The fact that Shutterfly just cranked out its 57th consecutive quarter of year-over-year net revenue growth (net revenues totaling $160M, a 17% year-over-year increase) would have been yawn-worthy if not for the fact that we’re now seeing the first full quarter impact of Shutterfly’s acquisition of Groovebook – in terms of order volume and average order value, if nothing else.
Groovebook is an inexpensive and subscription-based photobook creation app, popularized by their founders’ Shark Tank appearance. Shutterfly acquired the company last November for $14.5 Million. [There’s more about them in our The Photo Output App Market study].
Based on Groovebook’s impact on Shutterfly’s average order value (Shutterfly reports a 15% YOY decline, but only 4% when excluding the Groovebook sales), the app must have generated so many orders that it actually tilted Shutterfly’s companywide average order value.
Four things jump out when contemplating Groovebook:
- Groovebook is there to stay. It is not a fad, catapulted through Shark Tank but since fizzled. Not only do their subscribed customers generate ongoing sales, the app also currently ranks among the top 200 US-downloaded iOS and Android photo apps – not stellar, but certainly better than most print output products that have been on the market for a while.
- Groovebook is an app. Naysayers claiming that consumers don’t want to create and order multi-page photobooks on mobile devices: think twice. This app alone apparently can impact the average order value of a $1-billion dollar company.
- Groovebook sells dirt-cheap photobooks. To be exact: $2.99 each, including shipping and handling. Shutterfly made a daring move acquiring such a low-priced and potentially cannibalizing product, apparently willing to take the risk of a declining average order value.
- Groovebook is a subscription service. And this might be exactly why Shutterfly took this risk: Groovebook’s ongoing revenues and order volume help to smooth out Shutterfly’s seasonality. And that’s not a bad thing in the low season quarters, as we’ve just had with Q1. It also lowers their customer acquisition costs, assuming the customer churn is reasonably low.
We’ll keep a close look at how Shutterfly will manage further integration of Groovebook in its sales and marketing activities (Groovebook will remain under its own flag, we’ve been told), and how it will fair in the busier spring and summer seasons.