Is News Corp. overpaying for PhotoBucket?

News Corp.’s decision to snatch up MySpace.com parent Intermix for $580 million back in 2005 was a watershed — a media industry “shot heard round the world” that declared the Web and social networking sites like MySpace the next front in the battle for eyeballs. By 2005 standards (practically the Jurassic period in Silicon Valley time), $580 million sounded like a lot, but News Corp. picked up a lot of eyeballs in the deal: 50.6 million unique visitors and 29 billion page views a month in the United States within six months of that deal, and the #5 most popular Web site today, with close to 5 percent of global Internet users visiting the site. All in all, a pretty good bargain — even if monetizing MySpace has proved challenging.

That makes the published rumors today that News Corp. has signed a deal to acquire photo sharing site PhotoBucket for $250 million curious.

After all, it was only a few weeks ago that News Corp. was blocking photos and videos from PhotoBucket users in a spat over ad-sponsored slideshows that PhotoBucket users were posting on MySpace pages, which News Corp. alleged was a violation of its Terms of Service. That dispute was eventually resolved and, from the looks of it, acquisition talks started shortly thereafter.

In theory, this is a happy marriage between the world’s biggest social networking site and the Web’s most popular photo sharing site — each with huge populations of young, tech and media savvy users. But as the bright folks over at TechCrunch point out, the PhotoBucket deal may not bring News Corp. nearly as many eyeballs as the MySpace deal did. Why? Because most PhotoBucket users already _are_ MySpace users, according to statistics from Nielsen Netratings. That service estimates the aggregate PhotoBucket/MySpace userbase at 57.7 million unique visitors each month, compared to MySpace’s current flow of 55.9 unique visitors a month. That’s a 3% gain for MySpace, or $167 for each of the 1.8 million users at slivery edge of the Photobucket.com, MySpace.com Venn Diagram.

Of course, it’s also possible that News Corp and Fox Interactive Media Chief Peter Levinson know something that the folks at Nielsen don’t — The real numbers, for example. After all, more than one reporter has noted that there are serious problems with Web traffic monitoring and rating firms like Nielsen which still rely on panels of Internet users to estimate actual traffic, and are thus ill equipped to measure the true level of interest in dynamic Web sites like MySpace, Photobucket and Digg. In other words, don’t take the Nielsen numbers as gospel — there may be lots of traffic that Nielsen doesn’t see. That said, it certainly shouldn’t surprise anyone at News Corp. if the legions of PhotoBucket customers they’re paying for already have MySpace accounts. If that’s the case, News Corp. better have a pretty nifty plan for how to leverage the Photobucket site and photo sharing technology if it wants to make back its quarter billion dollar investment!