For the background behind this post check out Introduction: Five Lessons: How Photographers can Create New Business Models and Lesson 1: Photographers are your customers, not your competition. This is Lesson 2…
In the Introduction and Lesson 1 we spent a lot of time discussing what is going on in the photography industry. Now let’s start to think about what to do about it.
Take advantage of the atomization of demand and expand the scope of consumption.
What does that mean?
Atomization of demand:
- The demand for images, photographers and stories has splintered into a disaggregated variety of niches, groups and audiences.
- Fans and customers have splintered off into their areas of interest, disaggregated and re-formed across traditional dividing lines by the web.
- There are more people creating and consuming images than ever before; thus it’s not surprising that we have developed more varied ideas and perspectives of a “good image” or “what photography is about.” 
- Our definitions of amateur, professional, critic, curator and fan have become more blurred.
- Our reasons, interest and goals in photography have become less homogenous.
- And our use of images has become broader: we have easier and cheaper access to a wider variety of ways to consume, customize, personalize, remix and repurpose images than ever before.
Expand the scope of consumption:
- The opportunities to produce at scale are available to more people, easier, quicker and cheaper than ever before.
- And it will likely continue to get better as recreating and repurposing images becomes more akin to manipulating data.
- But since these opportunities are available to everyone, competing on scale is becoming tougher and tougher for individuals.
- The larger opportunity is to develop economies of scope.
- It is easier, cheaper and quicker than ever before to create, setup, market, distribute and sell images, ideas, knowledge and information.
- Take advantage of the cheaper and easier access to the interaction and distribution platforms to let people consume content (and context) in whatever form they want.
- In simple terms: create more products, customized to different niches, used in different ways. There is no single, killer product or strategy: the answer is much more grey and messy.
What are the business opportunities? What can and should we create?
Let’s remember two things:
- People spend their money, time and passion to better their lives, not to better yours. Accept it. Remind yourself of this mantra every time you create, market and deliver a product or service, and it will make you focus on exactly why someone should spend their money, time and passion on you.
- By and large, most new amateur photographers don’t want to buy your images, they want to do things with their own.
Whether they have thought about it this way or not, innovative companies and professional photographers are taking advantage of the splintering demand and the increased economies of scale and scope to manage their content, repurpose their images, connect with fans and customers, stir up attention and sell themselves and their images. 
- Help people share, print images and other products: Flickr, SmugMug, Kodak, Snapfish, Shutterfly et. al.
- Help people create and display portfolios: A Photo Folio, Zenfolio, liveBooks, et. al.
- Help people print (and frame images): Mpix, Imagekind, Pictopia et. al.
- Help people create, print and distribute books: Blurb, My Publisher and almost all of the image printshops
- Help people create, produce and distribute other products: Etsy, Cafepress and suddenly many of the printers like Mpix.
- Help people license and sell images: Photoshelter, Digital Railroad, iStockphoto, Shutterstock, Photrade, etc.
- Create communities around shared interests: Flickr, Lightstalkers, Photojojo, etc.
- Educate, portfolio reviews, share information, connect: David Allen Harvey, The [b] School, John Harrington and Photo Business Forum, Mike Johnston, Photopreneur, Photojojo, etc.
- Create experiences (travel workshops and groups, festivals): David duChemin, Matt Brandon, and many others
- Curate and critique: Jörg Colberg, Rob Haggart, Mrs. Deane, Andrew Hetherington, Miguel Garcia-Guzman, Tewfic El-Sawy
- Promote and connect with fans and customers: Chase Jarvis, Vincent Laforet, Jeremy Cowart, Josh McCulloch, etc.
- Exposure: publish, promote, photo contests, portfolio reviews, festivals: Jen Bekman, Flak Photo, Vewd, Verve Photo, We Can’t Paint, etc.
- Infrastructure: web hosting, online storage, image security and management, accounting, business management, etc.
All of these are examples of people and companies that are taking advantage of the opportunities created by the expansion and splintering of demand and the concurrent proliferation of and accessibility to the tools to connect, market, create, distribute and sell themselves and their images.
So, how should we think about pricing our products and ourselves? What business models are possible?
Looking at the list above, I used the word “help” a lot. Sometimes “help” is sometimes provided free, but often the service is also a source of income.
There is a broader debate in the business community about the variety of business models that have been created by the Internet and other technological changes. I won’t belabor the point, but the Internet has created opportunities for vastly different models of economic organization, creation and distribution, resulting in massive upheaval across almost every industry.
The Internet may have impacted the creative industries (e.g. music, film, photography, writing, journalism) first and hardest; yet at the same time these industries might also have been the slowest to realize what happened and take advantage of the opportunities. Most incumbents continue to cling to archaic, dying business models, and most creators and participants in the industry have failed to adapt their own goals, strategies and tactics. Many still see the problems rather than the opportunities; the majority of the value exchange is based on traditional business models shoved into new methods of exchange, new currencies, new channels, platforms, customers and suppliers.
A couple of leading thinkers about the variety of business models created by the Internet include Hal Varian, Chris Anderson and Kevin Kelly. You might have heard a bit of the conversation: a lot of the talk is about “free”. 
It’s a deceptively a simple concept, but the take-aways and practical applications are not as simple as “give it away for free”.
There’s actually many variations of “free” and thus many ways to deliver and profit from “free” products and services. We’re all familiar with giving things away: we give away advice, help on projects, donate pictures and help connect people (clients, photographers, buyers, fellow creatives) when we can.
But we give away a bit of ourselves and our images trusting, knowing, believing and hoping that we’ll get something back, directly or indirectly.
Let’s start with the four kinds of “free”:
##Get one thing free, buy another.
In essence, one product directly cross-subsidizes another.
Most photographers are familiar with this model: we give away views of our images (in fact, we often pay to have people view our images), but we limit use, ownership and physical reproductions of our images, instead requiring people to pay for prints, books, etc.
The music industry has always understood this model, but the model has been hard-hit by changing technology and cultural mores regarding purchasing music. Essentially, more people have changed their ideas on what they should be getting for free and what they should be paying for.
Photographers have seen a curve instead of a shift: we’ve seen a reduction in the perceived value and the prices they are willing to pay instead of a shift in what products should be free. In simpler terms, while many people say recorded music should now be free, nobody is saying stock images should be free, they’re just not willing to pay as much to license them (yet).
The Internet and the shift away from film and towards digital has fundamentally changed the marginal costs of creation and distribution (think how much easier, quicker and cheaper it is to shoot, view and print images). While all photographers have seen the impact of the rapidly decreased marginal costs of creation, few have begun to test the opportunities created by vastly lower marginal costs of distribution.
What’s possible? Perhaps it can make sense to give away prints.
##Advertising, sponsors and paid media.
We’re all familiar with this model. Advertising, patronage, grants, sponsors and commissions are all ways to get paid by creating content without having to sell it.
While the model works for many industries and many forms of media, advertising will always be a controversial model for many creatives. Advertising distracts from and potentially alters the messages behind creative content, sponsorships always have be judged by their underlying motives, and all creative content and creators risk losing authenticity or their message by their association with commercialism.
It’s always existed, but the web has brought the idea of advertising-supported business models far deeper than previously possible. Artists have always struggled with the idea, and probably always will.
##“Freemium” - Only some pay for paid version.
This is a standard model for many web services and software. Essentially, the features of the product are broken out and provided as different versions and tiers with different prices, and the customers that pay for the paid versions subsidize the users that do not pay for the free versions (note: “user” does not necessarily equal “customer”, in the same way “fan” does not necessarily equal “customer”).
Many of the companies and people listed earlier use this model. Flickr is an obvious example. But there are more creative ways to think about this: for example, a photographer that offers workshops, books and general advice usually creates differential pricing schemes based on time, access, personal attention and direct feedback and engagement with the photographer. One level, even if it’s nothing more replying to emails or blogging, is usually free.
Unfortunately not all “customers” understand this concept.  As we continue to create economic models based on the concepts of versioning, differential access and “this you get for free, but this you pay for”, we’re naturally going to run into more confusion, complaints and arguments: it’s far easier to see, use and understand versions of software than versions of people.
And that’s part of the reason this model is vastly untapped by photographers. But it’s also perhaps the largest opportunity.
##“Gift Economy” - Give away for non-monetary rewards.
If it’s not money, what do we get? Attention, reputation, non-cash awards, press, publicity… all of which may or may not indirectly lead to further economic opportunities. But the key is behind the intention.
Most blogs without advertising run according to this concept: we give away our content without asking anyone to pay for it. Given that photography has always been a difficult industry for people to make a lot of money in, professionals have always accepted the non-monetary rewards as a form of compensation.
What’s the opportunity? The benefits of non-monetary rewards were traditionally fairly limited to the people that we could reach and the attention we could draw. But the Internet has created a massive opportunity: think about how many more photographers are out there than before, the massive increase in the use of images across the Internet, the larger access to and interest in the tools of creating and producing images and the increased ease to reach more people more deeply.
##OK. So… what should we do?
The options are overwhelming, and instead of providing answers I’ve probably just created more questions. So, what should you do? How should you find fans and customers for your mix of products and services? How should you decide how to focus your time, passion and money?
There’s another layer to consider. The larger problem many photographers face is the other side of the market for content, an oversupply of photographers and images. How can professional photographers shift that problem into an opportunity? We’ll discuss that in the next post in the series, “Lesson 3: Take advantage of the oversupply and target your brand, your niche, your fans, your customers.”
Introduction: Five Lessons: How Photographers can Create New Business Models]1
- Lesson 1: Photographers are your customers, not your competition.
- Lesson 2: Take advantage of the atomization of demand and expand the scope of consumption.
- Lesson 3: Take advantage of the oversupply and target your brand, your niche, your fans, your customers.
- Lesson 4: Connect with context and content.
- Lesson 5: Make great work.
As discussed in earlier posts, the massive increase in the number of photographers has led to a more populist definition of a “good” picture; to get an idea of the debate simply look for the debate among professional photographers about Flickr. Better yet, dig into the site and the community itself, peruse some the of the “Award” groups in Flickr or troll through the comments littered throughout the site. I love what Flickr does, and there are some quality photographers throughout the site, but the average Flickr user’s idea of a “good picture” is very different from the average professional photographer’s view. But then again, Flickr was not created for the professional photographer; Flickr’s goals, value and footprint in the industry are far more grand. ↩︎
The phrasing “themselves and their images” should not be glossed over or taken lightly. ↩︎
I recognize these are broad buckets with a lot of overlap, and that there is a wide variation in the quality, market positioning, audience, customer segments and goals of these companies and people. And it’s not comprehensive. But let’s start with this… and my apologies to those I left out. ↩︎
Best primers to read on the underpinnings of the “free” debate: Chris Anderson: Free! Why $0.00 Is the Future of Business and Kevin Kelly: Better Than Free. ↩︎
For the record, it’s a person’s choice what to charge and it’s a person’s choice what to buy, simple as that. ↩︎