This is the first part in a series of questions I was asked by Photoprenuer that I thought I would put on the blog. I’ll release more of the interview later.
1. First, how long has Cutcaster been around and what’s the idea behind it?
Cutcaster is a brand new approach to the licensing marketplace. We are just starting to go to market with the business now that we have moved past phase 1 of our development and will begin a big marketing push starting at the end of March.
The other co-founder and I come from a stock trading background down on Wall St and the idea was to create an electronic marketplace similar to the one we worked in, which gave control over pricing back to the sellers and buyers in the market and provided tools to educate the participants in order to make better decisions over buying, selling and creating. We wanted to create a dynamic marketplace much like the NASDAQ stock exchange and also give people tools to educate themselves on what the marketplace was looking for, analyze the data surrounding their content and find available market research like a tool we used called Bloomberg in finance. Sellers can set their own price or choose the Cutcaster algorithm to fluctuate prices. On the other hand, buyers can submit a bid or lower price for content which a seller can accept, submit a new counter-offer or decline.
So Cutcaster was conceived as a community based content marketplace where all forms of photos and videos can be securely bought, sold or requested from the Cutcaster community. Cutcaster sought to create a consumer friendly licensing platform that took the best elements of sites like Flickr, YouTube and eBay and let people rapidly find, quickly review, grab back control over pricing and acquire still image and video content. We started working on Cutcaster in the fall of 2006 but I left my job on Wall st. to pursue this full time because the demands of the business were too much.
2. How does your pricing algorithm work? What is it basing quotes on and how often are the prices updated?
The price is based on the purchase of a single RF license for the desired file. The site is only RF at the moment but we are planning on offering different types of licenses in the very near future and the option to buy extended rights. The price will adjust to a number of different variables we isolated as being important when quantifying the cost of purchasing a RF license. Some variables the algorithm analyzes are time, demand, the amount of supply for a particular image, views, exclusivity, keywords, costs for photographers, what it would cost a buyer to create the file, return on investment for taking time to upload content into marketplace, return on investment for searching for content etc. We spent a good 2 years examining how the market was pricing content for different license types, what the different sites were charging their buyers, what the different ways the market was pricing content and what people thought about pricing their own content. We went straight to photographers/videographers and to potential buyers on our site to determine what the best solutions could be for helping the market better price content so it was fair to all. And a dynamic marketplace was the solution we can up with.
3. What causes the prices of images to rise and fall?
Rise- views, downloads (double edge sword for RF based on competitors using the same images possibly), exclusivity on the site, time variable, originality, the seller changing price, buying extended rights through site, increase in keyword queries etc
Fall- lower bid, time on the site without sales, uniqueness, poor metadata management, same usage same clients scenario, the seller lowering price, buyer proposing lower bid, seller responding to lower bids.
4. How often do sellers set their own prices? How do these compare to the prices recommended by your pricing algorithm?
Pricing options are controlled by the sellers and the price paid is controlled by the buyers (buyers can accept the price or they can submit a lower bid for content). Sellers set their prices about 40% of the time, which means they choose a price that is set and doesn’t fluctuate. Plus, they can go in and change the price so they are not locked in to what they initially set or what we tell them is best for them 
It’s supposed to be a fluid system where buyers and sellers can adjust to what the market is telling them. The rest of the time they choose the algorithm, which has a default starting price to help them, and will move up or down based on the variables listed above.
The prices generated from the algorithm are generally in line with that of which the sellers set themselves and we track how they are pricing their content so we are able to adjust our default start price. We can even go into the backend and adjust the starting prices for particular content. The default prices for setting the first price is 5 for photos and 50 for videos but users can choose the starting price they want so it could be higher or lower depending on what the seller wants. They can choose.
More to come later….
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