DotPhoto’s Roots

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This article by Doug Dixon was prepared for the March 26, 2003 edition of U.S. 1 Newspaper. All rights reserved.

Is DotPhoto’s Success Just a Phone Call Away?

Have you done the cell phone ring dance? That’s the

spontaneous reaction that happens when you’re standing in a group

and someone’s cell phone starts ringing. Suddenly everyone is bending

over to fumble in their pockets or frantically dig in their bags to

check whether it’s their phone that is ringing.

Of course, if your phone has a distinctive ring sound then you can

just look on calmly while everyone else is doing the dance. Recent

cell phones do provide a small selection of built-in rings to customize

the tone, but you will find that common selections like the William

Tell Overture soon become more annoying than individualistic. And

people really want to customize their gizmos anyway, not only with

colorful faceplates for their phones, but also with a very distinctive

ring tone.

Ring tones are big business. "We think this has the potential

to earn a lot of money for dotPhoto," says Glenn Paul, Princeton

entrepreneur and co-founder of the Clancy-Paul computer stores that

flourished in Princeton in the 1980s and early ’90s. Paul, a 1979

alumnus of Princeton University, is CEO of dotPhoto, a Ewing-based

company that provides photo archiving, sharing, and printing services

for users of digital cameras (www.dotphoto.com). DotPhoto introduced

its new Blabtones ring tone service through Verizon Wireless at the

Cellular Telecommunications & Internet Association (CTIA) Wireless

2003 conference in New Orleans on Monday, March 17. "For the first

time ever, cell phone users can create their own ringtones," says

Paul (www.blabtones.com).

Launched in May, 2000, dotPhoto survived the dot-com crash and has

expanded from Internet to cell phone services, and from images to

audio. It provides free hosting of digital images uploaded by members,

and then sells printing and other services. DotPhoto then expanded

into cellular phone services last year by developing the Pictavision

application for downloading and viewing photos on new cell phones

with color displays.

So how can there be profit in ring tones? Especially

in these days of Napster and file sharing of songs and even videos

across the Internet, how can very short audio clips be a serious business

revenue stream?

The answer comes from the different network architecture and billing

practices in the cellular business. If you have Verizon cellular services,

delivered through a Verizon-authorized phone, then Verizon controls

and manages your connection to the Internet and other services. The

phone is a controlled and relatively protected environment; you cannot

download arbitrary files and programs, which is probably a good idea

in this sometimes unpleasant world of electronic spam and hackers

and viruses.

In the Internet world, you typically pay a flat rate for monthly service

to one service provider, and then access and download information

from the vast array of independent sites across the globe. As a result,

nobody has yet figured out how to impose small transaction fees that

can be efficiently collected across a wide range of Internet sites.

Conveniently for cellular service providers, you already are used

to paying connection and service-based fees for your cellular service.

Your carrier then can provide new services, accessed only through

their network, and add the additional charges on to your existing

bill. A package of 10 custom ring tones, for example, costs around

$11 to download.

And of all the possible new services — E-mail and the Web, news

and stock quotes — the "killer application" right now

is in fact ring tones. "People of our generation will say `I don’t

know anybody who uses phones like that,’" says Paul, "and

it reminds me of people who were our generation when I was 20, and

they would say `I don’t know anybody who uses computers, seems like

a fad to me.’"

Red Herring magazine, in the June, 2002 issue (the last issue before

it too died a dot-com death), reports that over 80 million ring tones

are downloaded each month in Japan, 60 million in Europe. In the U.S.,

as the market is beginning to develop, 1.5 million ring tones were

downloaded last December. That’s an estimated more than 1 billion

ring tones downloaded globally in 2002. At a monthly fee of around

$3 for ring tone access, ring tones are indeed an interesting market.

"The guys at Verizon Wireless tell me that there is nothing bigger

on cell phones right now," says Paul. "It’s enormous. When

I asked them to quantify they said it’s just `many many, many’ times

bigger than anything else."

"Ringtones, especially for our new customers, has been one of

our most popular services. In fact, customers typically purchase ringtones

by the bundle," says Sheldon Jones, Philadelphia-based public

relations manager for Verizon Wireless.

Merrill Lynch predicts that the global mobile phone content marketplace

— including ring tones, wallpaper images, and games — will

reach $25 billion by 2005.

Even to enter the cellular market, dotPhoto had to survive

the dot-com crash. Other online photo services that arrived with big

splashes have since folded, including Zing, PhotoPoint, and Intel’s

GatherRound.com, which was launched in September, 1999, and discontinued

service two years later in October, 2001.

"We have come through the nuclear winter of the Internet and of

venture capital at the same time," says Paul. "What it has

taken is a small group of shareholders at dotPhoto who believed in

it, and kept putting money in the company and loaning it to the company."

"And still we did not have a lot of money," says Paul. "Shutterfly

raised $64 million and built a $16 million business. We had $3.4 million

and are at a $4 million run rate right now. You could say we have

a little better use of capital."

DotPhoto is significantly smaller than other competitors. While dotPhoto

has grown to more than 200,000 customers and 20 million photos online,

Ofoto has 5 million registered users, and Snapfish has over 4 million

members and 85 million photos online. Many other competitors remain,

including services from other new photo sites such as Shutterfly,

Picturetrail, PhotoAccess, and PhotoWorks; Internet portals such as

Yahoo, MSN, and AOL; traditional photo companies such as Kodak and

Fuji; electronics companies like Sony ImageStation; and even discounters

like Wal-Mart.

"It’s taken a group of determined people at dotPhoto," says

Paul. "This little group of people has always done what is necessary

to stay in business. There have been some break points where we might

not have been there."

One such problem for dotPhoto is managing capacity for the boom in

business around the Christmas season. This past season, for example,

dotPhoto’s business jumped from $300,000 to $450,000 in December.

But last February, "we were really choking on orders from December,"

says Paul. "We were running 3 shifts around the clock and we couldn’t

keep up with it."

"It was very difficult to raise money to buy equipment. The machines

we were using were $100,000 each. It became clear to me that we were

not going to get money for equipment. We were very fortunate to find

some folks who would do the printing for us." By off-loading some

of the peak work, dotPhoto was able to print almost a million pictures

the past December, and did not have to invest in additional new capital

equipment. "We never could have handled that the year before,"

says Paul. "That also allowed us to make the company a more variable

expense company."

"We have just a handful of technical people," says Paul, "who

have done things that normally would be done by much larger teams

of people."

To form dotPhoto, Paul teamed with co-founder Joe Godcharles, owner

of a MotoPhoto franchise in Plainsboro, to develop a new photo-processing

factory in Ewing. He also hired Walter Krieg, of Research Park-based

InfoFirst Inc., to implement the Web hosting service and databases

behind the site.

"To have a chance at any business you need to be really fierce

about it," says Paul. "It’s hard enough. You need to get lucky

in a lot of ways and run across the right people, and just be incredibly

fiercely devoted to it too."

While focused on dotPhoto, Paul did maintain an interest in his sales

quoting software company, Qwik Quote Development in Pennington. "Qwik

Quote has a better product than ever," says Paul. "Their development

moved to China a year ago. They’ve been able to put together much

better code in China than we could afford to do here."

Meanwhile, Godcharles gave up his MotoPhoto store. "Joe spent

almost all of his time at dotPhoto," says Paul, "and when

you take time away from a business it usually falters. That was becoming

a harder business anyway because one-hour labs were competing with

Wal-Marts and drugstores. Last year Joe decided to close it down,

which was a great sacrifice to him."

InfoFirst, which supports the dotPhoto website and developed the mobile

applications, was founded in 1996. It too struggled with the crash.

"Last year was abysmal," says Walter Krieg, "we had to

let two people go last summer." With Krieg, president, and his

partner, Bob Johnson, InfoFirst has three full-time staffers and three

to four part-timers. InfoFirst has focused on building the back-end

infrastructure to support websites and services. "What we do is

behind the scenes," says Krieg, "the database and the workflow.

It was a goldrush before; now it’s business."

InfoFirst got involved in developing wireless applications

for dotPhoto in the middle of 2001. It worked with Verizon to develop

the Pictavision photo-viewing application for the QualComm phone platform.

QualComm is the developer of the CDMA (Code Division Multiple Access)

wireless network technology adopted by Verizon. More recently, QualComm

developed the BREW (Binary Runtime Environment for Wireless) programming

platform for downloading and running applications on wireless devices.

BREW carriers in the U.S., including Verizon Wireless, ALLTEL and

U.S. Cellular, represent about 48 million customers.

With the availability of more powerful and downloadable phones, Verizon

assembled and packaged a variety of applications and services as its

Get It Now service (www.verizonwireless.com/ics/plsql/getitnow.intro).

You can review the list of available applications on the Verizon web

site, and then purchase and download them to your phone. Many offer

a free trial demo, and then can be purchased for a limited period,

or on a subscription basis.

Verizon has organized the Get It Now services in several categories:

Get Games offers dozens of games, from sports to cards. Get Going

offers a variety of travel services, including airline flight information,

restaurant guides, and expense reporting. Get Fun offers entertainment

goodies, including jokes, horoscopes, and drink recipes. Get Mail

provides an E-mail application.

The Get Pix service provides tools to view and share digital images,

including dotPhoto’s Pictavision, and a mobile video viewer to access

public or private webcams and watch live video on your phone, albeit

at very small resolution and updated every few seconds.

Finally, the Get Tones service offers four collections of pre-created

ring tones. These are libraries of pre-defined tones that are offered

as a bundled package. DotPhoto’s new Blabtones service would then

add the ability to create your own recordings as ring tones.

"Where you used to need a "toolbelt" of devices to get

certain capabilities, you now need just one," says Jones of Verizon

Wireless. "Convergence has been a key factor in driving adoption

and will continue to be. It took only 17 years for the wireless phone

to reach the 100 million customer mark; by comparison, it took television

54 years, the automobile 68 years and the landline phone 91 years."

In contrast to cell phones, digital photography has

just kept plodding along. One big growth constraint is that it requires

using a computer to take advantage of all these wonderful new possibilities.

"It became clear, almost as soon as we got into the business,

the problem with the model was that it was too complicated," says

Paul. "You have to take your pictures from your digital camera,

you have to get them onto your computer, and you have to upload them

from your computer to the Internet. It was just too long a process,

and too hard for an awful lot of consumers."

One solution that camera companies and services have been pursuing

is simplifying the process of getting photos from the camera to the

computer and then to the Web. For example, some manufacturers provided

camera "docks" and associated software so you could insert

your camera and automatically upload images into your digital photo

album.

DotPhoto also experimented with these kinds of devices. "We demonstrated

at our shareholders’ meeting at least two years ago a little computer

with a wireless card and a camera attached," says Paul, "and

showed how we could take a picture and it go directly to dotPhoto.

We even tried to raise money to make such a device, of course nobody

was buying that either.

"Then we realized that those devices were going to come to us,

in the form of cell phones. Everybody carries a cell phone, nobody

carries a camera."

DotPhoto then developed the Pictavision application to download and

view photos from your online dotPhoto albums. In fact, you can access

any of the albums hosted at dotPhoto that the owners have made publicly

available. "It’s a limitless photo wallet," says Paul. "There

are over 20 million pictures on dotPhoto, and you can get them all

for your phone now."

"The new vision of our company has metamorphosed from printing,

which we set out to do to begin with. The more you use digital pictures

the less you want to print them. You’ll always print a few. The way

to share these things is going to be electronically."

DotPhoto calls this vision "Digital imaging in every palm."

"In about 1983 you may remember Bill Gates going around saying

`a computer on every desk,’" says Paul, "and even those of

us in the business though that’s a little ambitions. But certainly

it happened. Here 20 years later it’s looking to us like digital imaging

in every palm, which again seems a little ambitious to begin with.

But if you think about it there are 120 million people in this country

with cell phones already, and cell phones are turning over at 35 percent

a year."

"It’s just like the early PCs, people want the new features, they

want the latest and greatest. By 2005 there will be 200 million cell

phones, all with color screens, probably half at least will have cameras.

That will bring digital imaging to every palm. We would certainly

like to have a piece of that."

With the current Pictavision service, you first choose a photo album,

and then select a photo name, and then download the individual photo.

The albums and photos are listed by name to speed up the interaction

by using text. The download of the final photo takes about 18 seconds.

dotPhoto keeps the full-size photo on its servers for printing, and

automatically generates the smaller screen-sized images to download

to your phone.

Pictavision consistently has been one of the top 10 downloads of all

BREW applications on the Verizon Wireless network. Pictavision’s service

is priced at 99 cents for a single interaction, up to 25 images in

a single session, or $3.99 a month for unlimited access. It is currently

available for the Motorola T720 and Sharp Z-800 phones, and soon the

new Audiovox LGVX4400 and Toshiba 9500.

The next version of the Pictavision service, currently in final testing,

adds the ability to save and share your photos. You can save pictures

locally on your phone, install an image as the background screensaver,

and share photos from your phone by E-mailing them to others. The

photo is still stored on the dotPhoto server, so actually you are

E-mailing an invitation to the recipient to download and view it from

there.

Pictavision’s competitor at the Verizon website, Exego, already allows

users to send photos from their cell phone to another cell phone.

It costs $6 per month, and the photos must have been uploaded to the

website of Raleigh-based Summus Inc. (www.summus.com). The full realization

of portable photography, however, comes with cell phones that include

an integrated digital camera. DotPhoto hopes to introduce its "click

and deliver" service this summer to not only to show pictures,

but also to capture new pictures right where you are and immediately

share them. In this patent pending service, once you approve your

photos they will be uploaded to the dotPhoto service, and then automatically

processed and shared according to your previously-defined preferences.

"When the pictures come in we can send automatic E-mails, or automatically

print them," says Paul, "whatever it is you want us to do."

This service can be available even if you do not have an Internet

account. You can dial an 800 number, set up an account, and have your

photos automatically processed in groups. "When the 36th picture

comes in," says Paul, "we process them all and send them straight

to your mail box."

Blabtones grew out of another service that dotPhoto

offers for web photo albums. "We allow you to voice-annotate your

pictures," says Paul. "We’re still the only site that allows

you to do that." You can download a small application to your

computer to record a voice-over for your photos, and then upload it

to the dotPhoto site to play when visitors view your photos. For businesses,

this "talking pictures" technology can turn a static photo

album into a more dynamic marketing presentation.

Since dotPhoto already had the infrastructure to record and manage

audio clips, it was a small step to allow users to record their own

ring tones. The new phones not only have better sound chips to play

audio clips, they also provide the ability to assign individual ring

tones to specific callers. "You’ll have phones that actually talk

to you when they ring," says Paul, "`Come on honey, pick up!

It’s really me.’" Similarly, you can use distinctive ring tones

to identify high-priority and less urgent callers.

Blabtones are scheduled to be available on Verizon Wireless phones

that have the Get It Now service and polyphonic sound chips. Paul

expects to be able to sign a Verizon contract by the middle of April.

At launch, it will be available on the Motorola T720 phone. Blabtones

are priced like other ring tones, including the 10-tone package for

$10.90.

With this ability for anybody to create ring tones, "We hope you’ll

have the very creative few linking up to the acquisitive many,"

says Paul. "There may be a couple of thousand people who take

advantage of this, and make some outrageously interesting and funny,

clever ring tones. The rest of us can then buy them." dotPhoto

will make money from delivering the tones to subscriber’s phones,

Verizon will take its cut, and, for the moment, says Paul, "we’ll

offer prizes for the top-selling ring tones."

"It’s a mechanism that has worked on the Web," says Paul,

"to allow people to be creative and see what they come up with."

Paul has some concern about digital rights management. "We don’t

want to become a Napster-like tool, but still want to provide a tool

that enables creative ringtones. For that reason, we are withdrawing

the capability to import MP3 and MIDI files, but we may return to

that capability if we can put together a general agreement with the

recording industry. High-quality speech Blabtones are only 4 seconds,

and the average ringtone is about 3 seconds."

No good idea is without competition, and though no company matches

Blabtones’ creative capabilities, several competitors emerged at the

CTIA conference. According to an industry B-log (www.ringtonia.com),

AOL is selling Hollywood tunes for $1.99 each to Cingular, AT&T, and

T-Mobile subscribers, and college fight songs are available from www.Zingy.com

Zingy also translates a user’s song to a ringtone and sends it to

the mobile phone.

Having survived the dot-com debacle, dotPhoto is now

expanding its services. "We’ve had many profitable months, and

we hope to establish that as a permanent thing." However, access

to new capital is still difficult. "We would like to bring in

some money to solidify our electronic handling services," says

Paul, "which are more profitable and the long term for the industry

we think." Paul sees further consolidation coming in the on-line

photo industry. "I hope we can be one of the consolidators in

the industry," he says. "We can take these larger customer

bases that are married to print, which is not very profitable, and

overlay our services, and we’ll have a good model."

"We can sell pictures and license content," says Paul. "The

reselling side could become kind of an eBay of photography. Go to

dotPhoto and type in China or Paris and you get a good number of pictures

from any part of the world."

"This is our model," says Paul, "creating tools that link

people together. You can find any kind of picture you want, you can

find any ring tone that you want. We’ll allow people to create this

stuff and distribute it to everybody else.

DotPhoto Inc., American Enterprise Park at Ewing,

800 Silvia Drive, West Trenton, NJ 08628. Glenn Paul, president and

co-founder. 609-434 0340; fax, 609-434-0344. Www.dotphoto.com

InfoFirst Inc., 8 Wall Street, Princeton 08540.

Walter Krieg, president. 609-683-3800; fax, 609-683-3802. Www.infofirst.com

Top Of Page
DotPhoto’s Roots

DotPhoto started as a photo sharing and printing service,

and has evolved to add more electronic services for sharing digital

images. "We’re trying to make dotPhoto the one place where you

can do everything with a picture," says Paul.

You can join dotPhoto for free, upload and share your photos, and

order prints for 29 cents for 3x5s, 95 cents for 5x7s, $2.95 for 8x10s,

and $9.99 for 12×18 inches. You also can upgrade to a variety of prepaid

plans for quantity purchases. For example, $4.99 a month includes

10 4×6 and 5 5×7 prints, and $14.99 a month includes 36 4x5s, 8 5x7s,

and 2 8×10 prints.

One important difference from other services is that dotPhoto allows

customers to sell their pictures, and provides the infrastructure

for displaying photo albums, ordering prints, and collecting revenue.

Professionals using the dotPhoto Pro service (www.dotphotopro.com)

can watermark their images, add keywords for searching, add their

own branding, and set custom pricing.

"We have a lot of people who sell pictures," says Paul, "newspapers,

professional photographers. We just signed a contract for 25 percent

of the radio stations in the country. Every radio station has a website,

and they have events and take pictures, and they have stars."

"That’s a neat business," says Paul, "because essentially

we get free content. We’re providing a service to the many people

who want to sell pictures."

This ability to create albums and sell photos then becomes a

form of viral marketing for dotPhoto. "You can take that dotPhoto

album system and bolt it on to any website," says Paul. "There

are U.S. Navy carrier groups communicating between the carriers and

the families at home. There’s a high school in Rockwell, Texas at

YellowJackets.org. It seems like every hour of the day they’re taking

pictures there. More than 200,000 people have come from there."

(The quantity of photos available from the Rockwell High site is amazing.

The album for just the Saturday of their Prom Week last April has

over 1,000 pictures posted online.)

"We’re giving that feature away," says Paul. "There are

31,000 web sites linked to dotPhoto. All these people are linking

to us, and then they discover dotPhoto, and then they sell their own

pictures, and then their friends come in and buy pictures."

Pricing for friends to buy individual prints starts at $1 for 3×5

prints, $1.50 for 4×6, and $7.50 for 8×10.


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