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Shutterfly’s Strategy: A Conversation with CEO Jeff Housenbold (Part 12)

Posted on Monday, Mar 31st 2008

SM: The TAM is huge.

JH: It’s a $150B TAM worldwide, and $50B in the US.

SM: I am not worried about the growth opportunity at all. JH: The key for me and the management team is, and I think for any small business in any space, is how do you focus? What are the three to five things you are going to do really well to stand out from the crowd? The temptation is to see some other cool new feature which is a distraction, but the question you have to ask first is ‘Does your customer want it?’ and then ‘What order does your customer want this in compared to everything else?’ and finally ‘Can you make money from it and can you do it differently / better than the competition?’ We did not always have the DNA and discipline to know what our 4 or 5 corporate objectives are. If something does not match up well against that, then we put it in a parking lot that says ‘good idea, just not top priority’. That has been a large part of our secret sauce of success; hire great people, focus on what they are doing, and involve the customer as part of the feedback loop.

SM: The last thing is probably really getting the business flows right. There is a humongous opportunity where you don’t have to do it all if you partner with the right players. A lot of people are doing synergistic strategies.

JH: I will tell you it is not us from the BD side. We have been approached or had conversations with everyone you can imagine, and it is changing as we are going through our third phase of realization of this space a large part of it has been ‘hey, I would love to do that but you have to white label it’, and we don’t white label. When I came here we powered Yahoo, BestBuy, Creative Memories, and I shut down all the white label deals because you can’t build a consumer brand and you can’t make money on small gross margins.

The second thing they have had is we have to own photos. It is so strategic. You look at some large portals and they say they have to own photos because they want photos on their blogs and they offer blogging, and you want photos in your mobile and we offer mobile, and I am like “well, you have access to those images, but what brand is the customer going to trust with respect to their shared memories? If you want an open photo sharing site versus a revenue generating site, then yes you can do that”. I think people are starting in today’s world where Brad’s peanut butter manifesto drove Yahoo… you know, Yahoo Photos was seen as peripheral. You are starting to see that in lots of areas. You have the flip side and you see AOL reinvesting and their third reinvestment in AOL pictures, and they launched some new stuff and it is no different in the marketplace.

SM: My hunch is, and this is purely a hunch based on what I have seen in the market, is that the smaller players are better business development opportunities for you because they are not going to ask for white labeling. They have context. Groople is a great example of a company that is so synergistic to your mission.

JH: That is why building that platform to go after lots of them more efficiently is key, rather than going after the big clients who takes 9 months to negotiate and they want too big of a rev share, and they want branding issues. We agree.

SM: Great, thanks Jeff. As you know, I love your business!

This segment is part 12 in the series : Shutterfly's Strategy: A Conversation with CEO Jeff Housenbold
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I think you are right. We are grapic art experts that specialize in printing. Our talent is having several patented products that are specific to photography and printing. We protect them to the point that we don’t publicize them and focus on our key targets. We aren’t sure about your company being a target as you may see this as not part of your main mix a delegate it to your parking lot.
We feel the same way about that, as you do about white labeling. No margin and not worth our time. Our products put your pictures on patented printed products.

Jamie Mentzer Monday, June 9, 2008 at 7:56 PM PT