MySpace owner to buy Photobucket

NEW YORK (Reuters) - MySpace-owner Fox Interactive Media said on Wednesday it will buy photo-sharing site Photobucket and Flektor Inc., a provider of Web-based photo editing software, to give its more than 100 million unique visitors tools to create their own content.

Terms of the deals were not disclosed. Earlier, a source familiar with the talks said the Photobucket deal was worth about $250 million. A separate source said on Wednesday the Flektor deal was worth about $20 million.

The two purchases are part of News Corp.'s NWS.N plan to bolster its Internet businesses, which are expected to generate about $500 million this fiscal year, and about $1 billion in 2008.

Photobucket lets its more than 42 million users upload photos and videos, which can be pasted on their own Web sites, blogs and social networks like MySpace. Some 40 percent of its users have already posted their content on MySpace.

Culver City, California-based Flektor offers easy-to-use software tools to manipulate photos and videos.

Fox Interactive President Peter Levinsohn said in a telephone interview he saw Flektor's technology being used across other News Corp.-owned Internet services, including AmericanIdol.com and games-related IGN.

"If you combine MySpace, the largest social networking platform in the U.S., and Photobucket, the preeminent personal media destination, we feel like we've got a fantastic package of assets that differentiates us in the marketplace," Levinsohn said.

The long-anticipated Photobucket deal comes after a high profile but short-lived flap between the two companies. MySpace blocked photos from Photobucket when Photobucket began displaying ads in photo windows that appeared on MySpace.

Fox executives said the Photobucket had run afoul of MySpace's terms of service agreement that forbids companies from the unauthorized commercial use of the service.

Levinsohn said Fox has been reviewing its terms of services agreement to explore relaxing current rules regarding third-party commercial use, amid far smaller rival Facebook's move to allow so-called widget companies to profit from its service.

"The fact that they're (Facebook) enabling them (third party widget companies) to sell ads is something we're looking at and have been looking at," Levinsohn said. "Do I think at some point we will change that? We're looking at it every day to try to come up with the right solution."

Far fewer number of users are on Facebook, which up until last September was closed to regular users, who did not attend college.

But it has embarked on an aggressive expansion plan and last week announced 65 partnerships to allow widget companies that create software to run on other services like MySpace and Facebook to begin building and profiting from Web applications for Facebook.

Photobucket serves about 3.5 billion images each day across the Internet. Users of the service upload about 50,000 new videos per day, similar to MySpace user statistics, Levinsohn said. The deal "confirms our position as easily the No. 2 player in the online video space," he said, behind Google Inc.'s (GOOG.O) YouTube.

Photobucket will be operated as a standalone site and continue to serve some 300,000 other Web sites.

(Additional reporting by Anup Roy in Bangalore)