Valleywag: John Borthwick

France's Hi-Media buys Fotolog for $90 million

Owen Thomas — Mon, 27 Aug 2007 09:28:57 PDT

Our tipster was right that Fotolog, the New York-based photo-sharing site had been sold — but wrong, alas, about the buyer, and the price. We'd heard of a Latin American buyer paying north of $100 million. Instead, it's Hi-Media, a French Internet concern, paying $90 million in cash and stock — a rich price for a company with 10 million users but only $2.3 million in revenues projected for this year. Hi-media is publicly traded on the Euronext stock exchange, so its shares are as good as cash. But Fotolog backers 3i and BV Capital say they plan to hang onto their shares and "participate in the development" of the combined company. So now the most interesting question is, who cashed out? We wouldn't be shocked if CEO John Borthwick, above, and founder Scott Heiferman were among those receiving an immediate cash payout. Borthwick has a host of other startup ventures, and Heiferman is the CEO of Meetup.

What's Fotolog worth, and why does it matter?

Owen Thomas — Wed, 22 Aug 2007 13:34:05 PDT

Some observers think that Fotolog's rumored sale price, at north of $100 million, is too rich. After all, the photo-sharing site has a mere 10 million users, putting the price on each user's head at $10 and up, while Photobucket, with 40 million users, reportedly sold to MySpace for an amount in the range of $250 million to $300 million, valuing its users at $6-$7.50 apiece. But that facile analysis ignores two important factors — factors which tell us much about the changing market for Web companies.

One, the recent deal between Fotolog and Google, which brought it a $75 million revenue guarantee, according to Silicon Alley Insider. Revenue matters, even if it comes in the form of an ambitious guarantee from a deep-pocketed player.

Two, Photobucket, as a storage site mostly used as a widget on sites like News Corp. sister site MySpace, commands little attention from its users. As Fotolog CEO John Borthwick points out, Fotolog, by encouraging users to visit the site and chat with friends there, gets them to visit the site nearly four times longer than Photobucket's users. Advertisers are increasingly looking for engagement, not just raw numbers, when evaluating social-networking sites as a marketing medium. And by that measure, Fotolog's rumored buyer may have underpaid — or Rupert Murdoch, in snapping up Photobucket to bolster MySpace, may have overpaid.

Fotolog sold for $100 million-plus?

Owen Thomas — Wed, 22 Aug 2007 10:57:44 PDT

A source close to the company tells Valleywag that Fotolog, the social network and photo-sharing site, has been sold to a large Latin American company for an amount over $100 million. Fotolog CEO John Borthwick, who's on his way to Italy for a family vacation, hasn't returned a request for comment. Update: "As if," emails Fotolog cofounder Scott Heiferman. Still, the rumored sale, if true, makes eminent sense for Fotolog — and for Borthwick. Fotolog, though based in New York City, never took off in its home market. But overseas, especially in Latin America, it's huge. The site, which asks users to post a single photo every day, now counts more than 10 million members. While clearly successful, Fotolog is just one of many ventures for Borthwick, a former executive at AOL and Time Warner — and a sale would free him up to pursue those.

Borthwick also runs Betaworks, a technology-company incubator, where his startups include Daylife, Tumblr, Outside.in, and Iminlikewithyou.com. Tumblr, especially, seems to be gaining traction as a new blogging platform, and would make for a logical project to focus on.

But first, of course, he has to wrap up Fotolog's affairs. The deal has been signed, we hear, but not yet announced, and Valleywag hasn't yet learned the name of the acquirer. Our tipster says it's not, surprisingly, Grupo Clarin, an Argentinean media company with which Fotolog has a partnership. The sale price is rich, at four or five times the $20 million to $25 million sum Yahoo is believed to have paid for Flickr a couple of years ago.

Fotolog, however, is more social network than photo-storage site. Unlike Flickr, or the News Corp.-owned Photobucket, whose photos mostly appear elsewhere — mostly on sister site MySpace — Fotolog users view photos on the site itself, and then discuss them and chat with friends they meet on the site. With most of its users in Europe and Latin America, Fotolog's probably better off owned by someone close to its user base.

The sale, assuming all goes as our source has heard, will be a handsome payoff for venture capital backers 3i and BV Capital, as well as Fotolog's angel investors, who put a total of $12 million into the company.