What’s the one thing that all of today’s popular media applications have in common?
They’re all visual-centric.
Snapchat? It’s a place where consumers send and receive ephemeral images and videos.
TikTok? It’s an app for the sharing and consumption of short videos.
Instagram? It’s the world’s online photo library.
Even traditionally word-heavy social media apps – like Facebook, Twitter, and Reddit – are now being flooded with images, videos, and GIFs.
And have you noticed how all those news apps – ESPN, CNBC, Bloomberg, et al. – are also going all-in with video content?
Heck, even here at InvestorPlace, we are committing a ton of resources to introducing more videos!
The visual takeover of all-things-media is here – and it’s about time.
As the old saying goes, a picture paints a thousand words. Videos. Images. GIFs. They are are magnitudes better than text.
Simply consider these stats:
- Visuals are shown to increase desire to read content by 80%.
- 85% of folks are more likely to buy a product after watching a video about it.
- Media posts with images produce 180% more engagement.
- 9 out of 10 people prefer visual content over written content.
- Articles containing relevant images have 94% more total views than articles without images.
The data here is overwhelming, and the conclusion indisputable. Goodbye, texts. Hello, videos. The future is visual media – and that future is arriving now.
Today, we will tell you how to play this all-in shift towards visual media. It’s by buying stock in a small company that has established itself as the “picks-and-shovels” provider for visual media assets, and which is set to win big as all articles, communications, and advertisements are built on images and videos.
The Picks-and-Shovels Provider for the Visual Media “Gold Rush”
Longtime readers know all about “picks-and-shovels” investments.
Back in 1849, during the California Gold Rush, thousands of prospectors rushed out to the West Coast in search of gold. Few found any. Most ended up broke. But the suppliers who sold picks, shovels, and other essentials to the prospectors were hugely successful.
The implication? One of the best ways to strike “gold” in a booming megatrend is to invest in the industry’s suppliers – the picks-and-shovels sellers.
In the visual media “gold rush,” the top picks-and-shovels supplier is Shutterstock (NYSE:SSTK).
Many of you have probably heard of Shutterstock before, or even used the company’s service. Shutterstock operates the world’s largest marketplace of licensed, professional images and videos, hosted on Shutterstock.com. As of December 2020, the company’s marketplace comprised 381 million unique images and videos.
The business model is straightforward.
Shutterstock acquires those images from professional photographers, aggregates them into a centralized and searchable marketplace, and then sells the licensing rights of those photos and videos to companies and individuals looking to use high-quality photos in their own sales, marketing, advertising, and informational materials.
This is a solid business.
You have big profit margins – gross margins hover around 60%, while EBITDA margins hover around 20% – because the costs of photo rights acquisition are not large, nor are the fixed or variable costs in operating the marketplace. You can also sell the licensing rights of one photo to multiple buyers, thereby boosting revenue per image on a small fixed cost basis, and leading to healthy margins.
You also have a big competitive moat. This is a visual asset marketplace. The value, then, is all tied up in the size and quality of the underlying visual assets – and Shutterstock’s 381 million images and photos gives it the largest library of licensed visual assets in the world. This size constitutes an enormous and durable competitive advantage for Shutterstock over other visual asset marketplaces.
But… this has also been a rather slow-growth business for years, with revenues growing at a rather pedestrian 8% compounded annual growth rate since 2016.
That’s about to change – in a big way.
The shift towards visual-centricity is on, and now, all companies – both B2B and B2C organizations – are in a position where they either have to adopt visual-centric communications, or risk getting left behind by their competitors who do go all-in with visuals and reap the corresponding rewards.
I’m seeing this in every industry I cover. Just a few months ago, visual presentations and selling materials were rare among the companies I follow. Today, they’re increasingly becoming ubiquitous.
Importantly, because these companies need high-quality visual assets (they don’t want to look tacky) and most don’t have the resources to create their own visual assets for everything, my belief is that all of them will increasingly license content from visual asset marketplaces over the next decade.
The implication for Shutterstock? A surge in demand in the coming years. A surge in revenues. A surge in margins. A surge in profits. And a surge in the stock price.
This is just a $3 billion company today. In a world where everything is visual-centric – and all those visuals are supplied by Shutterstock – this company could easily be worth more than $30 billion.
That’s why Shutterstock stock deserves to be on your radar today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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