Shutterfly 2009 Annual Report Download - page 7

Internet and digital photo-
based technology enables consumers to create an archive of memories that extends beyond photos to include
highly personalized, more engaging products and services that can be protected and preserved for future generations. We believe that the key
forces driving the expansion of the market for these products and services are:
Addressable Markets
Digital cameras, digital image processing and the Internet have dramatically changed the photo-
related services market, and have created
entirely new ways for consumers to capture, edit, enhance, organize, find, share, create, print and preserve images. In particular, the range and
quality of printed photos, photo-based products, photo-
based merchandise and ancillary products have expanded and improved significantly,
while associated production costs and the time required to create this output have dramatically decreased. Consequently, companies like
Shutterfly are now addressing a wide variety of consumer needs and multiple, large markets in ways not possible with earlier technology.
•
Proliferation of digital cameras and penetration of
high
-
speed connectivity.
The growing use of digital cameras, largely driven by
price decreases, has increased the demand for online photo-printing services. High-bandwidth, high-
speed Internet access has spurred
the integration of the Internet into daily life and provides consumers with improved performance and speed for sharing information,
especially large files sizes such as digital images. According to InfoTrends, in 2008, U.S. digital camera unit sales reached
approximately 37 million units, approximately 90 million U.S. households will have broadband by 2013, up from 64 million in 2008,
and the number of U.S. households that have both a digital camera and Internet access is expected to grow to more than 90 million
households by 2013.
•
Increasing convenience and quality of online photo
services.
Online photo services provide multiple advantages over at
-
home printing.
Although at-
home photo printing is instantaneous, it requires an investment in a printer, photo paper and ink, resulting in a much higher
cost per print. The quality rendered from at-home printers is usually inferior compared to commercially produced prints. In addition, at-
home printers are less capable of producing products that require binding and / or finishing, such as photo books, calendars and folded
greeting cards. In contrast, online photo services conveniently provide a wide variety of customized, high-quality photo-
based products
delivered directly to consumers
’
doorsteps.
• Growing consumer desire to find easy, convenient ways to generate personalized content.
Consumers are interested in creating highly
customized and personalized photo-
based products and merchandise to preserve their precious memories, express their creativity and
make gift giving more personal and thoughtful. Improvements in software and photo editing tools have enabled consumers to modify
their photos quickly and easily using a personal computer. Consumers are now able to create digital compilations of memories that were
previously only possible through a physical and more time
-
consuming process.
•
Participation in online communities.
Consumers have become increasingly comfortable using the Internet as a forum for sharing and
publishing information in open or permission-based networks. Many of the most popular online communities include user-
generated,
rich-
media content such as photos and videos to communicate more powerfully than the written word. Additionally, busy consumers
continue to leverage these online communities to keep in touch with distant friends and family, share event photos taken by multiple
cameras, in a single location, and even promote a business or hobby.
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