Roses are red
Buyouts are blue
Why buy one photo-share site
When you can buy two?
The greeting card giant announced it would buy fledgling PhotoWorks (OTC BB: PHTW.OB) in a $26.5 million deal. The move comes a month after American Greetings acquired Webshots.com from CNET
Why would a greeting card company snap up a pair of traffic-rich, yet monetization-poor, websites that thrive on digital snapshot uploads? Do you really have to ask?
Take a picture site, it'll last longer
It didn't take long for American Greetings to milk more out of the Webshots traffic. Attracting 7 million unique monthly visitors, scrolling through the more than 500 million user-submitted photographs, American Greetings has been promoting holiday gifts that can be personalized with digital snapshots on the site. Webshots turns to third-party partners like Qoop, Stamps.com
PhotoWorks is a logical fit, especially since its emphasis is more on customized products and prints than actual photo-sharing.
It's also hard to beat the price. PhotoWorks shareholders will be cashed out at $0.595 a share. It may not seem like much, but that is more than double what the shares were worth yesterday.
How did PhotoWorks become a lamentable penny stock? Bleak financials will do it. Through the first three quarters of fiscal 2007, the company's operating loss widened to $2.8 million. Revenue fell by 8% to $8.4 million, as gains on the digital side failed to offset decline on the film side.
One picture is worth a thousand blurbs
As a result, American Greetings now has two popular sites for shutterbugs for a mere $71.5 million outlay. The sites may be financial drains at the moment, but they will be perfect for funneling traffic back to American Greetings itself. The greeting-card juggernaut will also be able to make the most out of deals brokered by the smaller photo-sharing sites.
For instance, PhotoWorks struck a great deal with The Knot
Now just think about what American Greetings can do with that. Don't thank-you notes for wedding gifts need to be sent? Maybe grateful wedding guests will want to send greeting cards and photos to the returning honeymooners. It's too easy.
In April, PhotoWorks teamed up with Carnival
Just click and shoot
So where does American Greetings go from here? There won't be too many bargain-bin deals to be had. The most popular photo-centric sites like Flickr, Snapfish, and Photobucket have rich parents with little reason to punch out. Standalone players like Shutterfly
American Greetings is unlikely to nab any big names, but you can bet that the small sites -- the ones that are barely getting by -- have American Greetings on speed dial now that they know it's on a shopping spree.
For better or worse, American Greetings is a new, new media mogul. I guess you can teach an old school paper company new, new media tricks.
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Longtime Fool contributor Rick Munarriz never tried to shake it like a Polaroid picture. He does not own shares in any company mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.