Surprise, surprise. Just as Photobucket talks to potential acquirers, there's a burst of press about the photo hosting service. The biggest web site you've never heard of, says Fortune's David Kirkpatrick. Worth $300m-$400m, Lehman Brothers, bankers hired to pitch the company, tells Michael Arrington. 17m unique visitors a month, according to Comscore. It's a veritable coming-out party for a previously obscure widget company. No doubt Photobucket will be acquired, probably for something like the price that the site has signalled through Arrington's Techcrunch. (By the way, when did bankers start sending messages through blogs?) But the venture is not, as Arrington says, cheap at the price. For three reasons.

1. Not as big as it looks. Most users come into contact with Photobucket because they're visiting a Myspace page, which has photos hosted on the service. There's no obvious Photobucket branding on these sections of the site, nor is there any opportunity for the venture to run its own advertising. It is only when a user decides to log in to Photobucket to upload or reorganize their own photos that the company can serve up its own ads. That's reflected in the revenues: $6.3m in 2006. Even with a valuation at the lower end of the range, $300m, that's a fearsome multiple.

2. Not as powerful as it thinks. Photobucket execs, rather unwisely, imply to Fortune that it has more loyalty than the social networks for which it hosts users' photos. "If one social networking site goes away and another comes up the user just moves, but their content stays with Photobucket," says the chief exec. But that could work the other way: I could absolutely imagine Myspace offering its own photo service to users, with the option to automatically slurp up all images from their Photobucket accounts, and move them over. Even if Myspace didn't offer that migration tool, the mere suggestion that it was building one would weaken Photobucket's bargaining position. This is one thing that Myspace's owner, News Corporation, with all its experience in TV production and distribtion, does know: how to squeeze a provider.

3. Serving photos costs more than you think. How curious that Photobucket leaked only its revenue numbers to Techcrunch. There is a reason that most photo ervices limit the number of images that users can upload, and most won't host images that are displayed on other sites. That's Photobucket's central proposition to users, that it will bear the burden of hosting snaps of their friends, but that the images can be embedded and displayed on popular social network sites such as Myspace. It's a great proposition, but an expensive one.

So, I'm sure Photobucket will sell. It does, unlike many ventures of the current web crop, actually have users. The venture will probably go to News Corp, owner of Myspace, because the links make Photobucket worth most to Rupert Murdoch's media giant; and worth less with that company as a disgruntled losing bidder. But the deal is only cheap in the minds of the bankers pushing the deal.