DigitalBeat

Shutterfly, a company that lets you create photo albums online, has acquired mobile photo-sharing company Tiny Pictures for $1.3 million.

Shutterfly will expand its mobile offerings by using Tiny Pictures’ expertise in mobile, according to John Poisson, chief executive of Tiny Pictures, who confirmed the acquisition in an interview this morning.

The deal is a loss for investors, who had pumped in a whopping $12.2 million into the company, and suggests Tiny Pictures was unable to gain any significant traction. It faced scores, if not hundreds, of other photo sharing sites that flooded the Web in recent years, and so the odds it would produce the returns expected by its investors were very low.

Tiny Pictures runs a mobile site called Radar.net that lets users upload photos to pretty much any phone, and lets other users comment on them. Radar has an iPhone application that lets you do things like pull your Flickr photos into your Radar photo-stream. Radar enjoyed favorable reviews, but with Facebook emerging as a dominant photo sharing site online, its future looked rough as a stand alone site. Shutterfly apparently wants to apply some of these social media features to its own service.

Poisson wouldn’t comment on whether the Radar site would keep running, or be shut down. He said to “expect a new product release from us,” suggesting it would be soon, but he provided no specifics on timing. He also wouldn’t comment on the number of users Radar has.

The acquisition also includes a $1.3 million earnout for the nine-person team at Tiny Pictures, thus providing an incentive to the team to keep working at Shutterfly even if the deal is a complete wash for investors. Tiny Pictures had raised its money from Draper Fisher Jurvetson and Mohr Davidow Ventures.

Still, Poisson said he and his team are excited about joining Shutterfly, which he called a visionary company, and great fit for Tiny Pictures. Tiny Pictures was founded four years ago, and was experimenting early with things like real-time browsing, commenting and social “whispers.”

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Tags: co:Shutterfly, co:Tiny-Pictures