M&A Alert - December 16, 2009
Ontela Agrees to Acquire Photobucket
Transaction Overview
On December 16, 2009, Ontela acquired Photobucket from MySpace (News Corp) via a private to private company merger.
Target Description
Photobucket, a subsidiary of MySpace, hosts an online photo website that allows users to upload, store and view photos and videos via slideshows and photo albums. Users can share photos and videos with friends by email, IM, mobile phone, blogs and social networks including Bebo, Blogger, Facebook, Friendster, Hi5, MySpace, Orkut and Xanga. In May 2007, News Corp., via MySpace, acquired Photobucket for $250mm plus a $50mm earnout. While Photobucket has grown steadily since the acquisition, Photobucket was never integrated with MySpace, which has its own photo and video platform. Photobucket has 100mm registered users, 46mm daily unique visitors worldwide, uploads 11mm photos, graphics and video files and serves 100 billion images each month. Founded in 2003, Photobucket is headquartered in Denver, Colorado.
Buyer Description
Ontela provides a product that allows consumers to easily upload photos taken on their camera phones to PCs, email addresses, and online photo or social networking sites. Ontela sells to wireless carriers who then integrate the product into selected mobile phones sold to their customers. The service is currently available on 100 devices on 30 carrier networks including Verizon and T-Mobile. Since inception, Ontela had received over $14.5mm in funding, which included a $4.5mm Series A financing in 2006 from Covera Ventures (Partner: Steve Coffey), Oak Investment Partners (Partner: Tom Huseby), and Voyager Capital (Partner: Enrique Godeau III), and $10mm Series B financing in 2008 led by new investor, Disney’s Steamboat Ventures (Partner: Beau Laskey). In February 2009, Ontela received funding from Eastven Venture Partners for an undisclosed amount. As part of this acquisition, Ontela’s existing investors have provided additional funding to finance the acquisition and support ongoing operations. Tom Munro, CFO and Dan Shapiro, CEO were the key executive sponsors of the transaction and will become President & CFO and CTO, respectively, of the newly merged companies. Founded in 2005, Ontela is headquartered in Seattle, Washington.
Transaction Parameters
Although transaction value was not disclosed, TechCrunch had earlier reported a $60mm valuation for Photobucket. Photobucket generates revenue from advertising and premium subscription fees. News Corp will retain a significant equity stake in the newly merged entity. A few data points on relatively comparable
2009
| Ontela / Photobucket (12/09) | $0.60 |
| MOL Global / Friendster (12/09) | $0.23 |
| Apple / Lala (12/09) | $17.00 |
| Twitter Private Placement (09/09) | $20.00 |
| MySpace / iLike (08/09) | $.40 |
2007
| Microsoft / Facebook (10/07) (partial stake) | $625.00 |
| Walt Disney / Club Penguin (08/07) | $1000.00 |
| CBS / Last.fm (05/07) | $18.70 |
2006
| Google / Youtube (10/06) | $66.00 |
| MTV / XFire (04/06) | $25.50 |
| NewsCorp / MySpace (07/05) | $26.40 |
Strategic Rationale
Photobucket allows Ontela to combine their easy to use photo and video upload product offering with a large scale photo destination site, in essence a vertical integration strategy. Ontela’s strong carrier relationships bring the potential for Photobucket to offer its services via these carriers, representing a potential audience of 140mm subscribers. This is a nice compliment to Photobucket’s 100mm direct customer relationships. Also, monetization options become more diverse with advertising, premium subscription fees, photo printing services, advertising and perhaps a split of any wireless carrier data plan revenue supplementing Ontela’s historic reliance on licensing fees.
Architect Partners’ Observations
Private to private mergers are very challenging to accomplish, requiring an alignment of stakeholder interests that is difficult to achieve. While execution will determine success, this transforms Ontela beyond simply a neat feature vendor into a formidable digital imaging vendor. Also, the merger undoubtedly brings a new enthusiasm and drive toward building Photobucket into the premier photo and video site. It is interesting to note that Photobucket will become the only major independent photo and video website, the others all owned by much larger companies with the inevitable conflicting agendas and constrained resource allocation.