What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-02-26 compared with 2023-02-14 · 94 added, 71 removed, 228 unchanged (42% of the section changed)

Shutterstock, Inc.

(referred to herein as the “Company,” “we,” “our,” and “us”) is a global creative platform for transformative brands and media companies.

The Company’s platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.

Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity.

(referred to herein as the “Company”, “we,” “our,” and “us”) is a leading global creative platform connecting brands and businesses to high quality content.

Our platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.

Contributors upload their content to our web properties in exchange for royalty payments based on customer download activity.

Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution.

Our key content offerings include:

Digital content licensed to our customers for their creative needs includes images, footage, music, and 3D models (our “Content” offering).

Our Content revenues represent the majority of the Company’s business and are supported by our searchable creative platform and driven by our large contributor network.

In addition, our customers have needs that are beyond traditional content license products and services.

These include (i) licenses to metadata associated with our images, footage, music tracks and 3D models through our data offering, (ii) distribution and advertising services from our Giphy business, which consists of GIFs (graphics interchange format visuals) that serve as a critical ingredient in text- and message- based conversations and in contextual advertising settings, (iii) specialized solutions for high-quality content matched with production tools and services through Shutterstock Studios and (iv) other tailored white-glove services (collectively, our “Data, Distribution, and Services” offerings).

Our Content and Data, Distribution, and Services offering revenues are as follows (in thousands):

Year Ended December 31,

2023 2022 2021

Content $ 737,264 $ 789,306 $ 757,470

Data, Distribution, and Services 137,323 38,520 15,945

Total Revenue $ 874,587 $ 827,826 $ 773,415

Our Content Offering:

Our Content offering includes licenses for:

• Images - consisting of photographs, vectors and illustrations.

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• Music - consisting of high-quality music tracks and sound effects, which are often used to complement images and footage.

• 3 Dimensional (“3D”) Models - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture.

Our offerings are distributed to customers under the following brands:

• 3 Dimensional (“3D”) Models - consisting of 3D models available in a variety of formats, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture.

• Generative AI Content - consisting of images generated from algorithms trained with high-quality, ethically sourced content.

Customers can generate images by entering a description of their desired content into model prompts.

Our Content is distributed to customers under the following brands:

Shutterstock;

and Splash News.

Shutterstock, our flagship brand, includes various content types such as image, footage, music and editorial.

For customers seeking specialized solutions, Shutterstock Studios extends our offerings by providing custom, high-quality content matched with production tools and services at scale.

In addition, our collection of images, footage clips, music tracks and 3D models is also distributed through our Computer Vision offering which is used by large technology companies to train AI models.

Pond5 is a video-first content marketplace which expands the Company’s content offerings across footage, image and music.

PicMonkey is a leading online graphic design and image editing platform.

TurboSquid operates a marketplace that offers more than one million 3D models and a 2 dimensional (“2D”) marketplace derived from 3D objects.

Our Offset brand provides authentic and exceptional content for high-impact use cases that require extraordinary images, featuring work from top assignment photographers and illustrators from around the world.

PicMonkey is a leading online graphic design and image editing platform.

PremiumBeat offers exclusive high-quality music tracks and provides producers, filmmakers and marketers the ability to search handpicked production music from the world’s leading composers.

Splash News provides editorial image and video content across celebrity

and red carpet events.

Bigstock maintains a separate content library tailored for creators seeking to incorporate cost-effective imagery into their projects.

The Company also offers its content customers additional services through our Creative Flow Applications Suite (“Creative Flow”) and an Application Programming Interface (“API”) driven infrastructure to further enhance and streamline our customers’ workflow and project management needs.

Creative Flow consists of the Company’s suite of workflow applications that connect our content library with a powerful editing and design platform, easy-to-use collaboration tools, and artificial intelligence (“AI”) powered insights so that creatives and marketers can make, share, validate and organize their creative work all in one place.

Our API allows businesses to gain access to our content without leaving their platform.

Through our API, content can be integrated into the platforms of our Enterprise sales channel customers and can also be distributed to end users through our partnerships with several social media, software and marketing technology platforms.

For customers seeking specialized solutions, Shutterstock Studios extends our offerings by providing custom, high-quality content matched with production tools and services at scale, leveraging assets from all brands or creating new assets as required.

In 2023, we launched our AI image creator and Creative AI-powered editing tool which gives our customers the ability to modify and transform any image.

The Creative AI editing suite will empower our customers to leverage signature editing capabilities to unlock transformative possibilities in content creation and ideation.

Signature capabilities include:

• Magic Brush - modifies an image by brushing over the areas customers would like to change and simply describing what customers want to add, replace or erase.

• Variations - generates alternate options of any stock or AI-generated image.

• Expand Image - broadens the view of any image, as easily as if zooming out through a camera lens, to see more of the scene behind the central image.

• Smart Resize - automatically changes the shape of an image to match the dimensions needed.

• Background Remover - removes or replaces the background with any scene when the subject of an image is perfect, but the background is not.

Our Data, Distribution, and Services Offering:

Our Data, Distribution, and Services offering address customer demand for products and services that are beyond our Content licenses.

These products and services include, among other things, the use of our metadata, leveraging our Giphy, Inc.

platform, and customized Shutterstock Studios offerings.

We have seen increased demand for access to our metadata for machine learning and generative artificial intelligence model training.

We offer ethically sourced and licenseable metadata at industry leading scales and quality.

Our metadata customer base ranges from large technology and media companies to smaller start-up organizations.

In 2023, we completed our acquisition of Giphy, Inc.

Giphy is a content platform that allows users to personalize casual conversations with GIFs, and generates billions of monthly impressions through over 14,000 API partners.

We believe customers in all industries will look to use Giphy in marketing campaigns as another advertising outlet.

Our Data, Distribution, and Services offering also includes high-quality production and custom content at scale provided by Shutterstock Studios (“Studios”).

Studios is a cost-effective solution for brands and agencies looking to meet their content needs and create fresh dynamic digital assets.

Customers can bring an idea, and our Studios team will provide a 360-degree content creation solution.

We offer a whole spectrum of services at pre-production, production, live production and post-production stages.

Our Marketplace:

We believe that we benefit from scale and network effects between customers and contributors.

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We believe that our licensing model and creative platform drive a high volume of download activity that in turn provides a high volume of search, download and other customer behavioral data that enables us to continuously improve the quality and accuracy of our proprietary search algorithms, including keyword, search localization and similar image identification, and encourages the creation and contribution of new content to meet our customers’ needs.

We enable users to search and discover content to meet their unique needs by searching our collection and previewing our content alongside its propensity to perform and global utilization, at no cost prior to licensing.

We enable users to search and discover content to meet their unique needs by searching our collection and previewing our content alongside its propensity to perform

and global utilization, at no cost prior to licensing.

We also leverage, to the greatest extent possible, the global nature of our user interfaces and marketing efforts, including local languages, currencies and payment methods, as well as our effective use of current and emerging technology to attract and retain customers and contributors.

We typically offer a royalty-free, non-exclusive license, and the processes we maintain to properly license content and the indemnification protections we provide allow individuals and businesses of all sizes, including media agencies, publishers, production companies and creative service providers, to confidently utilize such content for their unique commercial or editorial needs.

In October 2022, Shutterstock announced our strategic partnership with OpenAI, an AI research and deployment company.

In 2023, Shutterstock integrated Dall-E 2, OpenAI’s tool for AI-generated content into the Shutterstock platform to enable our customers to input keywords and generate unique images based on their specific criteria.

Sales and Distribution Channels

Our online platform provides a freely searchable collection of content that our users can license, download and incorporate into their work.

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Certain third-party resellers and affiliates sell our products directly to end-users and remit amounts to us based on the type of product sold.

Customer sales are diversified across the following channels:

• E-commerce:

The majority of our customers license content directly through our self-service web properties.

Customers in our e-commerce sales channel have the flexibility to purchase a subscription-based plan that is paid on either a monthly or annual basis or to license content on a transactional basis.

These customers generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs.

• Enterprise:

We also have a base of customers with unique content, licensing and workflow needs.

These customers benefit from communication with our dedicated sales, service and research teams which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available on our e-commerce platform.

Customers in our enterprise sales channel may also benefit from access to (i) Shutterstock Editorial, which includes our library of editorial images and videos, (ii) Shutterstock Studios, our offering which provides custom, high-quality content matched with production tools and services at scale, and (iii) Computer Vision, our offering which provides metadata associated with our content collection, used to train AI models.

Our range of solutions, including the depth of our API platform integrations, appeals to a broad and diverse customer base and enables us to adapt and evolve with the needs of our more high touch clients to deliver capabilities that embed deep within their workflows.

Revenues generated from each of the sales channels are as follows (in thousands):

Year Ended December 31,

2022 2021 2020

E-commerce $ 501,384 $ 490,212 $ 412,521

Enterprise 326,442 283,203 254,165

Total Revenue $ 827,826 $ 773,415 $ 666,686

An important driver of our growth is customer acquisition, which we achieve primarily through online marketing efforts and directly through our sales force.

Online marketing includes paid search, online display advertising, print advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships.

An important driver to grow Content revenue is customer acquisition, which we achieve primarily through marketing efforts and directly through our sales force.

Marketing includes search engine optimization, paid search, online display advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships.

Over the past several years, our investments in marketing have represented a significant percentage of revenue.

This spend considers, among other things, the blended average customer lifetime value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.

We believe that another important driver of growth is the quality of the user experience we provide on our websites, especially the efficiency and speed with which our search interfaces and algorithms help customers find and download the content that they need, the degree to which our websites have been localized for our global user base, the degree to which we make use of the large quantity of data we collect about image, footage and music and search patterns, and the security of user information on our platform.

To this end, we have invested aggressively in product development and cloud-based hosting infrastructure, and we intend to continue to invest in these areas, to the extent that we can improve the customer experience and increase the efficiency with which we deploy new products and features.

This spend considers, among other things, the blended average customer value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.

We believe that another important driver of Content revenue growth is the quality of the user experience we provide on our websites, especially the efficiency and speed with which our search interfaces and algorithms help customers find and download the content that they need, the degree to which our websites have been localized for our global user base, the degree to which we make use of the large quantity of data we collect about image, footage and music and search patterns, and the security of user information on our platform.

To this end, we have invested in product development and cloud-based hosting infrastructure, and we intend to continue to invest in these areas, to the extent that we can improve the customer experience and increase the efficiency with which we deploy new products and features.

Our Customers

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Whether providing graphic design, web design, interactive design, advertising, public relations, communications or marketing materials, these professional users and teams support organizations of various sizes including the largest global agencies, large not-for-profit organizations and Fortune 500 companies.

These customers may also utilize our content library, through our Computer Vision offering, to train their AI models.

These customers may also utilize our content library, through our data offering, to train their AI models.

• Media and Broadcast Companies.

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These organizations and users vary in size and type of organization and include casual creatives ranging from sole proprietors to social media influencers.

Customers generally engage with us through the following sales channels:

The majority of our customers access and/or license content directly through our self-service digital properties.

Customers have the flexibility to purchase a subscription-based plan that is paid on either a monthly or annual basis, or to license content on a transactional basis via these properties.

Customers who engage and buy exclusively via self-serve digital properties generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs.

Customers are also able to access content they have purchased through a live interaction or as part of a large global business license option via our self-serve digital properties.

• Live Sales, Services and Client Management:

We also have a base of customers with unique content, licensing, workflow and service needs.

These customers benefit from communication with our dedicated sales and service teams, which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available via self-serve environments.

Access to additional solutions are also made available through our sales and client management teams.

Some of these additional solutions include:

(i) Shutterstock Editorial, which includes our library of editorial images and videos;

(ii) Shutterstock Studios, our offering which provides custom, high-quality content matched with production tools and services at scale;

(iii) our data offering which provides metadata associated with our content collection, used to train AI models;

and (iv) distribution and advertising revenue generated from our Giphy assets.

As the use cases for our creative solutions expand, we believe our customers are seeking alternative means to consume our offerings.

As a result, we have seen continued demand for our monthly subscription products, including our suite of multi-asset subscriptions, launched in 2021.

These multi-asset products are credit-based and enable customers to license images, footage and music in a single subscription.

Our monthly subscriptions provide for either a fixed number of content licenses or credits that may be used to download content during the period.

As a result, we have seen demand for our monthly subscription products.

These monthly subscriptions provide for a fixed number of content licenses that may be used to download content during the period.

Our subscription-based pricing model makes the creative process easier because customers can download content in our collection for use in their creative process without incremental costs, which provides greater creative freedom and helps improve work product.

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For users who need less content, individual content licenses may also be purchased on a transactional basis, paid for at the time of download.

Customers that purchase one of our monthly recurring products for a continuous period of at least three months are considered subscribers.

Our quarterly number of subscribers and subscriber revenue are as follows:

* Subscribers and Subscriber Revenue from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination.

Accordingly, the metrics include Subscribers and Subscriber revenue from TurboSquid beginning February 2022 and from PicMonkey beginning September 2022.

These metrics exclude the respective counts and revenues from our acquisitions of Pond5 and Splash News.

Content Contributors and Content Review Process

Our collection of content is provided by a community of contributors from around the world and is vetted through our proprietary technology and by a specialized team of reviewers to ensure that it meets our standards of quality and licensability.

Whether photographers, videographers, illustrators, designers or musicians, our community of more than 2.3 million approved contributors as of December 31, 2022 ranges from part-time enthusiasts to full-time professionals.

Whether photographers, videographers, illustrators, designers or musicians, our community of contributors ranges from part-time enthusiasts to full-time professionals.

The content contributed by our five highest-earning contributors was together responsible for less than 2% of downloads in 2023, demonstrating the depth and diversity of our contributor population.

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We use proprietary AI driven technology along with a trained team of reviewers to complete a comprehensive evaluation of all content submissions.

Our content review process is highly efficient, and our content review team generally evaluates and processes images and footage within 72 hours of submission to make them available for license on our sites, while working to continually improve our process to reduce review time.

Our content review process is highly efficient, and our content review team generally evaluates and processes images and footage to make them available for license on our sites, while working to continually improve our process to reduce review time.

Contributors are required to add a descriptive title and up to 50 keywords to each image and footage submission.

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Contributors are notified within the contributor portal when a content submission is not approved during the review process.

This notification includes an explanation of why the image was not selected for publication.

This notification includes an

explanation of why the image was not selected for publication.

We believe that this feedback is valuable to contributors and enhances the quality of future content submissions as well as our customers’ experience.

Content accepted into our collection is added to our web properties where it is available for search, selection, license and download.

Content accepted is also made available for delivery to our data offering partners for machine learning purposes.

Contributors of content typically earn a royalty each time their work is licensed.

Contributors earn royalties based on

a tiered earnings rate schedule that is tied to annual licensing volume.

Contributors earn royalties based on a tiered earnings rate schedule that is tied to annual licensing volume.

The earnings tier of the contributor at the time of licensing, as well as the purchase option under which the content was licensed, are used to calculate the royalty earnings for each licensing event.

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By using cloud services providers, we believe we are able to dedicate an increasing proportion of our technology resources to scaling our business, better serving our rapidly growing collection of content and meeting global customer demand.

We believe continued use of third-party cloud hosting, along with improvements to our platform, allow us to further diversify

our product offerings, reach new customers and contributors around the world and enable our developers to rapidly deploy new products, features and functionality.

We believe continued use of third-party cloud hosting, along with improvements to our platform, allow us to further diversify our product offerings, reach new customers and contributors around the world and enable our developers to rapidly deploy new products, features and functionality.

We have expanded our use of content delivery network solutions to help enable our customers around the world to have sustained and reliable high-speed access to our platform.

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An important driver of our growth is customer acquisition, which we achieve primarily through online and offline marketing efforts and directly through our sales force.

Online marketing includes paid search, online display advertising, print advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships.

Over the past several years, our investments in marketing have represented a significant percentage of revenue.

This spend considers, among other things, the blended average customer value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.

We also use customer relationship management (CRM) marketing to grow the lifetime value of our existing customers.

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law, be defamatory or libelous, or be pornographic or obscene.

Provided that a customer has not breached the license agreement or any other agreement with us, we will defend, indemnify, and hold a customer harmless from direct damages attributable to breaches of the express representations and warranties provided in our license agreements.

representations and warranties provided in our license agreements.

From time to time, we agree to customize our license agreements with non-standard indemnification terms.

Regardless of customization, indemnification only applies to claims for damages attributable to our breach of the express representations and warranties provided in our license agreement and is generally conditioned on our timely receipt of an indemnification claim and our right to assume the defense of such claim.

Our license agreements generally cap our indemnification obligations at amounts ranging from $10,000 to $250,000, with

exceptions for certain products for which our indemnification obligations may be uncapped.

Our license agreements generally cap our indemnification obligations at amounts ranging from $10,000 to $250,000, with exceptions for certain products for which our indemnification obligations may be uncapped.

We maintain commercially reasonable insurance intended to protect against the costs of intellectual property litigation and our indemnification obligations under our license agreements.

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We protect our intellectual property through a combination of patent, trademark, copyright and domain name registrations, as well as trade secret protections.

We own a portfolio of trademarks, including “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Shutterstock Studios,” and “Shutterstock Editor” and their associated logos.

We own a portfolio of trademarks, including “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Giphy,” “Shutterstock Studios,” “Shutterstock Editor,” “Shutterstock.AI” and “Creative Flow” their associated logos.

We will pursue additional trademark registrations to the extent that we create any additional material and registrable trademarks or logos.

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• The Directive on Copyright in the Digital Single Market, which governs a marketplace for copyright in the European Union.

• The Digital Services Act, which governs the operation of online services in the European Union.

• The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 and similar laws adopted by a number of states, which regulate the format, functionality and distribution of commercial solicitation e-mails, create criminal penalties for unmarked sexually-oriented material, and control other online marketing practices.

• The Children’s Online Privacy Protection Act and the Prosecutorial Remedies and Other Tools to End Exploitation of Children Today Act of 2003, which regulate the collection or use of information, and restrict the distribution of certain materials, as related to certain protected age groups.

In addition, the Protection of Children

From Sexual Predators Act of 1998 provides for reporting and other obligations by online service providers in the area of child pornography.

In addition, the Protection of Children From Sexual Predators Act of 1998 provides for reporting and other obligations by online service providers in the area of child pornography.

• The Federal Trade Commission Act and numerous state “mini-FTC” acts, which bar “deceptive” and “unfair” trade practices, including in the contexts of online advertising and representations made in privacy policies and other online representations.

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Congress and various state legislative bodies concerning privacy, security, content regulation, data protection and other consumer issues that could affect us.

For example, the State of California has enacted the CCPA, which became effective in January 2020.

The CCPA, among other things, requires companies that collect personal information about California residents to make disclosures to those residents about data collection, use and sharing practices, allows residents to opt out of certain data sharing with third parties and provides a new cause of action for data breaches.

Moreover, a new privacy law passed in California, the California Privacy Rights Act (“CPRA”), which is scheduled to take effect on January 1, 2023 (with a lookback to January 1, 2022), will significantly modify the CCPA, and will impose additional data protection obligations on companies such as ours doing business in California.

For example, the State of California has enacted the CCPA, which became effective in January 2020 and was extended by the California Privacy Rights Act (“CPRA”) effective January 2023.

The CCPA and CPRA, among other things, requires companies that collect personal information about California residents to make disclosures to those residents about data collection, use and sharing practices, allows residents, amongst other rights, to opt out of certain data sharing with third parties and provides a private right of action for data breaches.

Thirteen other states have passed comprehensive data privacy laws, which are in effect today or taking effect by 2026.

In addition, from a taxation perspective, there are applicable and potential government regulatory matters that may impact us.

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and therefore, the full impact of the TCJA on our tax provision may continue to evolve.

Further, we continue to remain subject to uncertainty related to foreign jurisdictions’ potential reactions to the TCJA, as well as evolving regulatory views and legislation regarding taxation of e-commerce businesses such as the Organization for Economic Cooperation and Development (“OECD”) Base Erosion and Profit Shifting (“BEPS”) proposals, specifically the adoption of BEPS Action II and its ancillary impacts to other areas of TCJA related laws and regulations as well as and other country specific digital tax initiatives.

Further, we continue to remain subject to uncertainty related to foreign jurisdictions’ potential reactions to the TCJA, as well as evolving regulatory views and legislation regarding taxation of e-commerce businesses such as the Organization for Economic Cooperation and Development (“OECD”) Base Erosion and Profit Shifting (“BEPS”) proposals, specifically the adoption of Pillar Two (relating to the Global Anti-Base Erosion Model Rules) and BEPS Action II (relating to hybrid mismatch arrangements) and its ancillary impacts to other areas of TCJA related laws and regulations as well as any other country specific digital tax initiatives.

As these and other tax laws and related regulations continue to evolve, our financial results could prospectively be materially impacted.

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• providers of commercially licensable music such as Universal Music Publishing Group, Sony/ATV Music Publishing and Warner/Chappell Music;

• websites focused on providing creative workflow tools such as Canva, Picsart and Bending Spoons;

• websites focused on providing creative workflow tools such as Adobe, Canva, Picsart and Bending Spoons;

• websites focused on image search and discovery such as Google Images;

• providers of free images, photography, music, footage and related tools;

• social networking and social media services;

• social networking and social media services, including GIF platforms such as Alphabet’s Tenor;

• commissioned photographers and photography agencies.

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Additionally, because a significant portion of our revenue is derived from repeat customers who have purchased subscription plans, our revenues have historically been less volatile than if we had no subscription-based customers.

In addition, expenditures on content by customers tend to be discretionary in nature, reflecting overall economic conditions, the economic prospects of specific industries, budgeting constraints, buying patterns and a variety of other factors, many of which are outside our control, including any impacts from COVID-19.

Finally, our Data, Distribution,and Services results will fluctuate from quarter to quarter based on the satisfaction of certain agreed to milestones with our customers

As a result of these and other factors, the results of any prior quarterly or annual periods should not be relied upon as indicators of our future operating performance.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business