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Summary:

Photobucket, which started out as a plain-vanilla hosting service, cried wolf last night when it claimed that MySpace was blocking its videos. The truth came out this morning: because Photobucket is selling ads on videos that get shown on MySpace via widgets, MySpace is blocking them […]

Photobucket, which started out as a plain-vanilla hosting service, cried wolf last night when it claimed that MySpace was blocking its videos. The truth came out this morning: because Photobucket is selling ads on videos that get shown on MySpace via widgets, MySpace is blocking them just like it would anyone else.

It is clearly an emotional issue, as you can tell from the big debate that rages on the blogs. The fact is, Photobucket and MySpace are both for-profit entities, and this is less about emotion than it is about capitalism. Nevertheless, there are some lessons here for start-ups hoping to thrive in the new disaggregated web world.

1. Don’t depend too much on one partner, especially one you don’t have a formal relationship with. Or as one smart commentator writes, “One line of code from that 3rd party literally puts these guys out of business.”
2. If you are going to depend on one partner, don’t make waves. Stay under the radar. I am sure bragging in Fortune didn’t help Photobucket’s case.
3. Don’t lose sight of your own mantra. Photobucket said all along it was just a service provider, and didn’t care about page views on its own site. How it was going to scale and build its revenues, based on that model, is a tough question Photobucket didn’t ask itself in the early days.
4. Pay to play and ensure longevity. Remember, even Google had to pay MySpace, and you the start-up are not that special.
5. Free is a tactic, not a business model, and has strings attached to it.

Liz pointed out during a chat this morning that these are all truisms of the old media world that some optimists had thought wouldn’t apply to to the new new media world. Now, it seems the new theories of disaggregation are getting throughly trampled.

I haven’t had a chance to ponder over that, but would like to throw this open to debate and get your thoughts on this. Are there other lessons to be learned from this fiasco? What does Photobucket do? Become a destination? Are destinations a better option for a start-up? Let the conversation begin!

  1. Biz Dev is back, baby.

    Not that it ever went away. It’s just that these ajax and ruby on rails developers that though they could just build “great products” that would spread naturally… all by themselves.

    Even the internet has a hierarchy. And key business relationships can drive a whole lot more… a whole lot faster. Especially when combined w/ a viral application.

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  2. all the background images on my myspace profile are still in tact. dont know the reason

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  3. 2005
    myspace
    thighspace
    unzip-your-flyspace

    2006
    friend-space
    trend-space
    why won’t you spend-space?

    2007
    mock-space
    lock-space
    3rd-party block-space

    2008
    faux-space
    blow-space
    where-did-they-go-space?

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  4. Just goes to show that you need to think differently and go find other ways to support your service and make your money from in a unique offering while using the piggybacking on others just as a way to gain scale. You also probably could factor in a partnership model to offer something back to the the sites where you become really popular.

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  5. the dirty secret is that a huge number of these web 2.0 apps don’t have a f*ng idea of how they’re going to generate revenue.

    to generate revenue, someone has to be willing to pay you for something in return. most of these guys just kind of hope that they can somehow pull in enough traffic to allow somebody to want to place ads on the site…

    the better question, albeit much harder is figuring out how you can build a network of sponsors/advertisers to come to your site… this requires a sort of sales force, who will go push your offerings…

    gee… imagine that.. sales… biz dev… marketing…

    who knew!!!

    sarcasm off…

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  6. Looks like you have the facts wrong OM
    http://news.com.com/2100-1026_3-6175272.html

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  7. I agree that a “destination” approach is more sound in the long term. All that these “we’re just a tool” guys are really saying is that “we’re only looking to sell our app to somebody who’s really making money” (see flickr et al). The problem with Photobucket is that they started their business life on the wrong leg, so to speak, and changing the strategy half-way through will be tough…

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  8. If this is true, Om, your points are awesome.

    I disagree with dddd

    Good content and startegic partners int his era and outsourcing the ad sales like Viacom Yahoo is how you do it.

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  9. ummmm…what % of traffic really comes from MS?

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  10. What Photobucket should do is put the Remax sell outside and on their site “for sell”.
    I think startups should be desitination sites first so they can work out all kinks, and clearly define themeselves. Things photobucket were not conecern with at all.

    Another lesson that should be learned from the fiasco is that photobucket only had one product/ or one monetization scheme. In this uber competitive world people should know having one product/ scheme offering will help dig an early grave for your business.

    Photobucket RIP 2.0 bubble casualty.

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