Photo sites bulk up amid surge in interest

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As the photo industry straddles the line between traditional and digital imaging, more than 100 photo sites are battling for dominance in the crowded category.

Online photo imaging was a $113 million industry in 1999, rising exponentially from $10 million the previous year, according to Lyra Research. The Newtonville, Mass., photo industry researcher predicts the sector will grow to $3.3 billion by 2002.

"We believe that the Internet will become even more ubiquitous," said Lyra analyst Chuck Davenport. "People enjoy digital images, whether they're printing them, sending them through e-mail or putting them on a Web page," he said.


Photo image giant Eastman Kodak Co. has labored to remake itself for the digital era. But despite all the resources Kodak brings, its Web site ( ranked only third in PC Data Online's photo category for January.

Kodak offers a series of services, including Picture CD, started last year; Kodak PhotoNet Online, launched two years ago; and You've Got Pictures, a more than year-old partnership with America Online.

Web ventures are aggressively expanding their online photo opps. Companies such as online photo community Zing Network and Club Photo offer free image storage and sharing, but charge for prints and other merchandise.

Zing, which launched last May, was the No. 1 photo category site with 1.2 million unique visitors in January, according to PC Data Online. Last week, it announced it had bought Mediabook--technology to allow Zing visitors to animate their online photo albums--from Macromedia; Zing now is the exclusive photo-hosting site for Macromedia's Shockwave Player site, a co-branding relationship similar to those Zing has with, and

Zing, whose offline agency Collaborate, San Francisco, created a San Francisco-only radio spot backing a Valentine's Day promotion, says co-branding is critical for dot-coms with limited marketing budgets. Even so, Zing hopes to move into TV advertising later this year.

"Co-branding is important," said Richard Roberts, VP-consumer marketing at Zing. "It's augmenting the brand to existing audiences."


But Zing, like competitors, says it must make it easier for photo film users to get their pictures online. There's a very good reason: Of the nearly 80 billion photos taken worldwide in 1999, only 6 billion were digital. Of that, 150 million images were uploaded onto the Internet last year, a number projected to hit 5.5 billion in 2002, according to Lyra. And in 2002, more than 70% of images uploaded to the Web still will come from film. So Zing said it wants to partner with a photo finisher.

That is precisely what Club Photo is doing with today's announcement that it is buying Austin, Texas-based photo finisher Signature Color. The merger will allow consumers to send in film for processing. They can view the images online for free.

"If photo sharing is going to become a major application, we have to enable the other users [who don't use digital cameras] to share," said Club Photo CEO Andrew Wei. Club Photo has done limited promotions to push the business.

Traditional companies, however, are the pioneers in the online photo category.

Seattle Film Works, which recently changed its name to Photo Works to reflect its mission as an "online image management" company, began digitizing customers' images on floppy disks in 1994, later moving to CDs. In 1995, it launched its Photo Mail service, allowing customers to download those images through their PCs; in April last year, it introduced Photo Works, through which consumers' mailed-in film is scanned and archived for free.


Photo Works, whose offline agency is Bozell, Seattle, earlier this month raised $15 million in venture capital from a group led by Orca Bay Partners. Photo Works, which has done limited print and radio ads so far, is testing new creative and considering TV advertising. Its Web site is a strong performer, ranking No. 4 in unique visitors in January, according to PC Data Online.

Photo Works has gone as far as offering Photo Works Uploader, free downloadable software so customers can upload images directly from their digital cameras via their PCs.

"We're providing a path [for consumers]," said Gary Tashjian, VP-marketing at Photo Works. "When they're ready to migrate to digital cameras, they can continue to do the same archiving [on the same site]."

Zing's intent was the same with its recent acquisition of software developer Foto Nation.

"The whole piece missing was how to enable consumers to share photos," said Club Photo's Mr. Wei. "Photo sharing will turn the model upside-down and enable users to take pictures and, with a few clicks of a mouse, share them with friends and family around the world."

Copyright February 2000, Crain Communications Inc.

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