There was a lot of fingerpointing, denials, and “he said, she said” going on today as everyone digested the news that MySpace had blocked PhotoBucket’s 40 million members from embedding videos into their MySpace pages.
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.
Comments
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Posting at 4 am…nice.
I liek the analysis, but I think this is a bad day for Photobucket. We’ll see if you are right though after some time.
“At their current growth rate, even a permanent ban only sets them back six months or less in terms of users and page views.”
This is the key cock up in your analysis as they wont be growing “At their current growth rate” if Myspace has anything to do with this.
Of course they will just have to swallow the bullet and take off the advertising that they incorporated into their videos, and beg that Myspace forgive them for past arrogance.
You are right.
Photobucket had their moment of glory for the past 3-4 days and still have it. Until now they have been like in the second row of web 2.0 but with this problem with myspace, probably they’ve jumped right on the first row with a red ribbon all over them.
So, eventually this situation will get back to them but in the positive way and will also increase their market revenue and price. If they realy want to sell themselves.
Does anyone know why MySpace doesn’t host their own pics? It seems inevitable that they would provide some kind of paid service.
I wonder how many times are we going to see this kind of crappy decissions again. It has never worked in the past for any other site in the world that i know, and i dont quite see why myspace is going to get a different result than the miriad of blind managers that attempted it previous to them.
You can’t expect that kind of competing strategy to work over the internet with so much information lurking about, the only way this kind of anti competence tactics have a chance to work is where there is no info available which is rather the opposite on the internet.
Overall, myspace has invested money in offering less functionality to their users and a worse experience, in this way they have accomplished with a single decision something that is very difficult to do, they have dameged themselves, their users and what they think is their competence, i think its time to send their marketing managers back to school and made them write 100 times:
“I wont go against my customers no matter what”
I can’t believe that MySpace will actually continue on this dangerous path. The user experience has gotten so bad in the last six months, there’s already been a huge drop off in member activity. Fake profiles, porn spam, account hijacking. Someone is going to offer a product that’s going to really hit the target and myspace will fade away. Anyone remember Friendster?
MySpace became popular not because they were the only player in the market, or because they had the best product but really only because it was the place where the users could do (almost) anything they wanted. Now they’re going to do a complete 180 and implement these new restrictions. Doesn’t make one bit of sense.
I think Photobucket should endorse one of the competing sites and send an email to every member explaining what’s going on.
“Can PhotoBucket Survive Without MySpace?”
One word answer - “No”.
…the larger question may be “Can myspace survive its fickle users?”
The once fun myspace, now at the hands of cold corporate Rupert Murdock, is slowly degenerating into one big advertisment for Fox products. If you look at cached pages on Google, you’ll see the number and the size of the advertising is ever increasing. While at the same time more and more restrictions are placed on the users ( let alone the killing off of users Photobucket videos and other widgets ). Add this fickle nature of the 18-25 crowd and you get a web site that will collapse as quickly as it gained popularity.
I have abandon myspace for Twitter.
my prediction (worth its weight in GOLD):
mySpace did this to lower photobucket’s valuation, and then myspace will buy photobucket at a discount and then integrate with them (and un-ban them, of course)
what do you think of THAT??
RE: gilltots
I posted about that earlier today, looks like speculation though according to Om Malik’s post though…
http://danielgardner.wordpress.....otobucket/
I agree with Om’s take and also with your thoughts about Photobucket’s survival chances. They can share ad revenue with MySpace, create additional revenue sources, etc. They just can’t “use” MySpace to create revenue-generating ad impressions that MySpace gets no piece of. Watch for more subscription fees, ads in videos that MySpace either gets a piece of or actually sells and pays Photobucket for, or other revenue models.
@ Todd - “I have abandon myspace for Twitter.” Hmm… that’s like saying I have abandoned living in houses for living in a tent in the woods with no running water. Twitter MySpace
@CrunchBack,
I don’t agree with your analogy. It’s more like:
“I moved from a crime ridden public housing project in one of the worst neighborhoods you can imagine ( myspace ) to a nice, quiet, modern home, complete with running water, air conditioning and a pool ( Twitter ).
I have total control of my Twitter “space”, plus RSS and an open API to make it do what I want.
its amazing to me how MySpace as undertaken a policy of such web tyranny that it is violating every pillar of web 2.0 profitability….who’s running that thing anyway?? fox media?? (oh wait, yeah)…the fundementals of what has made “web 2.0″ successful in the first place are being abondoned by Rupert faster than we can say “open source!”….i just hope the demise of myspace does not usher in media-fueld rumors and specualations of another bubble burst as overhyped as the first one….because, really, myspace is already a relic, a dinasour in this, the fresh new wave of internet success stories….its like watching a bomb implode on itself…what a mess….and they’re way of “fixing” it? dump more shit into it! hooray! more messy non-useful features! more ugly advertising! and should we change its very dated design! no! we’re myspace damnit! what a joke…
@ Todd and CrunchBack….
Twitter? really? REALLY guys? come on now…be a bit more brilliant than that…
Mike,
I think you’re wrong here. The $32MM in revenue projections for this year is an aggressive number based on being able to sell movie studios (and other advertisers) on the idea that their ads will be seen on MySpace via widgets that Photobucket users create. It’s undisputed that 75-80% of Photobucket’s activity (notice I said activity, NOT users) is around MySpace. You won’t hear that from anyone at Photobucket but if you look at the logs you would see it. So, if your number one source of activity is telling you to go away it’s going to be tough to stick to your 2007 revenue and user growth projections.
This is a brilliant move by MySpace. They are saying to Photobucket “we’ll let you handle a huge cost for us (i.e., picture hosting) but ya ain’t gonna make any money on our site.”
The other point you make about profitability is highly disputed. Photobucket was at one time profitable, I agree…when they had 10 employees and very low overhead. But when they upgraded their iron and added 30 more full-timers plus a whole crew to view the photos/videos for explicit content, they turned the profit into a loss. Yes, they COULD get back to profitability at some point, but not without reconciling the source of 80% of their activity, MySpace. MySpace has the marketplace, Photobucket is just a service provider. It’s not like MySpace is saying “we don’t want video and widgets on MySpace” they’re just saying “We don’t want you using Photobucket’s widgets on MySpace”…It’s a lot easier for a user to find another widget company (last count was that there were over 1,000) than it is to find another marketplace of 80 million people to meet online.
Photobucket’s valuation is going to suffer for this. Anyone who pays more than $50MM at this point is getting screwed. 40MM users worth about $.50 each…if you can make them profitable at all. Can anyone say BlueMountainArts?
“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.”
I think this statement betrays a lack of real understanding as to the way that social networking sites grow and maintain their userbase. For an individual user, the value of a social networking site is in the *network*, you can’t just move on and maintain the experience (unless you’re not actually social networking), you need to have your friends move as well. That’s not to say that broad realignments don’t happen, but they certainly don’t happen overnight in this manner. It’s much less disruptive to just host videos somewhere else.
Myspace has been blocking URLs and HTML codes for a while now, which probably improves the user experience most of the time. I think recently a “code” was floating around that changed profile links to point to an offsite location pretending the user had been logged out, asking for the user/pass. From what I remember, photobucket slideshows were pretty ugly too.
I agree with Andrew S.
As a MySpace regular user I can tell that there isn’t any chance I would leave MySpace because of something like this. I’d just find someone else to host videos. Period.
Furthermore, I think your take is a bit slanted and makes me wonder if you have some vested interest in seeing the Photobucket aquistion suceed. Or maybe you just don’t like the folks over at MySpace.
Why does anyone want to aquire PhotoBucket anyway? There are at least a handful of really promising, good-looking, and amazingly functional photo hosting and sharing websites available. These sites actually provide value to the user.
PhotoBucket is an eysore. Their UI is ugly. Their brand unsophisticated. Frankly, PhotoBucket is the arm pit of photo sites.
I agree with 17. Myspace has everyone, it has everything and it aint just going to let it go. I love it how all the commentors above, including you Mike, think that Rupert Murdoch is just going to let his most prized possession just go. Its stupid - everything Myspace does is tactics. Murdoch hasnt made Billions of dollars making mistakes has he ? Its simple - dont build a business off relying on other peoples sites. Frankly, I dont blame Myspace one bit. Photobucket is relying on a higher valuation because it has 30 million myspace users - take them away and what does it have ? Half the other social networks dont allow 3rd party hosting.
Myspace has their own video - and will no doubt purchase some small video editing company and integrate their features for $10 million rather than buy Photobucket at $200 mil.
Eitherway - I think Photobucket is arrogant if they believe their 7 days of fame is going to keep their valuation up for the next 6 months.
heh - No matter how - you look at it / for real /
- This hurts the company / and they will have to struggle a little.
-RB
MySpace User wrote: “As a MySpace regular user”
That’s like bragging that you take the short bus to school…
brilliant and exactly!
Joe Johnson spot on
Why do you not mention it is a TOS violation to embed ads in myspace?
@ Todd - Please stop kidding yourself. Moving from Myspace to Twitter is like moving from a cramped studio in Chinatown in NYC to a bamboo hut on Baffin Island, Canada. Yes, you left the mess and congestion, but you left it for a desolate, overrated place delusional types call paradise.
@ Joe Johnson, Andrew S., and Myspace user - spot on. Why would you leave the social network itself for a measly widget? RockYou, Slide, PhotoBucket, etc. have to wake up and realize they are one-trick ponies. Get bought out by Myspace, Bebo, etc. or die.
@ Haggie - Haha.
Photobucket does generate real revenue, but the online photo space is overcrowded and already well monetized. I do think Myspace is ruining it’s user experience and driving advertising far too heavily.
“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.” Like tagworld or hi5.com? Please! They don’t even come close to myspace.
@TallFreak
My sentiments exactly. Looks like Mike has some unspoken affinity with the Photobucket guys just like he’s probably buddying it up with Pud when he proclaimed that AdBrite’s crappy flash widget “redefines” the image tag.
Come on man. People go on MySpace because of the network.. NOT because they get to embed stupid videos and photos. Their friends are on it.
Who on their right minds would leave the network to some 3rd rate network without any friends just to “keep their Photobucket media”.
Michael, its time you took a good hard look at your journalistic independence.
Photobucket more sticky than myspace? No way…what are you thinking? Photos ARE portable, a profile IS NOT. Sure it’s easy to load up my info in another social network, but what about my friends (i.e. the “network” in “social network)? Maybe it takes a couple hours to transfer photos to another host…but my profile absolutely cannot be replicated anywhere else.
So, i just spent a few minutes typing out a reply and then realized Andrew S essentially already said it (and then a few others echoed it). It’s about your friends list, not about having the functionality to show videos…
Here’s my prediction: photobucket will figure out a way to offer myspace a revenue share on videos that are streamed on myspace. everybody plays, everybody wins. Myspace is the publisher, photobucket is the ad server… not a revolutionary business model…
I used photobucket for over a year before I ever even visited a Myspace page. Will it survive? I don’t have a clue. I guess it depends on the circle of friends you associate with, whether or not you care or are even impacted by the news of Myspace blocking PB. It doesn’t affect me at all.
I use Flickr and Photobucket for photos, I use Tagworld for blogs (and photos, and files, since it gives me about 5 gb of storage), and I use Myspace for, well nothing. I don’t have a profile there, nor does anyone I know. Well actually, I know a friend of a friend who has a MS profile for her dog, but that’s about it. From what I’ve seen you almost need to have a degree in Computer Science to make a MS page look like anything less than a bad accident.
If photobucket and myspace both ceased to exist tomorrow, I don’t actually know anyone personally who would be saddened, but perhaps I hang out with the wrong crowd. I do agree with the sentiments of a few here though; I don’t really care where my photos or videos are, it’s the (social) network that is important to me.
There are a number of comments essentially addressing the network effect issue - that people won’t leave myspace because their friends are there. That’s a whole new post if i am going to defend that statement, and really has nothing to do with my main point. But the basic logic behind the statement would be: these users are fickle and need to be at the cool thing (see friendster), i do not believe myspace has achieved “permanent cool” status like MTV where it is assured of decades-long popularity, and that many of the smaller soc networks aren’t so small any more.
But Like I said, it’s a side point for a different post. The key here is that photobucket is doing just fine.
Do I have an affinity towards them? Yes. They talk to me when I call, whereas Myspace/Fox now ignore my requests for comment because they think I am anti-myspace/fox (this is ridiculous - see http://www.techcrunch.com/tag/myspace - I cover lots of their new stuff in a positive way). I also hired a fox exec as our CEO, and she loves that company. But Photobucket is also a small guy that a very large gorilla is jumping on, and I tend to side with the small guy.
Of course I think it will. It’s incredibly niave for anybody to think MySpace is the only place web users are hanging out. Anytime I hear stuff like this, I think “rookie”. Newcomers to internet business are obsessed with MySpace - it’s like somebody coming to L.A. and thinking The Ivy is where they’ll see all the celebs. But, there are tons - literally tons - of old school chat rooms, message boards and even other social network sites where you see Photobucket used a ton.
I use the site all the time. Mostly to share personal photos, but sometimes when photos are too large to upload to our image editor. I think the changes they’ve been rolling out help a lot.
I’m not surprised to see this move from MySpace. I would think it’ll eventually help its hassles with copyright material, etc.
@ Michael - I agree with everything you are saying there. I don’t think MySpace is out of the water yet either, and chatter this past week online has been hugely about Facebook.
It’ll be interesting to see what happens.
Well Photobucket existed and did well for years before myspace came about, and I highly doubt its going away anytime soon. As stated in the blog, its the one that is actually profitable. Besides they have great partnerships with othersites that aren’t exactly tiny in and of themselves. :/
Myspace on the other hand? How much longer can that site possibly be popular? A year, maybe a year and a half max. People are already moving away from it to cooler venues. Myspace isn’t that cool anymore, everyone including my mom has a myspace.
@ Tsukari, what MySpace did was create a platform that allowed a population of new internet users to cut their teeth on using the Web for entertainment and socialization versus just accessing information. Prior to this past year or so, most of the population used the web in a different format - research, work, shopping, etc. It’s only been this past year or so that the web’s become more of a form of entertainment - faster broadband supporting video, etc. So, as MySpace users grow up and get exposed to other places to hang out, they’ll migrate. It’s an inevitable process.
Any time you’re the guy who brings people to the party, you risk leaving alone as they start to meet and mingle with other guests.
While I agree with you that re-creating a profile at another social network takes a lot less time than re-uploading hours of video. This can only be true if the entire friends network is moving.
Personally, I would say that people not only set up a profile at MySpace, it is the friends mania that keep people at one place.
i wonder if the myspace kids who used to be friendster kids will soon be virb kids.
I guess if I want an ‘unbiased’ take on this situation I should go over to Valleywag (where they tell you the truth).
And by the way, Photobucket VIOLATED THE TOS. That’s why their videos were yanked. Not because MySpace is some evil Goliath who wants to squash people as you imply in your post, Mr. Arrington.
Why aren’t you mentioning that?
And if photobucket is doing so well, why do they want to be aquired so badly? Sounds like they see that the end in site and are ready to take the money and run.
@ Myspace user, you kind of sound like it should be MySpace Employee
MU - valleywag, which by the way doesn’t allow me to comment on their blog, is saying basically that photobucket leaked their aquisition documents to me to get press, and that I am now in their back pocket.
Facts:
- companies don’t leak their financials for press. that was not the source of that info.
- photobucket was pissed, and lehman was pissed-er, that we published those documents
- our ceo was a Fox exec until two weeks ago and loves myspace
http://www.techcrunch.com/2007.....h-heather/
we have no conflict.
WRT TOS violations, that isn’t the subject of this post. It’s about whether PB can survive without MS. You should read Om’s updated post on the TOS issue. No ads were sold, and MS never contacted PB before the takedown.
People WILL leave MySpace. In fact, over 25% of my friends have dumped MySpace in favor of Facebook. Each week I have to troll through my profile and delete all of my friends “deleted profiles”
I see Photobucket being used on a lot of MySpace accounts. Most of these users are savvy enough to embed Photobucket code, so I assume they’re just as savvy enough to start using Facebook and never look back.
MySpace isn’t “cool” anymore… It’s reputation has been degraded to a pedophile’s search engine. The latest statement from friends is “dude, you’re not on Facebook?”
Mr. Arrington,
I’ll agree that the TOS is not the point of your article. And although I read a write-up on Valleywag about the TOS violation, I will take a look at Malik’s article.
As far as whether or not your article seems biased/slanted. You admit that it does. So end of story. And congratulations on stealing a Fox exec. You keep bringing up the fact that she loves MySpace. That’s nice. So what? It doesn’t matter if she loves MySpace or not. She didn’t write the article. You did.
And she didn’t love Fox enough to stick around either, did she?
And as far as Valleywag dragging your name through the mud - Well, I wouldn’t take that lying down. You ARE your product. And it looks like your brand value is taking a dip.
Can photobucket survive without MySpace? Sure. Why not. People may stop joining MySpace. But they aren’t going to stop taking photos and trying to find a way to share their media. If Photobucket were smarter they would have kept their noses clean and their mouths shut until after the aquistion.
And as far as the issue of MySpace not contacting them first…well…why should they? They don’t have to that. Period. If you want to delete this comment would you try to contact me first? No. Not likely.
And one last thing. One more time for the people in the cheap seats:
People invest time and energy into builing their MySpace pages and aquiring a community of friends. It’s an investment. Just because their video widget doesn’t work doesn’t mean they are going to quit MySpace. The widget is expendable. Their MySpace page is not.
P.S. It is totally lame that Valleywag makes it so hard (if not impossible) to comment.
MySpace User;
I think the biggest investment is the time spend deleting spam. Most users now have private profiles, so the magic of meeting new people has been worn down. Most people have (or are in the process) of “cleaning” their network - that is, getting rid of people you don’t actually know.
What’s wrong with that? Nothing - it IS an investment of time. However, Facebook seems to handle the “real-life network” a lot better than MySpace. If users are looking for real-life social networking, and not a popularity contest, they’ll go to Facebook.
Valleywag makes you register, no? I don’t think beyond that it’s very difficult to post something.
MU - You are now disagreeing with me without attacking my ethics. Thank you.
patricia - my account was turned off ages ago. i don’t believe there is open registration.
Patricia;
I remember the good old “what’s a blog” debate. If I have to register to comment, then forget it. Why block your users with a hurdle? Personally, I think that’s even worse than not allowing comments at all.
@ Robert, I completely agree with you. Just sayin’!
@ Mike, I know. The MySpace guy sounded like he/she couldn’t comment, and I was saying it appeared one could. Except you, of course
I think the answer is yes, just because not so long ago the CEO of the company declared this independence from MySpace to begin with:
http://money.cnn.com/2007/03/2...../index.htm
“We’re fad-proof,” he declares. “If one social networking site goes away and another comes up the user just moves, but their content stays with Photobucket.” He tries hard not to compete with the sites where his users congregate, which he calls “the social edge.” “We focus very much on not being a community,” Welch explains. “We let the communities build around us.”
not to throw things any more off topic but i have to say that MySpace is getting lamer by the minute.
1) They are now 100% advertiser focused, more ads, more flashy things, more annoyance.
2) There owned by Fox, as is Fox News, and I can’t think of anything less cool than that.
3) The main draw to MySpace was freedom, you could add widgets, change colors, all kinds of things that allowed people to express themselves. With more and more restriction you get less and less engagement.
4) SPAM - its way over crowded and spam is out of control
My opinion on PB: this is a major setback. While they owe a huge amount of their success to MS, I think they have made some smart diversification moves that may allow them to weather the storm.
Hi to all,
IMHO this the era of the access too. Could Mr. Murdoc a.k.a by theirself as a “Digital Emigrant” understand that if myspace is more open (for example, myspace API) is more useful for their users? Amazon did it. And others too.
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