Snapfish

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Snapfish

731 Market Street, Suite 500
San Francisco, California 94103
U.S.A.
Telephone: (415) 820-3888
Fax: (415) 820-0570
Web site: http://www.snapfish.com

Division of Hewlett-Packard Company
Incorporated: 2000 as Snapfish.com Corporation
Employees: 80
Sales: $100 million (2005 est.)
NAIC: 541511 Custom Computer Programming Services

Snapfish is a leading online photography service, enabling its members to print, store, and share their photographs. The company has at least 26 million members and one billion photos stored online. Snapfish charges $2.99 to develop a roll of film and offers professionally developed digital camera prints for as low as 10 cents per print. The company offers free online photo sharing, unlimited online photo storage, and wireless imaging services. Snapfish also offers more than 80 personalized photo products, such as coffee mugs, mouse pads, calendars, and less conventional items such as boxer shorts, dog leashes, and teddy bears. The company operates internationally through a U.K.-based operation.

ORIGINS

Like a military operation, Snapfish began operating veiled in secrecy, known only by a code name. It was an odd start for a company whose business would become largely dependent on the concept of sharing, but the first reports of Snapfish's formation were shrouded in mystery. The company's founders claimed to be in "stealth mode" in a CNET News.com article posted on November 8, 1999, referring to their start-up venture by the name "Project Skytalk," a "revolutionary new commerce and community online service" that the executives claimed would "change the way people communicate and turn an existing analog industry upside down and into the digital era." The founders included two executives from Excite@Home, Raj Kapoor and Suneet Wadhwa, and a former product line manager at Cisco Systems, Inc., Shripati Acharya. Although the founders withheld any further specifics about their venture, other than referring to it as a "pre-IPO startup," they each took specific job titles at the fledgling concern. Kapoor assumed the responsibilities of chief executive officer, Wadhwa became vice-president of business development, and Acharya became vice-president of product marketing.

Roughly a month after the first news of Project Skytalk was released, further details about the San Francisco-based firm were revealed, including the most important piece of information: which business the codenamed start-up was entering. In a December 3, 1999 article posted on CNET News.com, Project Skytalk announced that it was receiving $7.5 million in a first round of funding from two venture capital firms, Mayfield Fund and @Ventures. Brad Garlinghouse, a general partner with @Ventures, explained Project Skytalk's mission, stating, "The company is focused on creating a revolution in the way we think about photography. We're going to turn a whole industry on its head," he continued. "It's not going to be a niche, but the whole shooting match."

The founders, who soon settled on the name Snapfish.com Corporation, intended to lead the expected mass migration to digital photography. They planned to harness the capabilities of the Internet to revolutionize the consumer photography market, a vast market with estimated annual sales of $80 billion worldwide and $15 billion in the United States. Although the executives were not the only ones pursuing an online photography strategy—a handful of companies such as Shutterfly, oPhoto.com, and PhotoLoft.com were in existence—the market was largely untapped. An estimated 95 percent of consumers used traditional (analog) film-based cameras when Snapfish was formed, but the use of digital cameras was expected to proliferate. "Digital cameras are flying," an industry observer noted in a December 14, 1999 interview with Forbes.com. "Electronics stores can't stock enough of them." Snapfish also intended to court users of analog cameras with its web-based service. The company formed a partnership with District Photo, Inc., touted as the largest U.S., mail-order photofinishing laboratory, to provide customers with developing, printing, digitizing, and online storage and sharing of pictures of both digital and traditional 35mm film.

Snapfish's service launched in April 2000, entering a market that was expected to reach $1.4 billion by 2003. The company's service was promoted through a national print campaign built around the slogan: "You Paid for the Vacation; Let Us Pay for the Prints." Welcomed financial support arrived not long after the debut of the company's film developing, storage, and photo sharing service, as Eastman-Kodak Co., the preeminent photography company, acquired a stake in Snapfish for an undisclosed sum, seeking to expand its digital imaging business. The investment by Eastman-Kodak roughly coincided with a second round of funding led by a major Internet investor, Trans Cosmos Inc., that gave Snapfish more than $30 million to expand its operations.

Snapfish achieved substantial progress during its first years in business, attracting legions of customers, forging partnerships with established commercial entities, and drawing praise for the design and execution of its web-based service. PC Data Online, an independent Internet research firm, ranked Snapfish as the number one online photo service in June 2000, only two months after the company's service debuted. The ranking, based on one week of Internet traffic measured by PC Data, was achieved not only by the success of Snapfish's print advertising, but also from the company's efforts to broker partnership agreements. Throughout Snapfish's development, partnerships played a vital role in building its base of registered users. In May 2000, the company signed a deal with uBid.com, an online auction web site, to develop a co-branded web site in which uBid.com-referred customers could view their online photo albums. One day after consummating its deal with uBid.com, Snapfish reached an agreement with BellSouth to offer BellSouth customers Snapfish's service in conjunction with BellSouth's Internet service package, a deal that exposed Snapfish to more than 14 million potential customers. In September 2000, another pivotal deal was signed, guaranteeing that Snapfish's service was available to new owners of Compaq Computer Corp.'s Presario personal computer. As the company strove to make its industry-leading position more than a one-week stay, strategic partnerships would assist its rise to a great extent, making the Snapfish brand a recognized name for millions of potential customers.

COMPANY PERSPECTIVES

Snapfish is a leading online photo service with more than 26 million members and one billion unique photos stored online. We enable our members to share, print and store their most important photo memories at the lowest prices—online or off.

TWO MILLION REGISTERED
USERS BY 2001

Snapfish's growth surged forward during the first half of the decade, despite the collapse of the Internet sector. The company celebrated impressive milestones in its development and broadened the scope of its operations. In February 2001, the company became the first web-based photography service firm to launch a line of single-use cameras for sale in retail outlets. The cameras, developed through a partnership with Private Label Programs, Inc., a manufacturer based in Sandy Hook, Connecticut, offered another way to attract customers. The purchase price of the cameras included free developing, a free full set of prints on Kodak paper, and free online picture sharing. By October 2001, the company had established a promotional presence on more than 500 web sites, which, in conjunction with its numerous business development partnerships, fueled its growth, enabling it to register its two millionth user. Snapfish's swelling membership base made it the leader in the online photography arena, prompting District Photo to elevate the nature of its relationship with Snapfish. The Beltsville, Maryland-based company acquired Snapfish at the end of October, but the deal resulted in few changes at Snapfish's San Francisco headquarters. Snapfish joined District Photo as an independent business unit, retaining its brand and management team. In an October 30, 2001 press release, Kapoor, who continued to serve as Snapfish's president, commented on the merger with District Photo, saying, "We couldn't be more pleased with the acquisition.… Since day one," he continued, "the Snapfish strategy has been to partner with the leaders in the photo industry to deliver the best combination of online photo services with traditional processing and printing. This combination is a natural evolution that will accelerate our path to profitability. As a strategic move, it will allow us to aggressively grow both our digital and film businesses, while also expanding globally."

Under Direct Photo's ownership, Snapfish pressed ahead with its development, helping to promote the use of online photography services as it promoted itself. The use of digital cameras was increasing as expected, but consumers were not printing their digital photos at a commensurate rate, robbing Snapfish and all other entities involved in the online, digital imaging business of their primary source of revenue. In 2001, the number of images taken with a digital camera increased by an estimated 30 percent, but less than 20 percent of the images taken were printed. Snapfish responded in May 2002 by cutting its prices by as much as 50 percent to encourage digital-camera owners to print their images. Instead of 59 cents per print, the company began charging 45 cents per print and as low as 29 cents per print for bulk orders. The cost of shipping and handling was reduced as well, cut from $1.49 to 99 cents.

As Snapfish progressed toward its fifth anniversary, the company expanded its operations through strategic partnerships and by delving into new business areas. In August 2004, the company launched an online store featuring a broad assortment of merchandise that customers could personalize with their photos, everything from coffee mugs, T-shirts, and posters to baby bibs, neckties, and pet food bowls. The debut of the company's online store was followed by the opening of a bricks-and-mortar store. At the end of the month, Snapfish, working in cooperation with District Photo, opened a concept store in Alexandria, Virginia, that gave its online customers the option of picking up their prints at a retail location. Before the end of the year, the company celebrated eclipsing the ten million mark in its membership base by expanding overseas. In November 2004, Snapfish established operations in the United Kingdom and launched www.snapfish.co.uk to serve British and other European customers, enabling it to serve overseas customers in a timelier fashion.

By the end of 2004, Snapfish had established itself as a formidable force in the online photography market, defining success in the industry and proving to be the type of competitor worthy of copy. In 2005, an eventful year for the company, the business development partnerships it forged provided valuable exposure to its services, beginning with the January 2005 alliance with Circuit City Stores. Under the terms of the agreement, the massive retail chain agreed to offer Snapfish's services on its web site, giving Snapfish the opportunity to address potential customers in 160 markets, but the year's most notable event involved a strategic partnership of a different category. Online photography services had become, thanks in large part to Snapfish, a powerful new business, forcing the giants of the photography business to take note and respond. Snapfish, a jewel in the burgeoning market, had become an asset the industry titans needed to protect and to expand their business. In 2005, one such giant assessed the worth and potential of Snapfish and made its move, ushering in a new era for executives at the San Francisco offices of the leader in online photography services.

KEY DATES

1999:: Snapfish is formed.
2000:: Snapfish's service is launched in April.
2001:: The company is acquired by District Photo, Inc.
2004:: Snapfish opens a retail store in Alexandria, Virginia.
2005:: Snapfish is acquired by Hewlett-Packard Co.

ACQUISITION BY HEWLETT-PACKARD CO. IN 2005

Near Snapfish's headquarters, a $90 billion-in-sales company eyed the online photography market with consternation. Palo Alto, California-based Hewlett-Packard Company had embraced digital photography by marketing numerous color printers that consumers could use to print their digital photos. The foray gave the company its most reliable supply of profit and revenue, but the money flowed in from ink cartridge sales, not from the sale of printers. "Selling printers," an industry analyst noted in the April 1, 2005 issue of Investor's Business Daily, "is like selling men's shaving gear: You give away the razor and sell the blades. Hewlett-Packard can sell a low-cost printer only if people are buying the high-cost ink cartridges." Consequently, the online photography market threatened Hewlett-Packard's all-important digital imaging business, particularly as the industry began to consolidate. "It's a small industry," Shutterfly's chief executive officer said in the same issue of Investor's Business Daily. "Everyone's talking to everyone." Eastman-Kodak, an early financial backer of Snapfish, made its move in 2001, acquiring Ofoto and renaming it Kodak EasyShare Gallery in 2005. In March 2005, Yahoo! Inc. reached an agreement to acquire Ludicorp Research & Development Ltd., the owner of the popular Flickr photo-sharing web site. Within 72 hours of Yahoo!'s announcement, Hewlett-Packard made its move, agreeing to purchase Snapfish for an undisclosed sum. At the time of the announcement, Snapfish boasted 13 million registered users, adding more than 500,000 new members each month.

In the wake of its acquisition by Hewlett-Packard, Snapfish retained its brand identity and remained in its San Francisco offices. In August 2005, the company signed an agreement with the largest drugstore chain in the United States, Walgreen Co., to allow Snapfish users to pick up their prints at any Walgreen's store within an hour after they were ordered. The service, initially available in New York City, Boston, and San Francisco, was made available at more than 4,000 locations before the end of the year. In January 2006, Snapfish became the first major online photo service company to offer its members the ability to view, share, and store their digital videos online, a service that accepted videos captured by digital cameras and mobile telephones. In the years ahead, backed by the vast financial resources of Hewlett-Packard, Snapfish figured to play a prominent role in its industry, increasing the future influence and market penetration of online imaging services.

Jeffrey L. Covell