“In 2023 we sought to have all the resources in one place; In 2024 we want to bring together editing, collaboration or sharing in one place.” These are the words of the CEO of Freepik, Joaquín Cuenca, regarding the plan for a year 2024 marked by this wave of artificial intelligence that has triggered the generation of content on its platform to 10 million units per month. In response, the company has launched an AI image creator and another to retouch and improve them. The Malaga company seeks to maintain the business accelerator while the Nordic venture capital manager EQT, which has the majority shareholding, analyzes a potential transaction four years after having purchased just over 50% at a valuation of more than 250 million euros. . .
There are those who see a wave of innovation such as AI as a danger for platforms like Freepik and other of its rivals. Cuenca is clear: “In the end, the danger when there is any technological innovation is not adopting it; The opportunity here is absolutely tremendous,” adds the first executive of a company, which was born and developed as a graphic resources platform. In the Malaga-based company, they decided to create a specific division to launch tools and put Omar Pera in charge, coming from Meta where he worked on products linked to AI and messaging – he worked as a product director at Kustomer, which was acquired by the Owner of Facebook in 2022-. In the last six months he has launched Pikaso, a generative AI tool, and recently Reimagine, for AI retouching and enhancement.
The company, according to Cuenca, has seen how the consumption and production of images has skyrocketed with AI on its platform. “We receive approximately one million pieces of content a month; Now we are getting 10 million from AI that are produced by collaborators that we already had, more new ones that we have… When something becomes cheaper, consumption increases more,” explains the manager. How can that affect the company’s margins? “We don’t know how it will affect the image already made by a creator who is paid,” he points out.
But at Freepik they have detected that there is still a lot of reluctance because in general in the case of a resource already prepared professionally “the AI does not make it better, at most it makes it the same and you have to explain very well what you want.” They do not know how it will evolve, but they assure that for now there is no impact. Yes, there is a market, that of people who want to experiment and who have a certain creativity. “That is the one that is being developed,” he points out. At the company, whose income comes from both advertising and subscriptions to its resource repository and tools, they believe that for commercial use today “there is still some danger” in fully embracing AI. And they also defend that it is not clear that it will cover the “main problem which is that I do not know what to put in the image.” “When you have a vague idea, you need to spend several hours with something generative and the other thing is already done,” he argues.
Despite everything, they have tried to build several tools with which to go from being an ‘aggregator’ of graphic resources to a tool platform for editing, collaborating or sharing them. It is also where Canva, one of the big names in this sector and one of the giants that Freepik is facing, is heading. The Australian company, valued at more than $25 billion after a major adjustment carried out by several of its investors in 2022, has also embraced this wave of AI. Its chief product officer and co-founder, Cameron Adams, recently said late last year that there is a “real opportunity cost of not keeping up with the latest technologies.” The firm, like the Spanish one, believes that these tools will be able to increase revenue by attracting more business clients in the future.
Subscription model
Freepik launched a subscription years ago that has been gaining momentum. Initially his business was based on the advertising generated. The current distribution is not made public, but this recurring payment has a higher percentage weight than the past. “It has been growing faster than other sources of income,” says Cuenca. In 2022, it represented practically three out of every four euros generated by the company, as reflected in the consolidated accounts consulted by La Información. Today it has a common subscription for the entire platform, which is what the team prioritizes, although today they have decided to maintain specific payment products for verticals such as vectors and icons or video. These were mainly launched in 2022 when they went on a shopping spree to acquire several companies. First they paid 11.7 million to take over Videvo; later 2.3 million for Iconfinder and later other smaller amounts.
The company does not provide forecasts or updated numbers. In 2022, the income generated by the platform amounted to 79 million euros, of which 75% corresponds to subscriptions – the rest advertising agreements, among which those signed with Adobe and Shutterstock to include Advertising stand out. in searches for free users. Spain was barely 5% while the rest of the world beyond Europe (11 million) is the one that brings together the majority. And in 2023? If the 45% growth rate of the business were maintained, it would mean having greatly surpassed the barrier of 100 million in turnover. It previously entered losses due to the amortization of those acquisitions.
In this growth, the United States will play an important role. This is where Canva is very strong. “Between a fifth and a quarter of the group’s turnover comes from the United States and has been increasing, becoming the region that has grown the fastest,” says the CEO. They were weaker in this market, with greater strength in emerging countries. In 2023, it opened an office both for brand positioning and to develop strategy with companies. “We want to make it possible for companies to hire; Before, the product was a bit hostile; We are starting to do B2B to sell with salespeople in the US and you have to do that with professionals from there,” he explains. Added to this is the local presence with the community of designers.
The sale of EQT
While all this is happening, the EQT fund is analyzing its options. As it noted expansion months ago, the Nordic manager put the sale of the company on the table, although it ultimately slowed it down. In May 2020, the manager acquired just over half of the Malaga company at a valuation of around €250 million. The ‘price’ set by the ‘private equity’ firm has grown significantly, as reflected in the documentation regarding the end of the 2022 financial year. On that occasion, the ‘fair value’ for that 52.9% stood at 234 millions.
Asked about this circumstance, Cuenca does not discuss whether there is a formal sales process or not, since in transactions of this type the company is ‘neutral’. Although he insists that, in general terms and without referring to this case, these processes have their impact because when it comes to a private company it is necessary to carry out ‘due diligence’. Would a sale of EQT also imply the departure of the founders and management team? Today they continue to hold 47% of the shares, with Alejandro Sánchez, one of the co-founders, as the most relevant partner, holding almost 18%, according to the latest accounts.
Sea as sea, the company tries not to miss the train of AI in a market of giants. With AI, today they have new competitors. The ‘traditional’ ones are those headed by Canva itself. Then there are all the big photography companies like Shutterstock, Getty Images or Adobe. There are also pure generative AI tools such as Stable Difussion and those generated by OpenAI and others. And small startups have also emerged that have been making huge gains, such as Scenario and others. “The opportunity is absolutely gigantic; and there cannot be a single company that has it all,” Cuenca concludes.
