Photo apps: negative returns or still developing?

In 2000, 100 million photos had been shared on social networks. By 2013, this number rose to 1.6 billion. Even more impressive, 10% of all the photos taken in history were snapped just last month, and a mind-boggling 600 million photos are shared daily.

As photo sharing apps grow at an astronomical rate they have created a platform for budding photographers to show off their talent without startup costs in order to build careers. As the old adage goes: "a picture speaks a thousand words," and today's consumers want picture sharing to be faster, easier and more accessible.

This is the backdrop in which the tiny Instagram app grew to an impressive 27 million users during its first year in the App Store. Snapchat, which combines images with messaging is fast-becoming everybody's darling because of its ability to share pictures instantly. Hedge fund Coatue Management, run by Phillipe and Thomas Laffont, injected $50m into a series-C round in Snapchat last month. The investment brought Snapchat's total financing to $123m and the service's value is now deemed to be worth up to $2bn (or $3bn to Facebook).

Berlin-based EyeEm, Instagram's European stylish cousin, picked up $6m in a funding round led by Wellington Partners and Passion Capital in July last year, which also included Earlybird Venture Capital. Wellington and Passion also co-led a seed funding round of less than £5m for EyeEm in August 2011. Earlybird has said all existing investors will re-up in the series-B round taking place in the first half of 2014.

EyeEm's founder, photographer Florian Meissner, is building a mobile photo marketplace for wannabe-photographers with his topic-focused photo app. The market function, which lets users make money from their snaps, counts Lufthansa, Redbull and Vice Magazine among its customers. "The number of EyeEm users grew from a few million in January to 10 million by December last year," says Meissner. Following the US, Brazil and Japan are its next target markets.

Novelty fading?
Narrative (previously Memeto), Urturn, Vine, Scoopshot, Rawporter and Frontback are just a few of the newer players in the gigantic and growing sea of social photo editing and sharing tools. But are photo apps still worth all the hype and investment or is there a risk of fatigue from saturation?

"There is no sign of a decline in the explosive photo app market," says Jason Whitmire, partner at Earlybird. "It's the best business model on the internet, and Instagram can never get the same lock-in of the market that YouTube has for video sharing," he says. According to Whitmire, consolidation will be around a critical mass of users and not based on acquisitions.

Another concern over app investments is their commercial viability. According to Gartner, less than 0.01% of consumer mobile apps will be financially successful by 2018. Around 90% of paid apps are downloaded less than 500 times per day and make less than $1,250 a day.

A month after Earlybird's investment, Swedish venture fund Industrifonden and Maxwell Ventures injected SEK 10m in Malmö-based mobile photo start-up Foap, which allows iPhone users to sell their photos by uploading them to Foap's online market, just like EyeEm.

As it's in the interest of all users to keep up the high quality of images, Foap uses an internal rating system. Malin Carlström, technology investment manager at Industrifonden, who led the investment in Foap, highlights the commercial opportunities ordinary users gain access to: "I think people will realise there is value in their own pictures. It's not okay to have free images anymore without any licensed user agreements. There is concrete value in amateur pictures that is worth tapping into." 

Carlström was attracted to the combination of a picture agency and a community that doesn't sell any information on its users, and believes the sector is very healthy. "The values in this sector right now are 10-40 times revenue in addition to having a great scale opportunity. Foap has been good at PR; it has been on both CNN and BBC after being featured by Tech Crunch," she says.

There is no other similar startup at the moment in Sweden since the niche is too small for competition, but Carlström says if large photo agencies release their own apps it could change the market.

Future development
As photo apps gain traction they increasingly become marketing platforms for companies, which in addition to user numbers justifies the large investments going into them. While the photo communities themselves become more sophisticated and niche, their target markets also have a lot of room for expansion. Asia, Africa and Latin America provide entirely new markets for the sector.

According to Earlybird's Whitmire the next trend will be functions centred around location and geographies. Efforts to concentrate on one ecosystem, like the Latin American app Mobli, which is focused on one mobile operator, is another emerging movement.

Technical innovation is fuelling development too. "Apps tied to physical products, Google Pro, Google Glass, sharing photo albums socially and wearable cameras are the next big trends," says Narrative CEO Martin Kallstrom.

As mobile photo sharing is evolving with new apps constantly popping up it looks like the trend is set to grow further down the social network road, in Europe and elsewhere. Says Whitmire: "This is the golden era of photography as it shifts to mobile. Stock photo companies with a critical mass of users will become the new Getty Images."

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