Social Media Now: Photobucket, Scrapblog and the New Hype

There are many ways to measure a bubble economy. As a journalist, I look at media coverage of companies as one indicator. The more gee whiz stories that appear covering little-known companies with little skepticism quoting executives gushing unabashedly about the most obvious facts, the more inflated the bubble.

Yesterday’s orgy of coverage regarding image hosting service Photobucket rang my bubble bells big time. “The Biggest Website You’ve Never Heard Of” gushed Fortune.com in a headline that would have made a publicist blush. “How Much is Photobucket Worth?”  the Techcrunch headline asked, begging the answer: “A lot.”

I expect a lot better from guys like David Kirkpatrick and Michael Arrington. The Kirkpatrick piece read like ad copy: It’s bigger than Facebook! An audience growing by 80,000 a day! Kirkpatrick let ridiculous assertions by CEO Alex Welch go unchallenged: “We’re fad proof,” he proclaimed (yeah, and the Titanic was unsinkable).  And the day’s Ted Stevens Series-of-Tubes award goes to Jerry Murdock, a Photobucket investor who Kirkpatrick quoted as saying: “Linking is the new currency of the Web.”  Um, didn’t Tim Berners-Lee design the Web in the first place so that linking would be the currency?

The Techcrunch story at least placed the sudden publicity for Photobucket in context: Lehman Brothers is beating the bushes for buyers interested in purchasing Photobucket. But Arrington’s tone was just as promotional. “Basically, Photobucket is kicking butt,” he wrote.

Arrington, it appears, was working off the Photobucket roadshow Powerpoint. He published Lehman’s asking price (upwards of $300 million on $6.3 million trailing 12 months revenue). He published the company’s financial projection tables. He even published the blind comment that “our sources indicate that a number of acquirors are very interested in the company at this price.” All he needed to add was a tag line saying: “Act now before it’s too late!”

A dozen years ago, when Tom Watson and I launched @NY (the first media business to cover New York’s new media industry and darn near the first e-mail publishing venture anywhere), our avowed mission to deflate the the hype in press coverage of the initial commercial Internet boom. Thankfully, today, there are blogs galore with the same spirit.

Valleywag, of all things, struck a very considered, skeptical tone suggesting in an analysis that Photobucket doesn’t have anywhere near the consumer loyalty it claims and raising a red flag about the cost of hosting all those photos–a red flag that neither Techcrunch nor Fortune.com paused to consider.

Hipmojo.com called Photobucket out for it’s questionable growth predictions and attendant valuation goals:

Judging by the numbers, the company grew 116% in revenue from 2005 to 2006, but now expects to grow 255% from 2006 to 2007.  Is this normal, reasonable?
 ….

MySpace, the largest social networking site, will double in revenue over the next 12 months.  That means 100% growth.  Usually the outliers experience above average growth.  Can someone explain to me why Photobucket will experience 2.55 times, or 255%, growth in the same period?

Lehman Bros. is good, darn good.  But do they believe this or do they think we lost our calculators?

I can tell you from the time I spent analyzing investments for Primedia Ventures, hyper-inflated growth projections for the year in which a company is looking to sell itself or raise capital is par for the course, and something all investors consider with a grain of salt. That’s a grain more than we got from Kirkpatrick and Arrington.

Meanwhile the latest social media property be shown some love from the meme-makers is Scrapblog, a multi-media scrapbooking web service built around a Flash-based editor application. Earlier this month the company, based in Coral Gables, FL, announced that it had raised an undisclosed amount of first round venture capital from Longworth Venture Partners in Boston. At the heart of Scrapblog’s services is a photo slide show function, putting the start-up in the midst of a crowded space that includes, yes, Photobucket.

Link Love:

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