Ontela, a mobile photo upload and storage service, is backed by Disney’s Steamboat Ventures, among others.

Steamboat Ventures is said to be putting $40 million or more in additional capital into Ontela. Most of that will go to News Corp., valuing Photobucket at $60 million, say multiple sources. A portion of the new funding will go into the merged entity.

MySpace acquired Photobucket back in 2007 for $250 million, plus a $50 million earnout. This new deal marks that valuation down by almost 83%.

MySpace won’t answer queries about this story (in fact, they seem to have cut us off completely after this slightly critical story last week). Ontela keeps sending us to voicemail.

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Photobucket has grown steadily since the acquisition, and currently brings in 54 million worldwide users each month (Comscore). But MySpace never integrated with Photobucket, keeping their own separate photo and video platforms.

It’s been little more than a side show ever since the acquisition, and the founders have left to do other projects. With News Corp. scrambling to fix up its digital division, it’s no wonder Photobucket has been on the chopping block.

Best of all, the deal will bring in new cash to News Corp.

It’s not clear that the final terms have been worked out. But our source tells us that News Corp. will sell a majority stake in Photobucket, retaining some equity. If Ontela is the buyer, the merged company will take a new round of financing, with most of the cash going to News Corp., and part of it going into the new company.

Presumably this deal won’t look much different from eBay’s spinoff of StumbleUpon earlier this year, except on a larger scale. News Corp. gets a cash injection and retains a portion of Photobucket. And the service, combined with Ontela or another buyer, gets a new start.

Ontela didn’t return a request for comment. MySpace isn’t answering their phones or email. Everyone is being very quiet about the deal in general, in fact. We’ll update as we learn more.

Update: more details here.

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Photobucket attracted 53 million worldwide visitors in June (Comscore worldwide) and remains one of the most popular photo hosting sites on the Internet. The site first launched six years ago.

The two aren’t commenting on the timing of their exit or what they plan to do next. The earnout on the acquisition ended in May 2009, and it isn’t unusual for founders to leave once the acquisition has been fully paid out. Given their history, I’m sure they’ll be starting something new shortly.

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Shutterfly, an online photo sharing and printing site, is adding video capability to its photo sharing sites. Shutterfly is using video hosting site Motionbox to power its video sharing service. So when you upload a video to your Shutterfly Share site, it will also be stored in your Motionbox account. If you upload to Motionbox directly, you will be given the option to post your video to your Shutterfly Share site.

Users can also share videos to social networking sites including Facebook, MySpace, Twitter and Blogger can upgrade for unlimited video storage and HD-quality playback. The free account is a little limiting for storage—you can only upload ten video clips. For $30 per year, you can have a premium subscription which allows higher file size limits, unlimited video downloads and HD-quality playback.

I’m assuming that Shutterfly will monetize the addition of videos by offering customized DVDs of clips. Currently, the company offers users a variety or printing services where users can not only print their photos, but also create cards, mugs, invitations, apparel and more with photos emblazoned on each item. But I’m not sure how else Shutterfly can make money off of the video component.

Shutterfly, which IPO’d in 2006, is playing catch up to other more popular photo sharing sites, like Flickr and Photobucket, which both host video as well as photos. Even Facebook is becoming the go-to destination to share photos and videos. But Shutterfly, a vestige of the dot-com boom and bust, has managed to survive, despite being in an ultra competitive space that’s chock full of similar offerings and products.

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PhotoBucket, the FIM-owned photo sharing goliath that sees over 25 million monthly uniques, is taking aim at becoming the dominant photo sharing service on Twitter. The company has quietly launched TwitGoo, a media-sharing service designed from the ground up to be Twitter-friendly, allowing users to share photos with only a few clicks (and movies are on the way).

PhotoBucket used to be one of the small guys, coming from nowhere in 2006 to emerge as one of the Internet’s largest photo providers. Much of its initial growth was driven by its ability to thrive on a popular social site – in this case it was MySpace, which previously didn’t have many easy options for embedding photos. Now the tables have turned, as TwitPic has come from a similarly unknown position to become the leader in sharing photos on Twitter. Traffic may still be relatively modest compared to more orthodox photo sharing sites, but with Twitter poised to become a mainstream phenomenon, media sharing is going to take off fast. PhotoBucket competitor Imageshack launched its own service in February. And now PhotoBucket wants a piece.

TwitPic is the dominant player in this space with over 1 million users, but the one-man operation is having trouble coping with its rapid growth – an issue that will likely become even more of a problem as Twitter becomes more mainstream. Conversely, TwitGoo is built on the same infrastructure that powers PhotoBucket and its sister site TinyPic, which means that it should have no problem coping with a massive influx of new users.

TwitGoo’s other advantage is that it will likely be perceived as more friendly to brands than startup services like TwitPic. At this point this isn’t much of an issue, but as more brands begin to embrace Twitter and create their own applications that tap into the service’s API, they’re going to want to direct any media-sharing functionality through a trusted service. PhotoBucket and its parent company FIM have already built relationships with these brands. And the site also screens content for obscenity – something that no small-time operation can do effectively.

The service itself will be familiar to anyone who has used TwitPic or any of its competitors. Users sign in to TwitGoo with their Twitter credentials and then upload a photo to generate a URL shortcode, which they can then Tweet directly from the service’s web interface. The site tries to maintain the look and feel of the native Twitter interface, importing user backgrounds and consistently placing links where you’d expect them. And in the not-so-uncommon event of Twitter downtime, the service features a backlog queue, which allows desktop clients and other API users to queue their submissions for when the Twitter system comes back up.

Of course, one of the things that has made TwitPic so popular is that it is integrated into many Twitter clients, including favorites like TweetDeck and Tweetie on the iPhone. TwitGoo is on very few of them, though it is hoping to catch up on this front quickly and is launching with a full API. The service is also in discussions with a number of major Twitter clients, though it can’t discuss specifics yet. This is really where the battle will be won or lost – on Twitter it doesn’t matter how nice your infrastructure is unless its third party clients support your service.

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Photo-sharing on the Web keeps getting more popular as people transfer more of their digital photos from their the black holes of their computer hard drives to social networks where their friends and family can actually see them. Although Facebook Photos has emerged as the largest photo-sharing service in terms of users and is one of the fastest-growing of any size, it is still not the largest by the sheer number of images that it stores.

That honor, for the moment, goes to ImageShack, which currently hosts 20 billion images, I’ve confirmed with the company (for more background on ImageShack, read this post). Facebook holds 15 billion photos, according to a spokesperson there. But it should catch up by the end of the year. Facebook users are adding photos at a rate of 850 million photos a month, compared to 100 million photos a month by ImageShack users. Good thing Facebook just fixed its storage architecture to be able to handle the bigger load. Clarification: The numbers used in this post are for unique images. Facebook actually has 60 billion image files because it stores each image in four different sizes. But it stores 15 billion unique photos. The 20 billion Imageshack figure is also for unique images but ImageShack founder Jack Levin says that it is an estimate and there could be 10 percent duplication. The Flickr and Multiply numbers below I’ve also confirmed are unique numbers.

After Facebook and ImageShack, the third largest image warehouse on the Web appears to be News Corp’s PhotoBucket, with 7.2 billion photos. And then Yahoo’s Flickr comes in at 3.4 billion, which also includes some videos. Interestingly, coming in right behind Flickr in the photo count is social network Multiply, with 3 billion images. Multiply’s photo=sharing options are one of its main strengths, which make sit attractive to its core demographic of families and moms (an area where Facebook is still struggling). Picasa is probably up there somewhere, but Google won’t get any more specific than “billions” of photos have been uploaded “and millions of photos are uploaded every day.”

In fact, with the exception of Photobucket, none of these services publicly discloses its latest image count. I had to ask each company individually. Some companies like Shutterfly refuse to disclose their numbers, and they are a publicly traded company. I am still waiting to hear back from Kodak about KodakGallery..com, but the trend lines of these older photo storage services are not encouraging (see second chart at the bottom of the post). Below are the figures I was able to collect directly from each company:

Image Warehouses On The Web (numbers are total images stored)

ImageShack: 20 billion
Facebook: 15 billion
PhotoBucket: 7.2 billion
Flickr 3.4 billion
Multiply: 3 billion
Picasa “billions” (?)

While Google chose to be vague, Yahoo was completely transparent. It provided the following additional stats on Flickr:

Photos/videos uploaded daily: 3 million (implies 90 million a month)
Photos that are public: 50%
Photos that are tagged: 30%
Geo-tagged photos: 110 million
Number of unique tags: 38 million
Amount of traffic that comes from search engines: 75%

And Multiply shared with me the fact that its 12.5 million registered users are uploading an impressive 75 million photos a month. That comes to six photos per day per registered user, which is actually more than Facebook. Since Multiply encourages high-resolution uploads, it is handling 2.5 terabytes per day in image uploads. A little under one percent of its users, or 10,000 of them pay $20 a year for premium services such as unlimited storage and photo album backups. The one percent of premium users accounts for between 5 and 7 percent of all uploads.

If you look at comScore numbers, however, it is clear that Facebook is gaining the most usage overall, with 161 million unique visitors worldwide in February. Flickr is a distant but strong second with 76.5 million visitors. Photobucket is at 58.6 million uniques, Picasa is at 39.9 million, and ImageShack is at 33.2 million.

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If Facebook has one standout application it has to be Photos. Measured on its own, it is the largest photo site on the Web. A full 69 percent of Facebook’s monthly visitors worldwide either look at or upload photos, based on comScore data. And more than 10 billion photos have been uploaded to the site.

And it’s been pulling away from its competitors. As can be seen in the comScore chart above, as recently as last September the top three photo sites in the U.S. were running neck-and-neck, with Facebook Photos at 23.9 million unique visitors, followed by Photobucket at 21.3 million uniques, and Flickr at 19.5 million uniques. But by January, the number of monthly U.S. visitors going to Facebook Photos shot up 41 percent to 33.6 million. Meanwhile, Photobucket is up only 7 percent to 22.8 million, while Flickr is up 12 percent to 21.9 million. (Picasa is a distant fourth in the U.S. with 8.1 million).

In other words, Facebook increased the gap between its closest competitor (Photobucket in the U.S.) from 2.6 million monthly unique visitors to 10.8 million. On a worldwide basis, the gap between Facebook Photos and Flickr (which is the No. 2 site globally, and looks like it is about to pass Photobucket in the U.S.) went from 41.2 million unique monthly visitors in September to 87 million in December (the most recent data available, see chart below).

What accounts for Facebook’s advantage in the photo department? The biggest factor is simply that it is the default photo feature of the largest social network in the world. And of all the viral loops that Facebook benefits from, its Photos app might have the largest viral loop of all built into it. Whenever one of your friends tags a photo with your name, you get an email. This single feature turns a solitary chore—tagging and organizing photos—into a powerful form of communication that connects people through activities they’ve done in the past in an immediate, visual way. I would not be surprised if people click back through to Facebook from those photo notifications at a higher rate than from any other notification, including private messages.

But the tagging feature has been part of Facebook Photos for a long time. What happened in September to accelerate growth? That is when a Facebook redesign went into effect which added a Photos tab on everyone’s personal homepage.

(The chart above shows U.S. visitors through January. The chart below shows international visitors through December, with 153.3 million unique visitors for Facebook Photos, 66.7 million for Flickr, 45.5 million for Picasa and 42.7 million for Photobucket).

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Fox Interactive Media is eliminating more than just free lunches. News Corp’s digital arm is trimming nearly 100 jobs across several business units, including Photobucket, MySpace, Scout Media, Rotten Tomatoes, and corporate. The total comes to a little under 5 percent of FIM’s domestic U.S. workforce, and about 3 percent of its global workforce of 2,900. We have added the amount to our Layoff Tracker.

Although MySpace employs 1,600 of those workers, a check with sources close to FIM suggests that the vast majority of job cuts (80 to 90 percent) are happening elsewhere. One of the hardest hit business units is Photobucket, where 22 people are losing their jobs. The corporate offices are also absorbing a substantial portion of the layoffs.

In an official statement, FIM acknowledges:

Several of the groups within FIM are eliminating some jobs and repurposing others. It is important to note that we continue to hire in many areas.

Separately, a spokesperson for MySpace notes that, on a net basis, MySpace plans on ending its fiscal year with more people than it currently employs. And other sources confirm that MySpace is still hiring in key positions such as business development, whereas the other FIM business units are not hiring as much or have actual hiring freezes.

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On the heels of a major upgrade earlier this week that added facial recognition and video-editing features to its Picasa photo management service, Google added a new Explore page today that shows off the most popular public photos uploaded by members. In addition to the featured photos, shown in a 3 X 4 grid, the Explore page also shows the most recent photos uploaded in a slide-show widget. Below, it offers a list of the most popular tags. For instance, here are pictures tagged “New York.”

The Picasa Explore page also has a Where In The World? game that is mashup opf geotagged photos and Google Maps. It shows you a photo and you have to guess where it was taken. If you guess wrong, it tells you how far off you are in kilometers. This is fun for outdoor photos, but when people upload geotagged photos of a generic apartment of a plate of food, it can become tricky.

It is not clear how Picasa chooses what photos to feature, but it is obviously borrowing from Flickr’s Explore page, which shows photos based on its on ‘interestingness” algorithm. I find Flickr’s photos much more interesting than Picasa’s (keep working on that algorithm, fellas). Flickr too has a map mashup that shows geotagged photos on a map (although, it is not a game).

By adding new ways to discover public photos, Picasa is taking on Flickr, Photobucket, and Facebook Photos in a more direct way. Globally, Picasa passed Photobucket in July with 48 million visitors compared to Photobucket’s 43 million, according to comScore. It still trails Facebook Photos (97 million unique visitors) and Flickr (63 million). In the U.S., it is much further behind, with only 8.3 million monthly visitors, compared to 18.3 million for Flickr, 23.5 million for Photobucket, and 25.4 million fopr Facebook Photos.

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Photobucket, one of the web’s most visited sites and home to billions of photos, is introducing a new feature dubbed “Group Albums”. The feature will allow multiple friends to add their photos and videos to a shared album, which can be password protected and moderated by the Group’s owner. Group Albums aren’t currently active on the site – Photobucket expects to have them live by Wednesday morning.

Group Albums will support sharing via emailed invitations and RSS feeds, and will allow an album’s contents to be presented in a slideshow. Each album will have a maximum size of 1GB.

The feature will be handy for many Photobucket users, but it’s hardly novel. Similar features have been on social networking sites like Facebook for years.

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Previously the API was released only to signed business development partners, and had limited functionality. Functionality includes log in via OAuth, album creation and editing, content uploading, content sharing via email, search and metadata access (tags, titles, descriptions, etc.).

Photobucket is also promoting third party services on their API, at gallery.photobucket.com.

Flickr has had an API available since late 2005, with hundreds of third party applications built on the base service.

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Starting tomorrow Photobucket will be able to edit images on the service in-browser courtesy of technology provided by FotoFlexer.

The deal, which is highly reminiscent of the one recently struck between Flickr and Picnik, allows for things like resizing, rotating, coloring, decorating, beautifying, and distorting.

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Peter Pham, VP of Business Development over at Photobucket(acquired by FIM last May) has resigned to head up a new company, BillShrink, as CEO.

BillShrink, which has been in development for the past seven months and largely under the radar, will launch in a couple of weeks with the aim of helping users save money. Its strategy lies in suggesting better service packages for select verticals, starting with cellular phone plans.

Consumers will answer a set of cell phone service-related questions and optionally submit their wireless account username and password. The service will then extract your usage habits, assess your answers, and suggest an optimal set of wireless package configurations from the wide range of plans and add-ons that providers offer. This Orbitz-like result set can be tweaked by changing your preferences, for example, in favor of more coverage over lower prices.

Much of BillShrink’s power will come from its web scraping and normalization engine that will gather and make sense of the deals provided by the various cellular providers. The company aims to improve on suggestion services like LowerMyBills by moving beyond comparison grids and making clear suggestions that have been generated by the analysis of many factors.

BillShrink will eventually move into other verticals, such as credit cards and insurance plans, with the end goal of becoming a destination that consumers can trust and return to frequently for spending advice. The company will primarily generate revenue from lead generation, similarly to Mint.

Schwark Satyavolu and Samir Kothari co-founded BillShrink, which has taken funding from Bessemer Venture Partners.

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The only downside is that MySpace has yet to provide log in integration with Photobucket, and hence MySpace users will not only require a separate Photobucket account, they’ll also have to log in to Photobucket from within MySpace to use the feature.

The addition of Photobucket support in MySpace has certainly not been quick in coming (MySpace acquired Photobucket in May for $300 million) but it is a step in the right direction. Photobucket has continued to grow since being acquired by MySpace, and has recently passed the 56 million member mark, up from 36 million in March.

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Shareapic’s model is simple. It offers the same basic service other free hosting sites offer; upload your pic, get an embed code then display the pic on your site of choice. But Shareapic believes that their success in hosting files and profiting from this should be rewarded. Every registered Shareapic user gets a cut of any advertising revenues Shareapic makes. Primarily this isn’t based on advertising revenue made against each image (although users can add their Adsense code for some revenue via Google), payments are calculated based on image views. Their example:

If in month one Shareapic calculates to distribute $1,000 to our members, we will first tally up the total number of image views for that month. Using these two numbers we can determine the respective payouts for each user. If there were a total of 500,000 image views for the month, image views will equate to $0.002 each (1,000 divided by 500,000), or $2 per 1000 image views. If you’re posting lots of pics in forums, MySpace or eBay, you can see how easy it is to earn quite a bit of money!

Perhaps the only draw back is that Shareapic doesn’t disclose the revenue share; it may lack transparency but it’s still more than other sites pay in this space, which is zero.

We’ve covered two other companies that paid members to participate today, AGLOCO which went to the deadpool, and Capazoo, both of which had dubious multi-level marketing schemes (some would suggest pyramid schemes) and usually come with a catch. By comparison Shareapic has an honest model, so honest in fact that it should be the way of the future. What Shareapic does is recognize that users of a free service provide a financial benefit to the provider, and that in return profits provided by user participation should be shared (at least in part) back. Imagine the hours and hours put in by Facebook users or users of other sites; they may be free services but the providers benefit from each participant, and in the case of Facebook’s valuation, greatly. Expect to see more sites like Shareapic who value their users to the point that they offer financial rewards in return; it’s not only a smart marketing pitch it’s also fair recognition of your time and your effort in a market where many have business models that expect a free ride from their users. Build it and they will come may well be replaced with reward them for their time by sharing profits, and we’ll all be the winners from that.

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Slide provides widget based photo slideshows that users can embed in a range of social networking sites including MySpace, Facebook, Bebo and Friendster.

Slide has impeccable backing, being founded by PayPal co-founder Max Levchin and funded by Mayfield Fund, Khosla Ventures, BlueRun Ventures and Founders Fund with a rumored round of $20million in November 2006.

Slide’s Facebook apps alone have a combined usage number in excess of 10 million users. comScore reports that Slide was serving 117 million unique visitors a month as of April 2007.

Slide competes directly with services including RockYou, Flektor, and Photobucket.

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The new plug-in gives users of participating web sites the ability to search for billions of publicly stored photos, videos and images from Photobucket’s extensive library, along with access to their own content from existing Photobucket media accounts, all without leaving partner sites.

Photobucket Media Plug-in 2.0 partner sites include: Freewebs, Gaiaonline.com, LiveJournal, Piczo, Rockyou.com, Singshot, Slide.com and Tagged.com.

Photobucket CEO Alex Welch said that by adding search to Photobuckets Media Plug-ins will deliver a more compelling service option for Photobucket’s partners.

25 million searches are conducted daily across Photobucket’s public library of photos, images and videos. The Photobucket service is a top 50 site online according to Alexa; their acquisition by Fox Interactive May 7 seems to have done no harm to the wildly popular service and the launch of this new service would seem to indicate that the company continues to thrive under their new owner.

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We had earlier reported that MySpace made both of these acquisitions; in fact parent company Fox Interactive was the buyer.

See Photobucket and Flektor at the Techcrunch Database.

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Two separate analytics services, though, show that the Photobucket deal will bring very few new customers to MySpace because of the nearly 100% overlap in users.

Nielsen/Netratings says MySpace has 55.9 million monthly unique visitors, compared to Photobucket’s 14.7 million. Combined though, the sites will have just 57.7 million unique visitors. That means just just 1.8 million of Photobucket’s visitors don’t currently visit MySpace, too. That’s a 3% gain for MySpace. If you count just new users, MySpace is paying $167 for each one of them.

Comscore tells a similar story, showing that 77% of Photobucket’s users are also visiting MySpace regularly.

As a point of comparison, the overlap between Google and YouTube was even greater according to Comscore. At the time of the acquisition in October 2006, 80% of YouTube’s users also visited Google regularly.

MySpace already offers its users the same basic services as Photobucket (photo and video sharing). If they aren’t buying Photobucket for the product and they aren’t getting any new users…then why are they buying them? To limit the availability of Photobucket features and all that user content to other fast-growing social networks without these features? Because they can? Let’s see what MySpace has to say about this as the deal closes.

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Google paid $1.65 billion in stock for YouTube. By the time the deal closed, the Google stock was worth nearly $1.8 billion. Photobucket is being acquired for just less than 1/5 of that – $250 million plus an earnout of up to $50 million

At the time of the announcement of their acquisition in October 2006 YouTube had very little revenue. Photobucket, however, is on track to blow through their projection of $25 million this year.

Also, the relative sizes of the two companies aren’t that far off. At the time of the acquisition, Comscore suggested that YouTube had approximately 25 million U.S. monthly visitors. Today, Photobucket has around 20 million U.S. monthly visitors, or 80% of what YouTube had when it was acquired.

Photobucket has 40 million registered users and is gaining another 85,000 or so per day. Their users are highly active, and upload a lot of content to the network. YouTube’s registered users were far below Photobucket’s 40 million at the time of their acquisition. YouTube had (and still has) a lot of traffic coming to the site to view videos, but far fewer users actually creating and posting content.

Leaving revenue aside, the traffic numbers indicate a comparable price of $1.3 billion for Photobucket, 4x the price they actually received from MySpace. To look at this another way, YouTube was paid about $67 per unique visitor. Photobucket got just $13.

Did Google overpay for YouTube? Did MySpace get Photobucket for a steal? Perhaps both. But in the end, being no. 1 in a category means you get a premium on acquisition. In the case of YouTube, that premium seems to be about 4x.

Another factor: Photobucket just didn’t generate the bidding hype that YouTube saw. It looks like the final bidders were IAC and MySpace, with a number of other bidders falling off in the last few weeks (perhaps spooked by the MySpace blockage of Photobucket videos).

In a year or so this deal is likely to look as brilliant for NewsCorp (which owns MySpace) as the MySpace acquisition was. Some would argue that they play dirty poker, but shutting Photobucket down at a crucial point in the acquisition negotiations was a brilliant move, and may have shaved hundreds of millions of dollars off of the purchase price.

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Photobucket has been looking for a buyer since March, when they hired Lehman Brothers to help sell the company. They were looking for $300 million or more, but may have had few bidders other than MySpace.

The companies have been in serious acquisition discussions for the last couple of weeks – 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.

Our first coverage of Photobucket was a year ago. They’ve raised $15 million over two rounds of financing.

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But the interesting part of this story is what I don’t know yet – who blinked first and why. I’ve asked Photobucket if they made any concessions to MySpace and got back a long but essentially content-free reply that boiled down to “we get along very well with MySpace.”

I anxiously await Photobucket’s April Comscore numbers to see how traffic to the site was affected. Early indications from Alexa suggest traffic actually trended up over the last couple of weeks, although the massive press the story received could have had an impact. Comscore numbers will be much more reliable. Regardless of traffic, Photobucket was probably anxious to put this behind them and avoid spooking any potential acquirors looking at the company.

MySpace may have their reasons for ending this, too. They certainly showed that they were willing to execute a larger partner, and widget companies will think thrice before trying to slip any ads into their products down the road (and for the record, its far from clear that Photobucket was doing this). MySpace made their point quite clearly. However, the negative press surrounding the incident was perhaps more than they anticipated. With their point made, allowing Photobucket back in had little downside.

Been hanging around any tipsy MySpace or Photobucket execs lately and hear something good? Let me know.

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From my perspective this looks like MySpace just found an excuse to send a big middle finger to the largest independent widget company in the hope of disrupting their ongoing acquisition talks. Om Malik sees things differently and thinks Photobucket practically asked for this blockade (although see his more recent take). Robert Scoble calls Photobucket and services like it “parasitic.” Nick Carr says this is all basically inevitable, regardless of who’s to blame.

But the important question isn’t who’s fault this is. What is more interesting looking forward is, can Photobucket survive without MySpace?

I say yes.

Photobucket isn’t like YouTube, which was deeply unprofitable from day one. They’ve been at or near profitability for a long time, dipping back into the red to grow headcount and infrastructure. They have a diversified revenue stream – some from premium accounts and most from on-site advertising.

I took a look at their leaked revenue numbers from last month. Most of Photobucket’s revenue is generated from on-site advertising – 63% of it in 2005, and 68% in 2006. In the leaked documents the company says they’ll do $32 million in revenue this year. That projection is probably dead on because it is being distributed to potential buyers – any future variance could kill a deal in progress and so they are probably being very conservative.

That advertising revenue isn’t going anywhere. Unlike 2006, Photobucket is now set up as a destination site – a good hedge against exactly what MySpace did last night. The company says that over half of video views are now on their site (and generating advertising revenue), way up from a year ago. They also say that only 25% of their users embed videos at MySpace. At their current growth rate, even a permanent ban only sets them back six months or less in terms of users and page views.

And many MySpace/Photobucket users will simply leave MySpace and go to one of its many competitors rather than lose the ability to embed their Photobucket media. Re-creating a profile at another social network takes a lot less time than re-uploading hours of video. In the end, Photobucket could prove to be stickier than MySpace.

Photobucket execs were in a chipper mood today when I spoke to them, noting that traffic to the site is way up and that they’ve had more press attention in the last 24 hours than in the last year combined.

Update: See this BusinessWeek article as well.

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As with previous outages, embedded videos work fine until the user makes any edit to their profile. At that time, links to Photobucket are automatically replaced with “…” or removed, causing the embed to fail.

Photobucket has north of 40 million registered users.

This is turning into a habit for MySpace, which usually claims bugs, security issues or terms of service violations were the cause of a shut down. In January MySpace mysteriously shut down all Flash widgets on the site for 2.5 hours. An Imeem blockade came next. Vidilife, Stickam and Revver have been permanently banned.

Today’s shutdown of Photobucket comes suspiciously close to news that Photobucket is up for sale (Fox, MySpace’s parent company, was notoriously rumored to be furious when YouTube sold to Google). It seems that just when a company starts to break out from the pack, MySpace finds a security breach and shuts them down. Even though MySpace has flat out denied it to us, it is our belief that these blockages are meant to send a clear message to widget companies – don’t forget that MySpace is in charge.

More as this develops. I have a request for comment into MySpace PR, but I don’t expect to hear back from them until the morning.

Update: see The Photobucket blog for more details (read the comments to that post – Photobucket users are really angry.

Update: Photobucket CEO Alex Welch just sent me the following email:

Mike,

Tonight MySpace took the decision to prevent Photobucket users from posting
certain types of media to their MySpace pages.

This action by MySpace means that millions of pieces of content created by
our users may no longer be available on MySpace. This content represents
hundreds of thousand hours of effort on the part of our users – hours
invested using the editing, remixing and management tools and features
available only on Photobucket. Conservative estimates put one in every two
page views on MySpace containing content from Photobucket users. This step
will have a drastic affect on the usability and appeal of MySpace.

More importantly, by limiting the ability of its users to personalize their
pages with content from any source, MySpace, is contradicting the very ethos
of personal and social media. MySpace became successful because of the
creativity of its users and because it offered a forum for self-expression.
By severely restricting this freedom, MySpace is showing that it considers
its users a commodity which it can treat as it sees fit.

Faced with the prospect of recreating their content using only the limited
resources available on MySpace, we believe users will vote with their feet
(and their keyboards) and turn instead to the other sites that Photobucket
links to on a daily basis. Photobucket users link to 300,000 different Web
sites every day from their Photobucket albums – MySpace is just one of those
sites. This action by MySpace in no way affects Photobucket albums. The
content remains available in user albums for linking to other Web sites,
discussion boards, forums, e-commerce sites and blogs.

At Photobucket, we’ve seen a steady and growing trend by users towards
linking to a range of social networks – not just MySpace. If MySpace
persists in blocking Photobucket and other personal media sites, users will
transfer their loyalties to a combination of these networks. Photobucket’s
business model is built on allowing users to support multiple identities by
providing a central resource for creating, enhancing, managing and sharing
their content. Our business is in no way dependent on being able to link to
MySpace alone.

We believe this action by MySpace is a retrograde step in the evolution of
the Web and an unacceptable attempt to limit the freedom of the very people
who are its lifeblood – its users.

-alex

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