ptn: Your company's "Shutterfly Soirees" seem like an intriguing way to get the so-called "soccer mom" comfortable with digital imaging. Can you briefly explain what they are and who came up with the concept?
Wood: The Shutterfly Soiree program is part of Shutterfly's long-term initiative to grow awareness of the benefits of digital photography and online photofinishing and demystify the technology behind the benefits. The Soirees are essentially an updated version of a Tupperware party for digital imaging (without the financial obligations)they are informal, fun parties that allow women to enjoy themselves with friends and learn about this technology.
Our communications team devised the concept because at Shutterfly, we witnessed a big change in our customer base from mostly male "early adopters" to a more "mass market" consumer, where more than 70% of our users are women. They recognized that women are traditionally the "family archivist" and would be the family member most likely to use Shutterfly. Market research and our own consumer surveys showed that women prefer to learn in groups, especially from their friends. Hence, the idea of the Shutterfly Soiree was born!
The way the program works specifically, is that a hostess will invite 10-12 of her friends over for the party and representatives from Shutterfly act as private "technology tutors." They provide a brief overview of digital photography, field questions about digital photography (including questions about whether you still need to buy film with a digital camera, is it true that you can delete a photo, etc.) and then walk women in small groups or one on one through Shutterfly and the parts of the service in which they are most interested (whether it is creating a card, changing a color photo into black and white or making a Snapbook). Part of the Soiree also includes some informal research. We ask attendees to fill out questionnaires that will help us respond to their particular needs.
I am really pleased with the success of our programit has been extremely effective at growing awareness of online photo services, demystifying digital photography and online photofinishing and acquiring new customers. Our communications team is examining some potential methods for broadening the program's reach in 2003.
A few magazines have commended Shutterfly for producing some of the better prints in the online photofinishing industry. First off, what percentage of the images processed by Shutterfly come from film and how many originate as digital images? Secondly, what type of processing equipment do you use to process and print the film and digital images you receive?
The vast majority of our images processed originate as digital images — only about 10% of the images we process come from film. This again is part of the challenge we face of raising awareness among traditional camera users as well as digital camera users.
As you know, we do all our processing in-house. We process our silver halide prints using Fujifilm Frontier 390 Digital Minilabs and Fujifilm Frontier 370 Digital Minilabs and print them on Fujifilm Crystal Archive Paper.
We also have a number of HP Indigo Press 3000s (formerly named the Indigo Ultrastream Press) that we use to create our photo greeting cards, note cards and custom wall calendars.
What really makes our quality superior and our costs lower is our proprietary in-house technologyincluding our VividPics automatic image correction technology that enhances each image based on its characteristics (brightness, tone). Our customers have the ability to switch VividPics on and off, giving them ultimate control over their images. Additionally, we have a color quality assurance process that ensures consistency between orders and across our Fuji and Indigo platforms.
ptn: How do you see the imaging industry, and particularly the online photofinishing market, evolving in the next five years?
Wood: The industry needs to stop worrying about the transition from film to digital (which is being driven by parochial interests) and focus more on the fact that customers will find a way to access real choice. The industry needs to stop trying to force-feed consumers digital replicas from the film world where there is no choice. Consumers increasingly understand and value the flexibility of choice and if the industry doesn't respond to the choices the digital world provides consumers, consumers will vote with their checkbooks and find a solution that offers the choice they demand.
Also, although it is not a popular view in the industry, I think customers are going to continue to print a significant percentage of the images they capture. At Shutterfly, we have seen steady growth in the number of prints per orderthe average for Q3 was 31 prints per order, well above the film world.
In terms of Shutterfly specifically, I expect that late 2003 or early 2004, we will look towards an IPOdependent on our ability to continue to meet our aggressive internal goals and subject of course to market conditions. I have no doubt about our ability to meet our goals but I'll refrain from making any predictions about the market. ptn