MySpace is finalising a deal to buy Photobucket, the online photo sharing service, weeks after the two companies were at loggerheads over an advertising dispute.

The deal, the latest in a string of online investments by News Corporation, MySpace’s parent company, could value Photobucket as highly as $300m.

However, the recent row between the two companies is believed to have come close to disrupting the deal plans.

MySpace was in early stage talks with Photobucket last month when it discovered the company was encouraging users to insert ad-supported slideshows on their MySpace profile pages.

When MySpace blocked links to the slideshows, Alex Welsh, Photobucket’s chief executive, said the News Corp-owned company was “contradicting the very ethos of personal and social media …MySpace is showing that it considers its users a commodity which it can treat as it sees fit”.

The dispute was later resolved, however, with the two companies since understood to have come to a preliminary agreement on a sale.

They are expected to make a formal announcement in the next few weeks. MySpace on Monday declined to comment.

Photobucket, which has an estimated 40m users, also declined to comment. Photobucket would be the first acquisition masterminded by Peter Levinsohn, the News Corp veteran who was appointed to head MySpace six months ago.

Reports at the time of his appointment suggested he would concentrate on operations, rather than on doing deals, as his predecessor Ross Levinsohn had done. But in an interview with the FT two weeks ago, Mr Levinsohn said deals remained a strategic priority.

”Any type of technology that will help us to monetise the site better is something that we will be very aggressive in pursuing. We will aggressively pursue opportunities that help us create better experiences for our users,” Mr Levinsohn said. The purchase comes as News Corp looks to use proceeds from the sale of its stake in DirecTV to John Malone’s Liberty Media.

The group, which last week made a $5bn bid for Dow Jones, has made several investments in online companies and recently acquired Strategic Data Corporation, which specialises in sending targeted advertisements to niche audiences on the web.

Hitwise, the research firm, says Photobucket is the most-visited site in its category, receiving 40 per cent of all visits to entertainment-photography sites last week.

Nearly 60 per cent of its traffic came from MySpace.

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