Talk about negatives and slides! Shares of photography giant

Getty Images

(GETY)

have slipped about 38% since March 2. But for investors seeking business-to-business Internet plays, Getty is the very picture of a bargain.

As with other publicly traded B2B companies -- for example,

VerticalNet

(VERT)

and

Chemdex

parent

Ventro

(VNTR) - Get Report

, an investment in Getty represents a bet that there is money to be made by taking unsexy real-world business transactions and putting them on the Web.

But Getty has a number of advantages that better-known (and pricier) B2B operators don't. Chief among them: It isn't just a middleman in the imaging market it brings online, but it effectively owns the goods. And if there ever were a business that was invented to go on the Internet, photography is it.

Delivery Time

"Unlike groceries and furniture, you can deliver the product online," says Arie Kopelman, publisher of

directstock.com

, a search engine for professional photography on the Web. "You really do have a made-to-order situation for the Internet."

Getty is acknowledged to be the world's largest company in the business of selling stock images: photos, illustrations and moving pictures collected in huge libraries that other companies pay to use -- primarily for advertising -- rather than commission a photographer to shoot a photo specifically for their purposes. (Stock photo companies don't necessarily own the images in their libraries, but sell them on behalf of independent photographers.)

Getty, which is in the midst of buying up major competitors, will have sales of about $445 million in 2000, estimates Genni Combes, commerce analyst at

Chase H&Q

. (Combes has a buy rating on the stock, for which her firm has done underwriting.) The next-largest stock photo competitor is Bill Gates'

Corbis

, which analysts estimate has sales of about $70 million. The size of the highly fragmented stock photo market is hard to estimate, but it's believed to be somewhere above $1 billion a year.

Agent of Change

Along with being the industry's biggest consolidator in what's been a mom-and-pop business (think of what

Blockbuster

(BBI) - Get Report

has done to the video rental industry), Getty is on a crusade to transform the business from one in which the company ships three-dimensional products to customers -- transparencies and prints, that is -- to one in which it delivers only electrons -- sending image files over the Internet.

As the company and others tell the story, going online saves money and builds business in several ways. One way to illustrate that is the cost of adding images to inventory -- the few hundred thousand images, in a library numbering in the tens of millions, that Getty CEO Jonathan Klein says account for a majority of the firm's revenue. Putting a copy of one such popular image in each of the firm's more than 50 branch offices costs about $238, Klein says; in contrast, he says, it costs about $45 to electronically store and retouch one of these images, as well as labeling it with keywords that people can use to find the photo in an electronic search.

Valuing Getty, which has a market cap of about $1.6 billion, is tough, partly because no comparable public companies come to mind. But Combes estimates the company will have EBITDA -- earnings before interest, taxes, depreciation and amortization -- somewhere between $90 million and $100 million in 2001. Taking the conservative end of Combes' projections, the company is trading at about 18 times EBITDA and in the neighborhood of 3 times revenue. In comparison, Ventro, expected to have negative EBITDA in 2001, is trading at more than 13 times 2001 revenue; VerticalNet, also with negative EBITDA, is trading at 28 times 2001 revenue.

Published analysts' estimates for Getty are conservative, says Kriss Damon, an independent mutual fund consultant specializing in Internet stocks. (One of Damon's clients owns Getty.) "It's a cheap B2B story, and they own the content," she says.

In addition, Damon says she's a believer in the company's multiyear strategy of creating Web sites, built around its libraries, that will also serve as portals for different user communities, such as advertising/design professionals. "It's an e-workplace," says Damon, "and I think that e-workplaces will emerge as a whole subsector of B2B, and this will be the first."

What's Next

The investment has its risks, of course. Combes says the biggest risk for the company over the next six months relates to its acquisition last year of rival

The Image Bank

and last month's deal to acquire another big competitor,

Visual Communications Group

. "That's what we'll be watching carefully ... whether they can maintain revenue growth in those companies as they integrate them," Combes says.

Getty has had conflicts with photographers over the cut it takes from sales of their images, points out Holly Stuart Hughes, editor-in-chief of

Photo District News

, a magazine for professional photographers. But, she suggests, stock photo agencies are better at getting money for stock photos. "In the professional market for images," she says, "stock agencies have proven to be tougher negotiators at times ... than individual photographers who are freelancers and fear that the phone might not ring tomorrow."

Getty also faces competitive risks, though it's unclear from whom. "There's no magic to what Getty does," says David Moffly, ex-CEO of Visual Communications Group's FPG International operation, adding that he himself is seeking to compete with Getty.

But Moffly, who owns 200 shares of Getty, readily acknowledges that he's got a worthy adversary. "Getty today is as good as it gets. They are the smartest boys on the block," he says. "They are the state of the art."