by a sizable team. Of course, great credit goes to the duo, but the real underlying "magic" is simply the ever-growing development--and use--of AJAX, the basic underpinnings of what is now more broadly known as "Web 2.0" technologies. (Flickr is what is it because they were early adopters of AJAX.) In other words, creating the technology behind what would become a social-networking photo-sharing photo licensing site is not hard. This means that the technical "barrier to entry" is not technology. It's really about three other things. First, one has to have the vision that this is the future. Second, the ability to attract a critical mass of users and create a living, breathing social network that people talk about. And third, to know and understand the economics of selling a commodity whose value in the individual units, not as a generic "class" of widget. Hint: an auction-based system where buyer and product are combined to establish viable price points.
The second point that I found particularly interesting is Dan's discussion of an auction model for pricing. Supply-demand pricing is a particularly interesting notion in a case like this where many of the content creators are amateurs who 1.) Don't really have a lot of experience in setting prices and 2.) Would, in many cases, be more than happy to take whatever price they can get for what is essentially a zero-cost product--assuming that it is photography that they would have created anyway. No-reserve auctions aren't perfect pricing mechanisms but one need only look to eBay to see wrinkles such as "Buy It Now" and reserve prices that could be optionally layered atop a basic auction mechanism.
The auctioning system in online advertising is a model to follow, and I would certainly expect eyes to be looking in that direction. It took the online ad auction system a long time to get to this point, and I would expect nothing less here. Best yet, it is a much more efficient system than the $1/image microstock model.
I continue to think, as I wrote earlier, that the surety offered by a more traditional microstock site, such as iStockPhoto, will continue to appeal for certain types of applications where guarantees around quality or legal concerns may trump variety and lowest price (e.g. a lot of the pics in corporate presentations for example). However, I do tend to agree that the "world's biggest flea market" (as eBay is sometimes called) model has a place as well.

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