A few weeks back we reported that “Photobucket was out of space” which was a play on the fact that Myspace had blocked the photosharing/widget site. Ironically, this led to acquisition talks and now its been confirmed Myspace has bought Photobucket for $250 million in cash with another $50 mil in the pipeline.

Photobucket generated $6.3 million in revenue last year and planned on hitting $25 million or more this year. They have 40 million registered users and add another 85,000 per day.

Some bloggers have called it:

a parasite fusing with its host

Photobucket is the most important site on the Internet that hardly anybody understands. Unpretentiously, it has built an essential service that didn’t need to shout out for attention, the way MySpace, YouTube, Facebook, Flickr, or other related sites have.

The risk to Photobucket would be if the next hot social network were able to become popular while prohibiting linking from the outset. But now with the News Corporation social network under the same roof they can continue to develope and innovate exclusively to Myspace’s 170 Mil + users. Does this mean Slide.com, who recently closed a round of funding, could be blocked from Myspace?

Photobucket’s deal should be cause for celebration for Alex Welch (founder) and his partners, and for Trinity Ventures, which invested $10.5m in the company last year. But, for other widget makers, it marks something of a ceiling on their likely exit.