Youtube vs Photobucket: who's really cheap here ?

Valleywag supposedly got word that Fox Interactive’s MySpace unit is acquiring photo-sharing site gorilla Photobucket, in a deal that Mike Arrington says should be worth around $250M.

Photobucket accounts for a whopping 73% of MySpace’s photo traffic, according to Hitwise.  It’s also the #1 downstream visited site in the photo category, well ahead of  The Myspace photo property does not even shot up on the list.  By contrast MySpace video is the #1 downstream visited site in the video category, at 2.2X the rate of YouTube.  This explains why MySpace felt compelled to move on this key asset in a weak area.

Techcrunch maths is wrong
Techcrunch has some questionable maths comparing the acquisition of YouTube and Photobucket, where it is lambasting Google for paying too much ($73/UMV) and lauding MySpace ($13/UMV).   This prompted me to write this post on a topic otherwise well covered elsewhere. So let ‘s do two exercises: price and rationale.

Acquisition metrics
What are the (highly speculative) metrics on this acquisition:

  • Users shared: 25% to 50% (CNET)
  • Registered users: 40M, adding 85K per day or growing 6% per month (TC)
  • US monthly visitors: 20M UU
  • Rev 06: $6M, Rev 07: $25M

I did a dumb little static comparison of the value of a UMV back in October.  If we assume Photobucket has around 25-35M unique visitors a month, MySpace paid in the range of $7 to $10 per unique (you have to assume all these sites are growing at roughly the same rate for these back of the envelopes to be relevant.

Google never paid $73 / UMV of course, that’s an example of Techcrunch being US centric and calculating the value of YouTube on domestic uniques.  Never mind that YouTube is #1 in every country in the world except France and China, and that it has probably well in excess of 10M UMV’s in every major monetizable market.  The data suggests they paid $23 a the time, and probably less since the growth in international markets was simply phenomenal (much more than the 6% a month reported for Photobucket).  I heard YouTube was still adding 10M UMV’s every month, and they must be well over 100M UMV’s by now.  So let’s say Google paid in reality around $16/ UMV for YT.  After all, October was not that long ago :-)

Acquisition rationale
The next question is: what are you buying ?  Are all UMV’s born equal ?

  • How do you monetize a UMV that is not on your site ?  With YouTube I can take a forward looking view and assume that some kind of in-stream advertising will emerge (pre, overlay, in-video placement or whatever) and that owning the stream has value.  For Photobucket, I do not see it.
  • Is a person watching a 3-minute video worth the same as a person reading your blog page and “seeing” the pictures on it ?  The level of engagement is fundamentally different.

Google bought the ultimate streams engine (the universal video hub and destination site with the deepest reach), MySpace consolidated its base with the digital archive and memory of 20-odd million people, and what appears to be a page-view based monetization method.  I feel this is a defensive move designed to lock the user base.

I am thinking through what I am missing here, and of course my view may be biased by DailyMotion, but personally, I would have done the YouTube deal over Photobucket any day.

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