MySpace Acquiring Photobucket?

Although an official agreement has yet to be announced, reports from Reuters and elsewhere have social networking site MySpace in a preliminary deal to acquire photo sharing service Photobucket for around $250 million.

Photobucket is primarily an image and video hosting service, acting as a media repository for users who want to share their content via other sites, most notable MySpace but also including FaceBook, Bebo, Xanga, and Friendster, along with blogs, online auction listings, and other common online activities. In four years, Photobucket has managed to become the largest single player in the online image hosting market, accounting for about 40 percent of traffic to photo-sharing sites, managing to sign up over 40 million users, and hosting over 2.8 billion images. (In comparison, Yahoo’s photo services, Flickr and the soon-to-be-defunct Yahoo Photos, garner about 10 percent of photo traffic.)

However, Photobucket’s recent growth has gone hand in hand with MySpace, with data from market research firm Hitwise finding that nearly 60 percent of traffic to Photobucket originates from MySpace.

The news of MySpace possibly acquiring Photobucket comes after a dispute between the two companies; last month, MySpace briefly blocked traffic from its site to Photobucket, alleging Photobucket was encouraging its users to offer ad-supported videos and remixes on MySpace, in violation of MySpace’s terms of use. The two companies were able to resolve the dispute, with PhotoBucket saying that its users must comply with MySpace terms of service if they want to share material stored on Photobucket via the social networking site. Photobucket CEO Alex Welch wrote at the time: “we’ve established open lines of communication and procedures with MySpace;” those lines of communication may have led to talks of acquisition.

If MySpace takes over Photobucket, it may be bad news for Photobucket users who store content on the service, but who don’t tie in with MySpace. Although MySpace would seem unlikely to simply shut down Photobucket services which have nothing to do with their social networking site, their focus going forward will certainly be on offering improved services and capabilities to MySpace users, rather than to users of other sites and MySpace competitors.

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