Posts from March 2007

Thinking About Online Photo Services

I woke up this morning thinking about online photo services. Probably because of my friend David Kirkpatrick’s column this week on Photobucket. David points out how huge Photobucket has become by riding on the coattails of the social networking boom. I don’t use Photobucket but my girls do.

In our family, we use three online photo services, Photobucket (the girls), Flickr (me and Gotham Gal), and Shutterfly (Gotham Gal). The Gotham Gal used to use Shutterfly more, but she doesn’t use it as much these days. She mostly used it to get prints, but now she uses iPhoto for that.

The online photo business is big and getting bigger every day. Shutterfly, which is the only pure play public company (SFLY) did $66mm in revenue in Q4 2006 and almost $20mm in operating income. But the stock’s been flat all year at about $16/share which is a $380mm market cap. The problem is the analysts aren’t projecting much growth in Shutterfly’s business in the coming years.

Which brings me to the point of this post. About a year ago, my friend Helene asked me why I used Flickr. I told her that I thought it was the best online photo service. I could upload my photos, store them, share them, tag them, blog them, and see everyone else’s photos as well. And it was free to use for a basic account but that I had quickly upgraded to a Pro account. She was using Shutterfly and liked it. I told her that I felt Shutterfly was closed and not likely to  succeed long term with that model.

I may be wrong about that. Shutterfly might succeed long term with it’s business model, but it’s going to be surpassed (and has been surpassed when it comes to user base) by the open services.

Take a look at these worldwide numbers from comScore. I used Google search results plus my own knowledge of the market to put together this list. If I missed a popular online photo service, I apologize in advance.


There are two juggernauts in the online photo market right now; Photobucket and Flickr. They are blowing everyone else away. Webshots was once the leader in the free/open market has been in decline for the past year. Fotolog, which is largely an international phenomenon, is doing well too (again with a free/open model).

The closed/web 1.0 players which to my mind are Snapfish, Shutterfly, and Kodak (fka Ofoto) are flat or in decline. They may be sustainable and large businesses (just look at Shutterfly’s numbers), but they aren’t growing.

And it’s not just because the services are more expensive than the newcomers (although they are), it’s because they don’t take advantage of the web. They aren’t about sharing, self expression, linking, blogging, social networking, and everything else that the web has become today.

The Gotham Gal and I have this long running debate that will never end about digital photography. She is still all about the photo album and we have dozens of them. In my view, the photo album is now the web, and when we are old and gray (getting there), a simple google search (or some other better image search engine) will produce the images we want to look at. For now, we are hedging our bets. I suspect many people are doing that.

But back to the money part of this issue. Shutterfly is worth $380mm and hasn’t increased in value in the past year. Photobucket is talking about selling the company for between $300mm and $400mm with revenue projections of $32mm for all of 2007. So the market values Shutterfly at 3x revenues and Photobucket (potentially) at 10x revenues. What does that tell you?

It tells me that Yahoo! got one hell of a bargain when it bought Flickr.

#stocks#VC & Technology

The Industry Standard - Lessons Learned

One of Flatiron Partners’ more high profile failed investments was The Industry Standard, "the bible of web 1.0". I learned a bunch of lessons from that investment but the two that stick with me most are:

1) Unsustainable revenues will kill you if you build your costs to match them.

2) Don’t invest as a minority investor in a company controlled by a corporate entity.

The corporate entity in that deal was IDG, and John Battelle, who was the CEO of The Industry Standard, points to this bit of revisionist history on the part of Pat McGovern, founder and CEO of IDG:

Why did the Industry Standard die?

McGovern: In 1997, the magazine was launched as many big Internet
companies were launched, and investors needed a weekly publication
covering the industry. In its first year, ‘97, the magazine made $9
million in revenues, and in its second year it made $25 million. And
then at that point, there was $800 billion invested in Internet

But then the bubble burst. The magazine went from making $200
million in revenues in 1999 to making only $50 million in 2000.
Unfortunately the management had put the magazine on an IPO track. They bought very expensive CRM software,
and had $120 million in fixed costs per year. It was a hopeless
situation. The gap between costs and revenues was too large.

The magazine had made a volcanic rise and fall. We’d
never seen anything like that before or since. In 1999 the magazine set
a record for the number of ad pages, and the next year it set a record
for the largest drop in ad pages.

The paradox was that in 1999, we were approached by Time Warner and
Hearst, who wanted to buy the Standard for $400 million or $500
million. But [then-CEO] John Battelle had a plan to be making $1
billion a year by 2006, wanted to take the company public, and planned
to make a tender offer to buy Dow Jones. It was a plan for world
domination, and we should have taken the money from the magazine
publishers and run. Business 2.0 sold for $350 million right before the

I edited that a bit to take out the less relevant parts. Click on the link if you want to read the whole thing. What Pat says is largely true about the fundamentals of the business. Try as we might (and my partner Jerry Colonna who was on the board did try a rescue financing), there really was no way to save The Industry Standard. That big of a whipsaw will kill most companies.

But that part about turning down the $400 to $500mm offer is pure revisionist history on Pat’s part. I recall very clearly Jerry coming back from a board meeting and telling us that IDG was blocking the sale, that they didn’t want the magazine to end up in a competitor’s hands. That was very frustrating to the investors because we would have made a significant gain in a very short period of time. But when you invest as a minority in a company controlled by a corporate entity, you have no control over such things.

Lesson learned. Never doing that again.

#VC & Technology

We Were Dead .....

The new Modest Mouse is out and it’s number one on iTunes and number twelve on Amazon. Not bad for an indie rock band.

I’ve had the pleasure of listening to this record for the past six weeks and I love it. Issac Brock speaks to me.  He isn’t the greatest singer. He isn’t the greatest songwriter. But ever since the Gotham Gal and I went to see Modest Mouse play at Hammerstein several years ago, I have had this thing for Modest Mouse’s music. I love the way Isaac spits out the vocals like a machine gun.

The early reviews say there isn’t a single like Float On on this record. Surely Dashboard isn’t in that category, but Missed The Boat and People As Places sure are.

People As Places As People – Modest Mouse – We Were Dead Before The Ship Even Sank

#My Music

Tree Skiing

  Jessica Cruises The Aspens 
  Originally uploaded by fredwilson.

My friend Pete taught me to ski the trees when I was in college. Up to that point, I had always skied the runs on the trail map. We had one particularly amazing day in the Aspens at Snowbird that I will always remember.

Anyway, as my skiing has become more family oriented, I’ve tended to stick to the trails, but as my kids have gotten better, I’ve taken them into the trees and they’ve gotten bitten with the tree skiing bug.

Today we woke up to 9 inches of fresh snow which was pretty quickly skied off. But not in the trees. So we spent most of the day in the trees and had a blast. Nobody got hurt although Josh did do a 360 flip when his snowboard hit a tree stump that was not visible under the snow. Too bad I didn’t videotape that one.


The National (continued)

Blogging is at best a discussion and my post yesterday about The National prompted this comment from Cameron:

Don’t know if you all have seen these videos which showcase tracks from Boxer.


"Start a War" is amazing. 
The blog in general is great. 

Posted by: Cameron Koczon

So of course I clicked on that link and found two videos taken of The National playing a couple songs one night in Southern France. This one shows them playing "Start A War" after a dinner outside under a tree. Here’s the description:

It was late, nearing the end of a typically southern diner beneath a
great tree. It was obvious that everyone there had to participate. I
think it was Bryan who had the idea to have everyone play in rhythm
with whatever he/she had in hand-glasses, plates, bottles, trunks of
wood. Hands. This unfolded gently, moving a little through the euphoric
haze of alcohol, a little through the heat of Spain close by.

How awesome is that? Now I have a small problem. As I mentioned in my previous post about The National, they are playing four nights at The Bowery in late May. The only night I am in town is May 31st and that show is sold out. Couldn’t find any tickets on Craigslist or Stubhub. I need two, one for me and one for the Gotham Gal. Let me know if you have any ideas.

#My Music

Now This Is A DoTube is a new show on VH1 that features short clips that are voted on by the audience.

Of course, you don’t have to wait for the show to watch the videos, you can watch them, comment on them, and vote on them (when voting is open), on the web.

You can even embed the videos on your blog, like this one called Homeless James Bond.

I wish they didn’t close the voting. I’d like to be able to vote whenever I watch as show. Other than that, I like the feel of this service. You can have a profile, create a channel with your favorite videos in it, etc, etc. They’ve taken their lead from YouTube and that is smart. They seem to be using the Revver player which I like and the embed functionality works like a charm.

VH1 produces some of the shows and users upload the rest. A great way to marry professional and user content. That said, the VH1 produced shows have way more views than the user content so far. It will be interesting to watch how this develops.

My friends Michael Hirschorn and Fred Graver had a hand in making this show so maybe I am biased, but to me this is the way web video should be done.

And check out Who Farted for an example of how product placement might work in this model.

#VC & Technology

More DoTube

I got some comments on my last two posts that suggested three more web video services to check out,, SuperDeluxe, and BravoTV. I’ll check out all of them and let you know what I think.

This morning I went to Yuck. If I wanted that experience, I’d watch TV. Sure it’s impressive that you can watch full episodes of Lost and Grey’s Anatomy on the web. My daughters love that.

But you cannot DO anything on but watch and email a friend. And the pre-rolls are grating. It’s way too commercial. It’s not web native at all.

Maybe this will be a big hit. Maybe it already is. But it fails to DoTube test. On to the next one.

#VC & Technology

Forever Stamp

One of my favorite posts I ever did was My Uncle Tom, a post I wrote about my uncle Tom Engeman three years ago. Tom’s an artist and his particular canvas is US Postal Service stamps. He actually has done way more than that, but it’s his stamps that most people know him for.

My mom sent me his latest design, called Forever, which will be available for sale next week. Check it out.


#Random Posts

The National

  The National at Maxwell’s 
  Originally uploaded by Rock and Racehorses.

One of the best new bands working is The National, from Brooklyn, NY (home of so many great bands these days).

Here’s the single from their new record, Boxer, which is due out soon.

Fake Empire – The National – Boxer

In case you want to experience more of this music live and in person, they are playing four shows at Bowery Ballroom from May 28th to May 31st.

I hope to go to one of them.

#My Music