This can be done in admin, for that (selecting png/gif watermark by user), we need an extra database field, read it every time to see if watermark is PNG or GIF, then display it.

Doing this process need cpu time, memory, it is not much, but for high traffic site, it will adds up. Do we need to use up extra memory for a rarely used feature ? Watermark image for most are set and forget feature, used only one time.