MySpace To Acquire Photobucket For $250 Million

8 05 2007

PhotobucketFinally the rumours are coming to an end. MySpace is acquiring Photobucket for $250 million in cash. Also sources say that there is also an earn-out for up to an additional $50 million.A dispute that involved Photobucket videos being blocked on MySpace led to acquisition discussions, and the block was removed. Photobucket generated $6.3 million in revenue last year and planned on hitting $25 million or more this year. They have 40 million registered users and add another 85,000 per day.

Photobucket, founded in 2003 by Alex Welch and Darren Crystal, took off in 2005 as users MySpaceon social network sites such as Myspace began to use the service to store and display pictures of themselves and their friends.

That’s been both a blessing and a curse. The popularity of Photobucket’s free service among users of the News Corporation social network took the service to 17m unique visitors per month, according to Comscore, making it the web’s most popular photo site, ahead of rivals such as Yahoo’s Flickr.  But the venture’s rising bandwidth costs have eaten up most of its revenue growth, according to people close to the transaction. And management’s claims — that users’ loyalty was to the site that hosted their photos, not the site on which they were displayed — were always a stretch. Photobucket accounts for more than 70 per cent of MySpace’s photo traffic, according to Hitwise. In other words, it has pretty much the same relationship to MySpace as PayPal had to eBay way back when.

Now this deal is far better than the Flickr deal coz Photobucket is being sold for almost 10x times the amount that Flickr was sold for.

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