• by Gavin O'Malley  @mp_gavin, May 9, 2007

Yesterday's announcement of MySpace's plans for a $250 million acquisition of the Web's top photo-sharing service Photobucket came after months of squabbling between the two companies over usage terms and agreements. Earlier this year, News Corp.'s MySpace blocked Photobucket--best known for helping users post images on MySpace members' pages--from doing exactly that.

Photobucket, which launched in 2003, provides a one-stop shop for uploading pictures and videos all over the Web. Despite its popularity among MySpace users, Photobucket was on its way to becoming a formidable destination site of its own. The site is ad-supported and hosts pictures and videos for free.

Photobucket currently has around 40 million users sending links pointing back to Photobucket from 300,000 sites in addition to MySpace, and boasts more than 40% of all online photo-sharing traffic, according to Hitwise. Furthermore, it serves some 3 billion online images and videos daily for its 41 million members.

Photobucket's chief executive Alex Welch earlier this year hired Lehman Brothers to shop the company around. Web expert Michael Arrington, who first reported the MySpace deal on his popular TechCrunch bog, had said the startup was being shopped for $300 million and $400 million.

Arrington also reports that roughly 1.8 million of Photobucket's visitors don't currently visit MySpace, which could mean large-scale defections if and when the site is absorbed by News Corp.