Valleywag
Like a squabbling couple finally realizing they can't live without eachother — or a parasite fusing with its host — Photobucket has concluded terms of a sale to Myspace, News Corporation's social network. The photo sharing service, which had a quarrelsome but symbiotic relationship with Myspace, may announce the deal as early as this morning. After final negotiations at the end of last week, Photobucket has called an all-hands staff meeting for 10am PST this morning. We don't have the financial details of the deal, but Photobucket, and its bankers Lehman Brothers, were looking for at least $300m.
Photobucket, founded in 2003 by Alex Welch and Darren Crystal, took off in 2005 as users on 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.
A reminder of the balance of power between Myspace and Photobucket came last month when the social network's users found they could no longer display videos hosted on Photobucket. Myspace claimed the Photobucket was partially blocked for technical reasons alone; but the move served as a warning to Photobucket not to be too confident of an independent future.
Lehman Brothers — seeking a valuation over $300m for a venture that only made $6.3m in revenues last year — talked up the likelihood of a bidding war for Photobucket. But Rupert Murdoch's News Corporation, the parent of Myspace, was always the most likely buyer. And the jostling between the two companies — Myspace's bullying, and Photobucket's public protest — were always part of the negotiations.
What does the deal mean for other startups which have piggybacked on Myspace? On the one hand, it's heartening. For a venture so dependent upon it, Myspace paid a hefty multiple. But Photobucket is the largest of the "widget" makers, ventures which depend on a share of the real estate of larger sites, rather than drawing visitors to their own properties . If even it could not develop an independent advertising business, the prospects of other widget makers are dim.
Photobucket's deal should be cause for celebration for Alex Welch and his partners, and for Trinity Ventures, which invested $10.5m in the company last year. But, for other widget makers, it marks something of a ceiling on their likely exit.
Update: Michael Arrington, quoting "senior" people at Photobucket, says the purchase price was about $250m.
Comments
MySpace is buying Photobucket reports Valleywag, even though it is not offering any details on the price MySpace is paying for the photo-hosting company. According to reports, Photobucket had hired Lehman Brothers to shop it around and was looking for $300 million.
Photobucket is in the ideal position in that they do not need to sell. They continue to grow (in traffic and sales), and therefore continue to get more valuable. No idea if this is a real deal or not, but....
Alex Welch is a down-to-earth, humble, and yet extraordinarily talented CEO. And he's assembled a great team (most in Denver area, not silicon valley).
It's a real lesson to web 2.0 companies: build a strong team and stay focused on your core value proposition to your consumers and you'll get to dictate your exit strategy.
Ultimately this appears to be the right equation for both Photobucket and MySpace. However, t does open the door to Photobucket wannabes who want to provide a similar solution for competing social networks. It's a good bet that many of these won't want their competitors' (e.g. MySpace's) content on their sites.
Given the row over ads in Photobucket videos, other revenue models that are either more symbiotic or at least not competitive with the host sites' revenue source will need to be developed.
Updated Photo-sharing site Photobucket has agreed on terms to be acquired by the giant social network Myspace, Valleywag is reporting, citing no one. Despite the lack of attribution, Valleywag offers details that strongly suggest there’s something to this.
News Corp has bought Photobucket, Valleywag reports. Lehman Brothers, the startup’s investment bank, was reportedly looking for a valuation north of $300 million. Photobucket had 17 million unique monthly users when it was acquired and had $6.3 million in revenue during 2006, according to reports.
Wow, this has to burn Tom and the original 'founders' of MySpace. Looks like Photobucket's founders, whose product only gained real traction as a subservice of MySpace, will make out far better then the MySpace guys! Unbelievable.
Updated with Photobucket stats: MySpace is buying Photobucket reports Valleywag, even though it is not offering any details on the price MySpace is paying for the photo-hosting company. According to reports, Photobucket had hired Lehman Brothers to shop it around and was looking for $300 million.
ValleyWag's scoop: MySpace will acquire Photobucket, the parasite service that allows users to post photostreams to their MySpace profiles. MySpace cut the service off a few weeks ago claiming Photobucket violated the terms of service by placing ads on their content.
Hullo? Tom was not even the real founder and he did pretty well for an intrapreneurial employee.
The real founder is suing Rupert for $10B or so.
Tom and Chris (and about 4 other guys) are the founders, the guy suing is the founder of Intermix, which bought MySpace before Fox did.
It's that troubled provenance which helped dilute Tom, Chris and the other guys' stakes, ultimately leading to the situation they're in today-- paying founders of a much smaller and less important site more then they ever got from selling the (now) buyer of PhotoBucket!
@Sally Tenpenny: Sorry, but MySpace was scaled with Intermix money by Tom & Chris as regular employees. If you sell out early, that's what you get!
Well, right, that's exactly my point! Photobucket founders, with something arguably worth 1/100th of MySpace, make out like bandits while Tom, Chris, and the others are left with salaries and a nice but not "FU money" payout.
Leading Silicon Valley entrepreneur and strategy consultant Sramana Mitra, outlines a strategy on how News Corp. owned MySpace should charge Photobucket and all the other services that have sprouted around the MySpace eco-system. Link: http://sramanamitra.com/blog/885
Start a discussion:
Login with your username and password below. Or comment on this post via email.
Forgot your username or password? New User?