| LAS VEGAS/SAN FRANCISCO
LAS VEGAS/SAN FRANCISCO MySpace, part of Rupert
Murdoch's News Corp. NWSa.N, has reached a preliminary deal
to acquire Photobucket, the world's top photo-sharing site, for
around $250 million in cash, a source familiar with the deal
said on Monday.
Photobucket functions like a kind of Swiss bank for
depositing and transmitting photos, helping Web users post
their photos on other social networking sites, instead of
trying to keep the users locked up on its own site.
Besides MySpace, Photobucket is popular on sites such as
Facebook, Bebo, Friendster, eBay, Craigslist, Blogger and
While hardly known outside the youthful world of social
network sites, Photobucket has become wildly popular with users
for providing free, online storage tools for multimedia
self-expression, from photos to videos to digital slideshows.
Site builders turn to it for images to decorate their sites.
The four-year-old startup, based in Palo Alto, California,
has signed up 41 million registered users, up from 32 million
at the end of last year and 2 million in 2004. It now hosts
nearly 2.8 billion images on the site.
Spokesmen for Photobucket and MySpace were not available to
comment on the deal.
The agreement with MySpace, the world's top online meeting
place and part of NewsCorp.'s Fox Interactive online business,
is tentative and could still fall apart, the source cautioned.
The site was founded in the suburbs of Denver by two young
telecoms engineers at Level 3 Communications Inc. LVLT.O,
Alex Welch and Darren Crystal, in the wake of the dot-com
downturn. The two came up with the idea of providing a simple,
less commercial alternative to existing photo sharing sites.
Welch, 30, the chief executive, said in a recent interview
he ran the site on credit cards for the first six months until
its popularity forced him to borrow money from his parents. He
made do without venture capital until it was a proven success.
Eventually, Photobucket raised $2.5 million in initial
financing from Trinity Ventures and another $10.5 million from
a group of investors led by Trinity a year ago. It eventually
moved to Silicon Valley and now counts more than 65 employees.
Photobucket holds a nearly 40 percent share of the U.S.
online photo market, nearly four times more than second-ranked
Yahoo Inc. (YHOO.O), according to audience measurement firm
Hitwise Inc. It was the 22nd most visited U.S. site overall
It recently struck a deal with top design software maker
Adobe Systems Inc. (ADBE.O) to supply its users with free tools
to edit, or "remix," images on its site. Its growth is fuelled
by users who link to its photos from 300,000 Internet sites.
But Photobucket's growth has been largely symbiotic with
that of MySpace, functioning as a kind of outsourced provider
of photo services to MySpace users.
Nearly 60 percent of Photobucket site traffic comes from
users leaving MySpace properties, Hitwise click data shows.
Photobucket is the third most popular destination for MySpace
users after Google and Yahoo, according to Hitwise statistics.
That relationship has proved rocky: Last month, MySpace
blocked traffic from its site to Photobucket after a dispute
over technical issues led MySpace to accuse Photobucket of
violating the social network site's service terms.
On April 10, Photobucket posted a statement on its blog
that attacked MySpace for limiting the freedom of its users to
connect to outside sites such as Photobucket.
"By severely restricting this freedom, MySpace is showing
that it considers you as a commodity which it can treat as it
sees fit," the Photobucket statement said.
Two weeks later, on April 23, Welch said his company had
talked to MySpace and resolved the dispute.
"We've established open lines of communication and
procedures with MySpace to prevent a sudden block of
Photobucket content in the future," he wrote at the time. Welch
was not available to comment on the sudden turnaround.