Some observers think that Fotolog's rumored sale price, at north of $100 million, is too rich. After all, the photo-sharing site has a mere 10 million users, putting the price on each user's head at $10 and up, while Photobucket, with 40 million users, reportedly sold to MySpace for an amount in the range of $250 million to $300 million, valuing its users at $6-$7.50 apiece. But that facile analysis ignores two important factors — factors which tell us much about the changing market for Web companies.
One, the recent deal between Fotolog and Google, which brought it a $75 million revenue guarantee, according to Silicon Alley Insider. Revenue matters, even if it comes in the form of an ambitious guarantee from a deep-pocketed player.
Two, Photobucket, as a storage site mostly used as a widget on sites like News Corp. sister site MySpace, commands little attention from its users. As Fotolog CEO John Borthwick points out, Fotolog, by encouraging users to visit the site and chat with friends there, gets them to visit the site nearly four times longer than Photobucket's users. Advertisers are increasingly looking for engagement, not just raw numbers, when evaluating social-networking sites as a marketing medium. And by that measure, Fotolog's rumored buyer may have underpaid — or Rupert Murdoch, in snapping up Photobucket to bolster MySpace, may have overpaid.