Digitalization has completely changed how we create and consume visual content. 

Since the rise of the internet in the late 20th century, photography, videography, and graphic design have all gone digital. What used to require professional equipment is now available to anyone with a smartphone.

This shift has opened up new opportunities for creativity and self-expression, leading to the growth of industries centered around stock images, video clips, templates, and other digital assets. 

Shutterstock (SSTK) has established itself as a leader in the stock image industry over the past two decades. 

Founded in 2003, the company has grown its content library to over 450 million images, with 200,000 more added every day. 

This vast collection of royalty-free assets has enabled Shutterstock to become a one-stop shop for the visual media needs of businesses, marketers, publishers, and creatives worldwide.

However, the stock image industry is evolving with new technologies like artificial intelligence and augmented/virtual reality. The market has concerns over whether services like Shutterstock can remain relevant with the new advancements.

Rather than seeing AI as a threat, Shutterstock has embraced these changes and incorporated them into its platform. 

The company partnered with OpenAI to integrate text-to-image generation into Shutterstock Editor. This allows customers to generate completely original images from text descriptions.

It has also added AI-powered editing tools that use generative adversarial networks (GANs) to refine images, applying changes like adjusting lighting or adding custom textures. 

Furthermore, with its massive image collection, Shutterstock possesses a key advantage for developing computer vision applications: Data. 

The company has tapped into this gold mine by launching services with AI, providing object detection, classification, and related image search tools via API.

As visual media becomes increasingly data-driven, Shutterstock is well-positioned as an early leader in amassing and annotating visual datasets. 

The company started to already benefit from these developments…

For Q2, it delivered a revenue of $220 million, representing 5.4% growth. While Content revenue declined 9% due to softness in new customer acquisition, Data, Distribution, and Services achieved a hypergrowth of 129%.

CEO Paul Hennessy noted resilient demand from large customers but are facing challenges winning new small-medium businesses. 

To address this, Shutterstock is simplifying products across brands like PremiumBeat and Pond5 to better meet customer needs. The recently completed Envato acquisition is also expected to fill a gap in unlimited subscription offerings.

Data continued surprising to the upside with large multi-year deals signed, including with Microsoft (MSFT). 

Additionally, Distribution saw GIPHY traffic up 25% annually with 65 paying customers versus just 5 in January. 

Furthermore, Services also grew by 50% including expanding 3D and virtual production work with Netflix (NFLX).

By embracing new technologies rather than fearing disruption, Shutterstock is proving its ability to innovate and sustain earnings through the industry transition.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

Today’s highlight, Shutterstock (SSTK) is one of the top stock picks from FA Alpha 50 this month. To see more stock picks like this, become an FA Alpha get access to FA Alpha 50.