News Corp. snaps up Photobucket, Flektor

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NEW YORK -- News Corp. has agreed to purchase fast-growing photo-sharing site Photobucket, ending weeks of speculation about a deal between the companies.

In a separate deal, Rupert Murdoch's entertainment conglomerate also has agreed to buy Flektor Inc., a technology company that provides software for video mash-ups and slideshows.

Both companies will fall under the Fox Interactive Media division, which houses MySpace, the social networking site responsible for a majority of Photobucket's traffic.

"The acquisition of these two companies is a perfect strategic fit for us that reinforces FIM's leadership in user-generated content," FIM president Peter Levinsohn said. "As a leading site for creative expression, Photobucket extends our reach among personal media-sharing enthusiasts, and the innovative new entrant Flektor brings highly differentiated new tools to the table that will drive the next generation."

Financial terms of the deals were not disclosed, but published reports this month said that News Corp. would pay as much as $300 million for Photobucket. Other sources peg Flektor at $20 million.

The Photobucket deal comes after the site engaged in a high-profile spat with MySpace last month. The social networking portal enacted a two-week ban on the photo and video links the service embeds because Photobucket was selling ads that appeared on MySpace. Photobucket criticized the action on its blog, writing that MySpace "considers its users as a commodity which it can treat as it sees fit."

The sites have become increasingly intertwined, though. For the week ending May 5, the four-year-old Photobucket received 59% of its traffic directly from MySpace, according to research firm Hitwise. Overall, Photobucket, which has doubled in size during the past year, has more than 42 million registered subscribers and in March had 14.2 million unique visitors, according to Nielsen//NetRatings, making it by far the leader in online photography destinations.

Under terms of the deal, Photobucket -- also popular with users on eBay, Facebook and Google Inc.'s Blogger -- is expected to remain a stand-alone site. Its technology and tools, which make it easily linkable to other sites, will be used throughout FIM's network.

"Becoming part of the FIM network will have a tremendous and positive impact on our ability to serve our users' needs," Photobucket CEO Alex Welch said. "We plan to continue developing innovative tools that enhance self-expression and allow our users to have the best media-sharing, linking and searching experience on the Web."

The Flektor deal will provide FIM with technology that lets users edit video and audio content in real time. This approach allows users to create mash-ups and slideshows and to incorporate live polls and quizzes into their content, which can be embedded on blogs and social-networking profiles.

Andrew Wallenstein contributed to this report.
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