Shutterstock’s Stability is as Safe as its Content
New marketplaces that did not exist just a few years ago have been popping up rapidly. Digital content sales falls into this category, and includes players such as Shutterstock, 123RF, Fotolio (Adobe), iStock, Getty, Bigstock, and the list goes on. How sustainable are these businesses and what are the forces acting as headwinds and tailwinds?
It is clear that this industry has been growing like a weed, even though stocks like Shutterstock have pulled back quite drammatically from their highs. These companies are media companies, where individuals and professionals can get content legally for their own applications. Companies such as Shutterstock have a crowd sourced team of contributors, and they pay out a percentage of the royalties to these designers and photographers. In the long term, there will always be a need for this type of content, and thus the industry as a whole has some strong tailwinds behind it.
However, with the increase in popularity, everyone wants a piece of the action. There are more of these websites coming up, and contributors are looking for the best way to make money off of sales of their products. The barriers to entry are quite low, and as long as there is a paying audience, contributors will migrate towards the highest revenue sites to showcase their work and make a profit from it.
Therefore, the tailwind lies within the industry as it continues to grow at a rapid pace, but headwinds lie within each individual company, as there may be many winners, or many losers in the future. This is one reason why Shutterstock stock has fallen to the $36 range from the mod 50's. In its most recent quarter at the end of October 2017, revenue grew by 15% to $141 million which greatly beat the estimates, although EPS fell from the year ago quarter to $0.31 but still beat the analyst estimates of 27 cents. The analysts have been less bullish on these types of media companies as the dynamics of the photo storage and sales market has continued to mature.