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March 29, 2007

How Much Is Photobucket Worth?

Michael Arrington

40 comments »

Silicon Valley/Colorado based photo and video sharing site Photobucket has 36 million registered users and adds another 85,000 per day. If the growth rate continues, they’ll have 60 million users by the end of the year. More users visit Photobucket each month - 17 million, than Facebook. 56% of those users are under 35, and 52% are female. 300,000 unique websites link back to Photobucket. They move a lot of data.

Fortune wrote a long article on the company yesterday - the first time mainstream press has noticed this already large startup.

Photobucket generates revenue through premium accounts, and advertising on the site. The rumor is that they are nearing break even, and aren’t spending much of the $15 million they’ve raised in venture capital ($8 million or so is left in the bank).

Basically, Photobucket is kicking butt. So the question is, how much are they worth?

Lehman Brothers, the investment bank they’ve hired to explore a sale of the company, is saying $300 - $400 million or more in private talks with potential buyers.

Included in the documents distributed to buyers is a revenue breakdown of the company by year. In 2005, Photobucket revenue was $4.35 million, growing to $9.34 million in 2006 and on pace to hit over $32 million this year. Last year, advertising accounted for 68% of revenue. This year, they estimate it will grow to 79%. See full revenue breakdown in the image below.

Photobucket wouldn’t comment on this article, but our sources indicate that a number of acquirors are very interested in the company at this price. Given revenue growth and another deal in this space, this might be cheap.

It also looks like Photobucket will be sporting a new home page design soon. Screen shot is below.

  • Sphere It

This entry was posted on Thursday, March 29th, 2007 at 2:57 am and is filed under Company & Product Profiles. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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    March 29th, 2007 at 5:02 am

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  7. Confirmed: MySpace To Acquire Photobucket For $250 Million

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  8. Confirmed: MySpace To Acquire Photobucket For $250 Million « Camtastic- Digital Camcorder Blog

    May 7th, 2007 at 1:10 pm

  9. Photobucket Was A Steal v. Google/YouTube

    May 7th, 2007 at 1:59 pm

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Comments

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  1. chrisco

    March 29th, 2007 at 3:19 am

    Nice chart… how about a walk through the valuation metrics, assumptions used, etc. Cheers, chrisco

  2. chris

    March 29th, 2007 at 3:19 am

    If photobucket is worth 1/4 of Youtube, then Excite’s acquisition of Bluemountainarts in 1999 was a steal!

  3. Darren Stuart

    March 29th, 2007 at 3:45 am

    I think this is more valuable than youTube because they are not just video.

  4. JonB

    March 29th, 2007 at 4:06 am

    I’ve been doing the maths (probably badly) but it appears that they generated $2M in advertising in quarter 4 of 2006. If we use the 17M visits per month that equals $1 of advertising income per 26.5 visitors per quarter.

    Does that seem right?

    The reason I ask it that my website (a clinical search engine) gets over 1.5M searches per quarter. If we equate one visit equalling two searches (on average) that would give an income, from advertising, approaching $30,000. We get about 1% of that. Partially down to the poor placement of google ads (these will be moved shortly to a more prominent place).

  5. Rex

    March 29th, 2007 at 4:13 am

    Their value has probably gone up due to the fact that they are compatible pretty much everywhere. Mainly MySpace of course, but you can put your pictures just about anywhere with their service.

    Rex

  6. Scott Yates

    March 29th, 2007 at 4:48 am

    First, good job mentioning that it’s a Colorado startup. They have a sales office in SV, but it’s a Colorado company, and unlike Sacramento we do talk about our startups!

    As for the valuation, if $32MM in revenue is correct, a sale for $300MM is 10X revenue. That seems fair, and an absolute bargain compared to the 100X for YouTube, especially given that PhotoBucket wouldn’t appear to have nearly as much legal exposure.

  7. David Pooxi

    March 29th, 2007 at 5:28 am

    I do believe that the growth estimates are completely out of reality ;)

    Revenue for 4Q2006 is about $3M and should grow to $32M for 4Q2007 within a year? That means 10x more in a year?

    I bet that they can not cope that revenue growth.
    It does not make any sense.

    What do you think?

  8. Paul Montgomery

    March 29th, 2007 at 6:17 am

    The online image industry has been the redheaded stepchild ever since video got hot. There is still a lot of activity going on there, though, and it’s great to see Techcrunch reporting it.

  9. Direct Textbooks

    March 29th, 2007 at 6:33 am

    Don’t know about the growth, but they’ve been claiming to be profitable for a long time, that’s a major difference than most hosting sites. Also they run the anonymous but great tinypic.com as well.

    I like them, which means they’re going down in flames.

  10. rack pallet

    March 29th, 2007 at 6:42 am

    This company is easily worth 300mm ….

    - I suggest they sell it; asap … as the worth is in the users -

    - and the users will switch as soon as the next better things comes -

  11. bdb

    March 29th, 2007 at 6:44 am

    David, I think you misread that. It is $32M for the year of 2007, compared with $9.34M for the year of 2006. So, It means ~3.5X in a year. Given the addition of 85K users/ day, does that make more sense now?

  12. Narendra

    March 29th, 2007 at 6:56 am

    Sorry, anyone can write a spreadsheet with revenue going from $9M to $32M. Reality is a bit more difficult.

    That said, this is a solid company and for $80-100, it would be a good deal. The question is who really needs a photo-sharing property right now? Maybe an old media company that is finally moving into new media?

  13. jughead

    March 29th, 2007 at 7:45 am

    Sorry to go off subject but I found this press release TechCrunch may be interested in and I can’t find an easy way to submit a story/news event on this site.

    RawVoice (Blubrry) acquires TechPodcasts.com

    http://www.transworldnews.com/.....fault.aspx

    Not earth shattering but tech related and interesting nonetheless.

    Jughead

  14. Doug

    March 29th, 2007 at 7:46 am

    Based on http://www.dnscoop.com/ photobucket is valued at $52,440,000. I’m not too sure of the math accuracy, but dnscoop is fun site to play around with!

    BTW, dnscoop.com values youtube at $904,700,000 - not too far off from the amount google paid… and TechCrunch is valued at $9,158,400. Michael, who should I write the check out to?

  15. Amy Wilsch

    March 29th, 2007 at 7:54 am

    One of the biggest issues with all of the online photo companies is that they get a lot of traffic - because people are uploading photos. Often they have more uploads than they do visits. Integrating themselves everywhere (like Flickr vs. Yahoo photos, Kodak easyshare or even Snapfish) is one way to make sure that traffic is actually doing something on the site (eyeballs = advertising) other than just adding photos no one ever looks at, taking up bandwidth - which is a growing issue.

  16. matt

    March 29th, 2007 at 7:58 am

    big question is whether myspace cuts them off, pre a sale or announces their own. hi risk for any buyer outside of myspace

  17. Rajeev Vashisht

    March 29th, 2007 at 8:34 am

    Cool figures guy, did you complete a Financial management course recently.

    Just kidding,
    Good to know Internet is not just a bubble, but you can make hey if you have the substance.

    http://www.tekno-world.blogspot.com

  18. SomeGuy

    March 29th, 2007 at 9:01 am

    What’s interesting to me is how the “Other” category pops from $500K to $1.3M in 4Q07. What are they planning? I’m guessing a big push into print and hardgoods (cards, invites, etc.)? Maybe a partnership with a retailer? Any other speculation from the Commenting Crew?

  19. Marc

    March 29th, 2007 at 9:34 am

    While all these sites are very successful, and I am sure they are worth a lot of money for the user base, I think there is a conceptual flaw in the architecture. Uploading files to a central website makes this website a target for hacking and is a more risky architecture than something distributed like P2P. Then again P2P requires a client on all side which is a barrier to entry. I think ultimately this services will have to evolve towards an hybrid of uploads/P2P or make room for a new wave of services based on the right architecture.
    This is why I like Quickeo (http:/www.quickeo.com - disclosure: I am involved in the company), which is based on P2P model with synchronization to hosted servers (can any hosting service, not a central one). Definitely a more viable model in the long run…

  20. TallFreak

    March 29th, 2007 at 10:44 am

    I’d be curious to know how many of their users use photobucket because of myspace. I’m sure photobucket wouldn’t be anywhere without myspace.

  21. Allen

    March 29th, 2007 at 11:43 am

    Photobucket can attribute some of its early success to the gamer demographic, posting up screen shots etc. Not sure if the move to Machinima ala Youtube has effected this, but I’m sure penetration into the gaming market has suffered due to video.

    Srill it is a solid company, and has the loyalty of many gamers who want to share screen shots (or flame eachother visually), also Imagedump, its funny no one ever mentions them.

    @Scott Yeats #6, Im glad you got a kick out of my prior post, it was of course a parody of the FC ruleset, and of course we do talk about our startups here. However I do still believe that the “sound of one hand clapping” is the best way to operate for small start ups engaged in sectors with 900lb gorillas running around…..

  22. Scott

    March 29th, 2007 at 12:02 pm

    Why is it that two of the largest “hosting” websites in the world can’t seem to get profitable?

    YouTube - Alexa Rank 4 - 2006 Revenue $15MM
    PhotoBucket - Alexa Rank 52 - 2006 Revenue $32MM

  23. Josh

    March 29th, 2007 at 1:16 pm

    Another photo sharing site? Why are there so many of them around? In the age of Amazon S3, why is this still an unsolved problem?

    I really don’t get it, they are all the same…

  24. Antik

    March 29th, 2007 at 3:25 pm

    Photobucket is alike webshots, but YouTube or some other video sharing sites are of another quality. To each his own!

  25. Garth

    March 29th, 2007 at 3:47 pm

    I would say photobucket is more about hosting than community, sure they added some sharing features, but the bulk of their traffic is stuff like ebay auctions and myspace profiles where they just host images and their brand is nowhere to be found.

  26. David Mackey

    March 29th, 2007 at 8:33 pm

    Would like to know more of the technical details of the servers, etc. that powers their service. Any idea where I might find that?

  27. Damon Billian

    March 29th, 2007 at 11:20 pm

    “I’d be curious to know how many of their users use photobucket because of myspace. I’m sure photobucket wouldn’t be anywhere without myspace.”

    I am sure that they would still do well. Unless I am wrong, I believe a good percentage of their traffic pre-MySpace was image hosting for things like eBay auctions.

    Personally: I love Flickr:)

  28. FrankRizzo

    March 30th, 2007 at 10:36 am

    I would love to know who their PR firm is? This is company that went from noplace to everyplace in a matter a minutes? Is that the just the Arrington effect? I dont think that is all of it. Clearly this PR firm is worth about $275MM since I wouldnt buy Photobucket for more than 2-3x sales or 10-12ebitda. I dont see the barrier - i dont see large switching costs that would make it worth more than a regular no-barrier business like a Subway franchisee

  29. wayne lambright

    April 2nd, 2007 at 9:33 am

    Smart investors know good investments are rare opportunities. Owning the leader in the photo–hosting marketsector for a mere $10 per user acquisition is a smart play.

    Likewise, building on that investment with another strong niche player-one currently serving Bay Area craigslist and eBay users-makes a smart play even smarter.

    Let’s walk through the numbers, apples to apples: If you search craigslist “for sale” in the Bay Area you’ll find ImageDeposit.com owns a 10% marketshare of Photobucket users.

    ImageDeposit.com has 40,000 Bay Area users and 53,000 users in total. How did we get there in just three years? Well we’re not giving away the secret sauce–just yet–but I will say this, our current acquisition costs are just under $0.25 per user. If you want to know how to make your smart investment even smarter–call Wayne Lambright at (415) 750-1921

  30. john griffin

    April 11th, 2007 at 9:38 am

    Still a bigger fan a flikr but impressed by Photobuckets meteoric rise. They must have some great JVs in place to generate that kind of traffic.

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