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Shutterfly's $14.5M GrooveBook Buy Boosts Customer Base

Zacks Equity Research

California-based online digital photo storage and printing company Shutterfly, Inc. (SFLY) announced the acquisition of GrooveBook, a mobile photo book app subscription service, for $14.5 million. GrooveBook creates personalized books with 100 mobile phone photos that are shipped to customers on a monthly basis.

GrooveBook, which was reportedly started in 2012, gained popularity when founders Julie and Brian Whiteman promoted their distinctively designed photo books on the TV reality show — Shark Tank. The exposure was immensely beneficial for the company, as it expanded the business to 500,000 paid subscribers. Prior to the promotion, the mobile photo book app service had acquired a subscriber base of 18,000 in 8 months.

Presently the company, which offers apps for iPhone and Android, has recorded roughly 1 million downloads, 200 million photo uploads and grown its subscriber base almost 15 times since appearing on the Shark Tank show. With the acquisition, GrooveBook will be able to use Shutterfly’s expertise in photo printing, which may help reduce costs and increase margins.

Shutterfly's main business allows customers to store photos digitally and use them for making printed albums, posters, coffee mugs and other products. In the past couple of years, the company has been continuously acquiring several photo-focused start-ups like ThisLife, R and R Images, Tiny Prints, Penguin Digital, MyPublisher, Treat, Wedding Paper Divas and BorrowLenses. In our view, these acquisitions will help Shutterfly to somewhat mitigate decline in profitability it faced due to the termination of its partnership with Costco Wholesale Corporation (COST) in 2013. Further, it will add GrooveBook’s subscriber base to Shutterfly’s clientele.

Shutterfly, currently, has a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Dice Holdings, Inc. (DHX) and Spark Networks, Inc. (LOV). Both these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SFLY
Read the Full Research Report on COST
Read the Full Research Report on LOV
Read the Full Research Report on DHX


Zacks Investment Research