Shutterfly 2012 Annual Report Download - page 7

Download and view the complete annual report

Please find page 7 of the 2012 Shutterfly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

experiencing a slow economic recovery from a deep recession and concerns about that recovery could
further impact consumer sentiment and consumer discretionary spending. We closely monitor these
economic measures as their trends are indicators of the health of the overall economy and are some of the
key external factors that impact our business.
Business and Marketing Strategy
We drive business and marketing strategies within two key categories: Consumer and Enterprise. To
support our business strategies within these categories, we use a variety of integrated marketing programs,
including advertising, direct marketing technologies, and strategic alliances. These methods include direct
marketing over the Internet, e-mail marketing to prospects and existing customers, search engine
marketing, strategic marketing relationships, and traditional direct marketing mailings such as postcards
and seasonal catalogs and more recently with a national cable TV campaign during the holiday season. In
addition, because many of our products are either shared over the Internet or given as gifts, the
appearance of our brands on the products and packaging provides ongoing viral advertising. We place
targeted advertisements on websites and in publications, contract for targeted e-mail marketing services
and contract for advertising placement on leading search engines.
In addition, to support our Enterprise category, we have hired a small sales force to engage with
marketing fulfillment organizations and advertisers for Enterprise services.
The following paragraphs summarize our business strategies within these two categories:
Consumer
Our Consumer revenues include sales from all of our brands and are derived from the sale of photo-
based products, such as photo books, stationery and greeting cards, other photo-based merchandise, photo
prints, and the related shipping revenues. Included in our photo-based merchandise are items such as
mugs, mouse pads, desktop plaques and puzzles. Photo prints consist of wallet, 4x6, 5x7, 8x10, and large
format sizes. In addition, Consumer revenues also includes revenues from advertising and sponsorship
activities. We also provide website services which include our share platform called Share Sites. Consumer
revenues as a percentage of total net revenues were 96% in 2012, 97% in 2011 and 98% in 2010. Within
this category, we seek to drive the following strategies:
•Continue to grow and optimize our core brands.
We have a primary strategy to grow our core Shutterfly and Tiny Prints brands by
acquiring new customers, expanding the lifetime value of our existing customers, and
improving conversion rates. In 2012, we acquired over five billion of Kodak Gallery
customer photos and migrated those customers onto the Shutterfly platform. Also in
2012, we offered SeeHere.com customers an opportunity to transfer photos from their
SeeHere.com accounts to our Shutterfly platform. Our Share Sites platform is also a
significant source of our new customer registrations.
We intend to increase repeat orders per customer by expanding our products and services,
tailoring our offerings to encourage additional purchases for different holidays and life
events and increasing our cross-selling and up-selling activities. In 2012, we added more
styles and introduced premium content across our brands. We also introduced new
products in 2012, such as a 6x8 sized flat stationery card and iPhone cases, which add to
our existing variety of photo-based merchandise. We have specifically focused on features
5