Shutterfly 2010 Annual Report Download - page 8

We are also able to dynamically assign visitors to test and control groups who are shown different versions of our service. This form
of A-B testing enables us to continuously optimize products, pricing, promotions and user interaction with our website.
Website system. 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.
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. We continue to expand our storage capacity to meet increasing customer
demand. Our innovative storage architecture provides 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.
Render farm. Once a customer orders a photo or any photo-based product or photo-
based merchandise, our render farm technology
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, prior to
production. For example, this technology allows 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 facilities in Charlotte, North Carolina and Phoenix, Arizona. Our new
manufacturing and production facility in Phoenix, Arizona began operations in April 2009, and replaced our Hayward, California facility,
which ceased operations in January 2009. Our automated production system controls our production processes, including order
management and pick, pack and ship operations. Using proprietary 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 presses.
Competition
The market for digital photography products and services is large, evolving and intensely competitive, and we expect competition to
increase in the future. We face intense competition from a wide range of companies, including the following:
●
online digital photography services companies such as Kodak EasyShare Gallery (formerly known as Ofoto), Snapfish, which is a
service of Hewlett
-
Packard, American Greetings
’
Photoworks and Webshots brands, Vista Print, and others;
●
“
Big Box
”
retailers such as Wal
-
Mart, Costco and others that are seeking to offer low cost digital photography products and services.
These competitors provide in-store fulfillment and self-
service kiosks for printing, and may, among other strategies, offer their
customers heavily discounted in
-
store products and services that compete directly with our offerings;
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