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Monetize the MySpace Parasites

Posted on Wednesday, Apr 18th 2007

I recently wrote a piece called News Corp: Bewildered Pioneer, where I discussed the rather low rate of monetization of MySpace, News Corp’s crown jewel in the online space.

Following that, MySpace blocked Photobucket, Photobucket whined, the media went up in arms against News Corp.

This is exactly what I would have done if I were on the News Corp side. However, I am not sure if NewsCorp executives are doing this strategically, or just off-the-cuff. Why are they defending their position vis-a-vis the widget vendors who are living off them? They should go right out, and say this is their strategy, fair and square!

MySpace has inadvertently helped numerous parasitic sites build traffic, audience and revenue. Photobucket, the largest of these, has built up to a $32 Million forecasted revenue for 2007, based upon which they’re now shopping for an acquisition deal. Their revenue model is advertising (on their site). Their value proposition is that photos loaded onto their site can be posted with one click to sites like MySpace, Facebook, Piczo, Xanga, Friendster, etc.

That means, by using them as the repository, users can share photos with friends on all those other sites. Photobucket is not only leveraging MySpace’s traffic, but also taking away their future value proposition of Photo/Video Storage. Notice, Yahoo’s wildly popular photosharing service Flickr has now started charging for photo uploads beyond a certain threshhold. MySpace, instead of enabling Photobucket to thrive on their audience’s need for storing and sharing photos, should start offering their users photo-storage as well, and preserve the option of charging for this at a later date.

Meanwhile, they should charge Photobucket and all the other services that have sprouted around the MySpace eco-system a toll to use their highway.

Now. Since Photobucket IS for sale, it may be a perfectly astute strategy for NewsCorp to pick it up for a maximum of $100-$150 Million dollars, and make it the cornerstone of the MySpace photo-video sharing strategy. The $300 Million asking price for Photobucket is too high, since none of its other big “channel partners” (Facebook, Piczo, Xanga) are in any position whatsoever to acquire them.

They can, however, meanwhile also start collecting their own toll from Photobucket!

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