Small Business Profile: Photobox.com

Graham Hobson tells Kate Hilpern how he expanded his online photo service into Europe

When Graham Hobson was out for breakfast with his wife one Saturday morning, he excitedly told her about his business idea. "That sounds great," she enthused, "provided you can fit it around your day job." She was, says Hobson, none too pleased with his response.

Mind you, Hobson had his own doubts at the time – not about the validity of his idea, but because he feared someone else would beat him to it. "I wrote my business plan on the Tube on the way to work. It must have taken about 10 weeks and I can remember walking into my office every morning expecting to read in the press that someone else had got there first," he recalls. But they didn't and today Photobox is the UK's number one online photography brand and a £30m business that is rapidly expanding across Europe.

It all started because Hobson had two young children and, like most new parents, he took lots of photos. "I was filling up shelves with boxes of photos, many of which weren't very good. In 1999, I bought a digital camera as a solution, but when I showed my wife she'd say, 'Yes, they're great, but can't we get real prints to put on the wall and show the grandparents?' I thought there must be a way to do this with ease online, but found there was pretty much nothing in Europe, even with big companies such as Kodak."

It so happened that Hobson, who had been working in the technology industry for investment banks since leaving college, was facing unwelcome changes at work and was ready for a new challenge. "There was this feeling in 1999 that a whole new world was opening up with the internet and if you had a good idea, anything was possible."

Serendipity was to clinch his plan. "One night, we were out and I asked this guy who seemed to know about start-ups if he knew any venture capitalists. He said he was one and could help me. He put together the paperwork, although in the end, I raised the £480,000 I needed from colleagues and friends in one week. So many people wanted to get involved that I even had to send some cheques back."

Then a longstanding colleague and friend, Mark Chapman, who was due to go off to Hong Kong to run technology for a bank, decided to come on board. "The final thing was that it turned out that my dentist's cousin, Colin Glass, ran PCWorld – just the kind of company I had wanted to help get the business off the ground by giving away vouchers for free prints. I was also interested in him because he used to run Boots Photographic in the UK. When he heard about the plan for Photobox, he decided to become our chairman."

Everything came together so quickly that Hobson found himself in for a shock when the business took three years to become properly established. "It was busy. We were three people in the room at one point – answering phones, doing customer support and running up to the post office with the prints. But the business felt much more like a traditional start-up than I'd expected," he explains.

There was also, of course, the challenge of the dotcom collapse in 2000. "We needed more money and that was hard, but we wound up doing what's quite trendy now – asking investors to buy more shares at a discounted price. It was enough to carry us through, although we had to reduce our expenses to the extent that we were surviving on a shoestring."

A further worry came from major competitors increasingly entering the market. "There was Fandango, funded to the tune of millions, and Boots, which launched an online photo service. They had us quaking in our boots."

But Photobox remained true to its vision – an online printing service that provided fast turnaround and high quality – and as such, it started to pick up "white label" clients: other online brands that wanted to offer its customers their service. Some co-branding followed with organisations such as Freeserve. "In fact, it was our deal with Freeserve in 2002 that gave us the kick-start we really needed."

As an online start-up, you might have the best vision in the world, says Hobson, but if you don't have the funds to put ads on the back of buses and on TV, you can fail to drive traffic to your site. "It was the white label deals that in the end managed to get business through our door."

Photobox's next step was to move premises from central London to Park Royal, a decision that five years on still proves a challenge to the company. "Our staff are our biggest expense because we need to have the right people who are highly skilled and very committed. Our problem is that, with all respect to Park Royal, it is not a place many people choose to work. It's an industrial estate inside the north circular in London and what we have faced, especially in the last couple of years, is that people are choosing to work somewhere where there's a Starbucks round the corner and great bars to go to after work. We can't click our fingers and change that overnight, but it is something we are still trying to find a solution to."

In 2005 Photobox became the UK's market leader. But, despite this, growth was slowing up again. Photobox got very close to an acquisition in Europe, as well as to listing the company. "But in the end, we decided to merge with a French company similar to us called PhotoWays. We did that deal in 2006."

Whatever anyone says, it's really hard to put two companies together, says Hobson. "Culturally, there was a huge amount of work involved and there were the logistical difficulties of dealing with two different locations."

Nevertheless, Photobox was soon ready to expand further. "We decided to completely rebuild our systems right across Europe. We've recently ticked off all the big countries and are now ready to concentrate on our smaller markets."

Part of this process included launching a brand new website, with greater emphasis on creativity and community sharing. "People liked our old site – they thought it was fast and efficient and simple, and we've tried not to stray from that, but on the other hand people want websites to act like desktop applications now."

Hobson admits there were teething problems when the website was launched at the beginning of the summer. "But it's now going really well and we're processing an order every few seconds. Customers seem to like our new features, such as our dynamic slide show, photo blog and photo editing, as well as our new products like our relaunched mugs."

Today, Photobox serves most European countries and has become, in Hobson's words, "a multinational SME, if there is such a thing.

"We have over 300 employees and a very professional management team that have come from places such as Yahoo and AOL, so these are very exciting times. As the person who runs technology for the group, I even have a boss, which is something new."

www.photobox.com