03:25 AM

Photobucket to MySpace for $250m

ValleyWag's scoop: MySpace will acquire Photobucket, the parasite service that allows users to post photostreams to their MySpace profiles. MySpace cut the service off a few weeks ago claiming Photobucket violated the terms of service by placing ads on their content.

TechCrunch confirms the rumors and adds a pricetag: $250 million.

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.

So what's behind the buy? Om Malik suggests it's kind of like Google buying YouTube. "The MySpace photo service hasn’t really gained as much traction and MySpacers continue to gravitate towards Photobucket."

Thomas Hawk says there may be untapped value in Photobucket's archives.

In my mind one of the biggest unrealized values of Photobucket is in the size of it's library of images. By unrealized values I mean that although they likely have the largest collection of images in any one repository, the images are not organized, ranked and categorized like you might find at Flickr.

Photobucket has always maintained that they don't want to build their own community like Flickr. That they simply want to be an easy place to host images. However, as their library gets bigger and bigger, figuring out a way to make sense of these images will unlock even greater value than a simple photo hosting service.