For all the doom-and-gloom forecasts for traditional photography linked to the rise of digital photography, Shutterfly has figured out a strategy that plays in both worlds. It recently reported $641 million in sales for 2012 -- an increase of 35% over 2011 -- and is forecasting sales will rise as much as 17% in 2013. Quarterly sales have risen at least 20% every quarter since December 2009 -- annual sales five years ago were just $214 million.
Unlike Kodak and Fujifilm, both of whom sold their web photo-sharing businesses to Shutterfly, online revenue at the 13-year-old company is soaring. Shutterfly now leads the post-photo products and services category, with more than 50% market share.
BCC Research estimates the global "complementary products and accessories" segment of the $68 billion digital-photography industry rang up $5.7 billion in sales in 2011 and will increase to almost $7.9 billion by 2016.
But why is Shutterfly succeeding when the storied photography brand Kodak -- the brand that captured "the times of your life" -- is still trying to emerge from bankruptcy after a failed digital turnaround?
Youth is one reason. Shutterfly didn't have the history or the capital overhead and physical cost structure of Kodak. Yet, Shutterfly is no web newbie. It launched in 1999 and has weathered several bruising economic downturns since then.
What has made the difference for Shutterfly is a combination of acquisitions, innovation and integrated marketing. The company snapped up small innovators and big-brand competitors' businesses while it continued to push forward on new kinds of photo products and services, all the while integrating it under one marketing mission of "helping people share life's joy."
"We've gone from a single brand market leader to a family of brands," said John Boris, Shutterfly senior VP-chief marketing officer. "We have a large and amazing database we can cross pollinate."
The four main brands --Shutterfly, Tiny Prints, Wedding Paper Divas and Treat -- each have their own databases, he said, but can cross over and use their sibling brands as well. Marketing efforts also seek to move customers from one brand to another. For instance, a Wedding Paper Divas customer who bought save-the-date cards, wedding invitations and thank-you notes could be sent a series of triggered emails meant to drive her to Tiny Prints or the Shutterfly main brand for photo cards or children's photo albums, Mr. Boris said.
Shutterfly's acquisitions serve strategic needs. The $24 million purchase of Kodak's online business brought with it 75 million member accounts, which significantly beefed up Shutterfly's database. And the September acquisition of Penguin Digital added mobile to its portfolio -- a new Shutterfly iPhone app rolled out in December. Just last month, the company bought ThisLife, adding a cloud-based photo-and-video skill set to its mix, and industry insiders have pointed out that could make it competitive with industry leader Yahoo's Flickr.
"There is more and more emphasis on mobile," Mr. Boris said. "The average person looks at their phone more than 150 times a day, and there have been more pictures taken in the last three years than all the time before that, and it's mostly mobile."
Shutterfly marketing also includes traditional advertising elements, and 2012 marked the debut of its first TV spot. Created by Via Agency, Portland, Maine, the holiday spot ran nationally on cable TV. Studies conducted before and after showed a 6% increase in unaided awareness. The spot, "Cardworthy," emphasized Shutterfly's business underpinning of encouraging the publishing of digital images in the physical world, unlocking them from the unnoticed -- and unprofitable -- place of just sitting in the camera.
"We think TV is a rising tide that lifts all boats. It increased awareness, drove people to the website and made our paid-internet-marketing channels more effective," Mr. Boris said.
Of course, Shutterfly could have just as easily been another casualty of the digital-photo wars. In 2005, it was one of a handful of prominent players in online photofinishing. It dominated in the digital 4x6-picture-printing world. But then-brand-new CEO Jeffrey Housenbold realized that strategy was quickly becoming a commodity. Diversification was necessary to survive in the competitive digital-photography industry, he believed. So Shutterfly expanded its product lines even as it built its own back-end printing and manufacturing facilities.
NPD Group analyst Steve Baker said while Shutterfly has "been able to roll with the punches," to continue growing it will have to contend with a generation of young people who don't "even think about printing pictures."
"That said, while printing pictures is decreasing, taking pictures and sharing memories is growing," Mr. Baker added, pointing out the potential for companies that are innovative, fast on their feet and savvy marketers.
BCC analyst Jeremy Dueck said he's spoken with several film-based photographers who noticed a hesitance among some legacy film providers to accept digital as a viable photography tool. "It makes sense that they were simply behind the curve and gave up valuable brand recognition to these newer, smaller and social-media-savvy companies like Shutterfly," he said. "Shutterfly reached customers better."