Social Media

Photobucket vs MySpace: Potentially Explosive Facts


We've held off posting about MySpace vs Photobucket, largely because we're in the middle of this and we're bound to piss off people on both sides. But there's a lot of misinformation being spread, too.

So to be clear, I think Photobucket is a great company that realized a great opportunity. I also think MySpace is a great company that hasn't embraced the opportunity to make a lot of money from the widget ecosystem. And for those who are unaware of the news - Photobucket is reporting on its blog that MySpace has blocked the embedding of Photobucket videos. As of noon today, slideshows and images can be embedded.

Photobucket's Achilles heel, which we emphasized last week when they became suspiciously communicative with the press (indicating that they're trying to sell the site), is that relations between MySpace and Photobucket have always been poor. The hate between the two companies is mutual, but Photobucket has more to lose, and should be sucking up to its unpredictable master. Here are some of the Photobucket tidbits that have yet to be discussed openly:

—Realizing the control that social networks have over it, Photobucket has begun to build itself into a fully fledged destination. Social networks partnered with Photobucket on the assumption that it was non-competitive. (Tension.)

—It's generally thought that MySpace could have saved a lot of bother by acquiring Photobucket. There were talks. MySpace didn't bite.

—A couple of sources say that Photobucket wanted to sell to Google at one point; Google wasn't buying

—Fact is, everyone speaks to everyone in this game. The number of rumors about buyers is ridiculous.

—MySpace's claims about terms of service violations are questioned by "conspiracy theorists". An argument in their favor: anything that Brad Greenspan touches seems to get blocked, which may be a sign that MySpace uses its power to protect business interests and even enact revenge. I was originally in this camp, based on Peter Chernin's statements about YouTube piggybacking on MySpace. Now, not so much.

—There was indeed a violation of MySpace's TOS, say sources. One example is Spiderman slideshows. These were themes applied to slideshows to promote the Spiderman movie. They were launched on April 5th and MySpace cites ad-supported slideshows in a statement: the pieces fit. However, it's videos that are being blocked.

—Photobucket says it employs people to screen all the content that is hosted.

—Photobucket is very good at communicating with the press, while MySpace, to the best of our knowledge, has spoken to nobody apart from through official correspondence from the PR department. They do, however, correspond with widget providers when they get blocked.

- at 68% (percentage of revenues from advertising) of $9.3 million in 2006 revenues on 1.5 billion pageviews a month, Photobucket is delivering a $0.35 CPM [from an email source, which I expect is using Techcrunch as a reference]

24/7 Wall Street puts Photobucket's price at $1 billion. Ridiculous. With MySpace's support, it may be worth something in the $300 million range. Without it, I fail to see who would buy.

—Hitwise says nearly 57% of Photobucket's traffic is referred by MySpace. Photobucket says this is wrong - Hitwise has errors. 25% is the real number, they told us a few months ago. Either way, Photobucket needs MySpace.

—Although frequently painted as the bad guy, MySpace does make amends with add-on providers. We've had correspondence with a number of services that were blocked and later reinstated, albeit with a lot of pressure applied. At the end of March, a massive "MySpace Comments" site was blocked and later reinstated. We had correspondence on this, but didn't publish. MySpace is worried about its liability when such sites carry copyrighted content.

—Another example of MySpace's forgiveness: Imeem was blocked for hosting copyrighted music, and reinstated once they'd sorted the licensing. If MySpace was smart, it would be either investing in or extracting fees from Imeem, which is currently one of the fastest growing social networks.

—All the evidence suggests to me that MySpace users will not immediately flee if MySpace ever decides to block Photobucket in its entirety. That's wishful thinking from the tech crowd, who tend to be egalitarian. But, long term, the pieces are aligning in favor of Facebook, which has shown itself to be more open to outside development. There is no social network that rivals the scale and flexibility of MySpace (Facebook does not allow the same profile editing, for instance), but all the other social networks have shown a willingness to open up. If the widget developers feel threatened, and good alternatives are provided, MySpace will eventually come unstuck. Ironically, the best way for MySpace to maintain its monopoly is to open up.

The Solution

There's an easy way for MySpace to maintain its dominance and for Photobucket et al to make money. MySpace should charge widget developers based either on the number of embeds, or create an ad revenue sharing system for the bigger providers. A proposed rev share system for YouTube embeds may or may not happen.

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