2% of U.S. Internet Traffic goes through Photobucket

Photobucket isn’t as flashy as YouTube or Flickr, but they have 14 million users, 80 uploaded photos per second and, just two weeks after launching their video product are nearly matching YouTube with 30,000 daily uploaded videos (YouTube is 35,000/day). And, Photobucket is both profitable and cash flow positive.

What is it? It’s the behind the scenes photo and video server for MySpace, eBay and dozens of other sites that either have significant restrictions on photo/video uploads or heavy fees. For users of those services, they often turn to Photobucket to host these files. Photobucket is not designed to be a destination site – their tools are focused on easy uploading, transcoding to flash (in the case of video) and posting to other sites. 63% of all media links to sites like MySpace are served by Photobucket. Compare that to 8% for Flickr and 1.38% for YouTube.

And their tools work so well that they are not forced to compete on price. Photobucket does have a free product, but it’s capped at 1 GB of storage, 10 GB of monthly bandwidth and, for video clips, 3 minutes of total footage per clip (YouTube is 10 minutes). The $25/year premium product has higher limits: 5 GB storage, unmetered bandwidth and video clips of up to 5 minutes.

They’ve just moved into video hosting (the official announcement isn’t until April 25), but after a quiet launch they’ve seen 250,000 video uploads and about 30,000 new uploads per day.

Photobucket was founded in 2003 by CEO Alex Welch. The company is based in Denver and Palo Alto, with 35 total employees. They’ve raised just one round of angel financing on their way to profitability. And VCs in the know are knocking down their door to fund this startup that very few people have ever heard of.

VP Sergio Monsalve gave me a walkthrough of the product today and is pictured in the image above.