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Today, Shutterfly filed to go public. Founded in 1999, the company is now a leader in Web-based publishing of digital photos for consumers (allowing such things as editing, sharing, and printing).
Shutterfly's revenue model is to sell high-quality prints. In fact, to ensure quality control, the company has its own manufacturing facility in Hayward, California.
Another key advantage of the Shutterfly model is that content costs are practically nothing (the company's users create the content by uploading pictures). Also, because people want to share photos with others, Shutterfly has a viral distribution model. In May, the site attracted 4.1 million unique visitors.
Up until now, online photo companies have been selling out to major companies, like Yahoo! (bought Flickr) and Google (bought Picasa). In other words, Shutterfly faces intense competition.
Yet, Shutterfly has been growing at a rapid clip. Revenues have surged from $31.3 million in 2003 to $83.9 million in 2005. Last year, the company's net income was $28 million.
There are powerful forces driving the growth in the online photo space: proliferation of digital cameras; penetration of high-speed connectivity; and the interest in personalized content and online communities.
I talked to Brendon Kensel, who is on the board of advisors of The Family Post, which is a leading Web-based publisher of family photos and videos. According to him: "The key to Shutterfly's the long term success will be to fully leverage their user base by offering a broader suite of products and services that generate re-occurring revenue. This is where Yahoo! and Google have a built-in advantage."
Expect the company to hit the market in a couple months. The underwriters include Goldman, Sachs & Co. JPMorgan. The proposed ticker symbol is SFLY.
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