Shutterfly 2007 Annual Report Download - page 15

Table of Contents
which different customer segments are identified and modified on a continuing basis for targeted marketing
communications.
By using this deep customer intelligence and ongoing analysis, we are able to offer customers a more
personalized website experience and to target them with specific website promotions, discounts, specialized
e-mail and direct mail offers. Our promotion engine generates special offers that are account specific and
applied automatically at checkout. This enables us to run multiple offers at any given time that are targeted to
specific customer profiles.
We are also able to dynamically assign visitors to test and control groups who are shown different versions
of our service. This testing enables us to continuously optimize products, pricing, promotions and user
interaction with our website. We are able to run multiple tests at once, which enables us to rapidly launch new
products and services and enhances our financial results.
Website system. Our website powers our service and e-commerce
functionality. We have designed our user
interface to be simple, uncluttered and inviting. There are only five navigational “tabs” that correspond to the
primary activities offered by the website — Add Pictures, View & Enhance, Share Online, Order Prints and
Shutterfly Store, which includes personalized product creation.
We have designed our website system to be highly available, secure and cost-effective. We can scale to
increasing numbers of customers by adding relatively inexpensive industry-standard computers and servers. We
have a strong commitment to our privacy policy, and we utilize technologies such as firewalls, encryption
technology for secure transmission of personal information between customers’ computers and our website
system and intrusion detection systems to ensure compliance with that policy.
Image archive. We store our customers’ images in our image archive. Once a customer uploads a photo to
our website, it is copied to multiple redundant systems, including an off-site copy. At present, our image storage
capacity is hundreds of terabytes. We continue to expand our storage capacity to meet increasing customer
demand. Our innovative storage architecture provides extremely low storage costs, facilitates the safe, secure
archiving of customers’ images and delivers the speed and performance required to enable customers to access,
enhance and edit their images in real-time.
When we store and archive a customer’s image, we do not alter the original image (for example, we do not
reduce the data file size), which preserves the quality and integrity of the image. This also lets customers
enhance the image using a duplicate, while giving them the ability to recall the original at any time.
Render farm. Once a customer orders a photo or any photo-based product or photo-
based merchandise, the
render farm performs fully automated image processing on the image prior to production. The customer’s
original uploaded image is retrieved from the image archive, and automatic algorithms enhance the color,
contrast and sharpness of the image. The render farm also performs customer-requested edits such as crop,
borders, customized back-printing and red-eye removal.
To ensure that output is of consistent quality, we apply our proprietary ColorSure technology during this
render stage. ColorSure creates an automated mapping of the image’s specific attributes to the printer’s specific
print calibrations and attributes, at which time the rendered image is scheduled for production. For example, this
allows a photo that is printed on a 4x6 print to look the same as a photo printed on an enlargement or in a photo
book, even if they are ordered at separate times.
Production system. We operate our own production facility in Hayward, California, which we believe is
one of the largest all-digital labs in the world. Our automated production system controls our bar code-driven
production processes, including order management and pick, pack and ship operations. Using complex
algorithms, the production system analyzes tens of thousands of orders daily and automates the workflow into
our high-volume silver halide photofinishing machines and our state-of-the-art digital offset presses.
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