Did MySpace just buy Photobucket?

Updated with Photobucket stats: MySpace is buying Photobucket reports Valleywag, even though it is not offering any details on the price MySpace is paying for the photo-hosting company. According to reports, Photobucket had hired Lehman Brothers to shop it around and was looking for $300 million. We are still waiting to hear back from MySpace executives.

That was before Photobucket got into a brawl with MySpace, which started blocking some of its slideshow widgets that were deemed as “advertising.” The very public and ugly spat showed who was the boss, and likely the price might have come down a little bit.

The Valleywag report says that the negotiations ended last week, and there is an all hands meeting at Photobucket today at 10 am, and perhaps that is when the news is going to be announced to the employees.

So why would MySpace buy Photobucket? The MySpace photo service hasn’t really gained as much traction and MySpacers continue to gravitate towards Photobucket. According to Hitwise, “Photobucket accounted for 73% of Photography category visits leaving MySpace and Photobucket is by far the most dominant photo website for MySpace users.”

If indeed true, then it could be one Happy Monday for Photobucket’s investors – Trinity Ventures and Insight Venture Partners. Their good fortune would mean that other Silicon Valley moneybags would be willing to take riskier bets on start-ups that have high traffic, but little in terms of revenues, profits.

Some Photobucket stats via Hitwise:

* Photobucket is the 22nd most visited website overall in the US among all US websites for the week ending May 5, 2007
* 58.78% of Photobucket’s traffic came from MySpace.com and MySpace Mail combined for the week ending May 5, 2007.
* Based on Hitwise Clickstream data, Photobucket was the fifth most popular website visited after MySpace.com, with 1.7% of the traffic leaving MySpace.com to go to Photobucket for the week ending May 5, 2007.