Earlier this week, Shutterfly Inc. (SFLY) bought Tiny Pictures for $1.3 million in cash and another $1.3 million in restricted stock with some performance triggers to employees. The acquisition will help Shutterfly to expand its mobile offerings by using Tiny Pictures’ mobile expertise.

Tiny Pictures has been facing tough competition from the flurry of photo sharing sites on the Web in recent years. Investors Draper Fisher Jurvetson, Reid Hoffman, Joi Ito and Mohr Davidow Ventures expect the company to produce very low returns going forward. Since its inception in 2005, Tiny Pictures has raised $11.2 million in two installments.

Tiny Pictures runs a site called Radar.net, which allows mobile sharing and is integrated with Twitter, Facebook, Flickr and other social networks. Shutterfly wants to apply some of these social media features to its own service.

After buying publishing service Nexo Systems for less than $15 million last year,

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Shutterfly Inc., founded in 1999, is an Internet-based social expression and personal publishing service. Trading on NASDAQ as part of the Consumer Services industry, they provide high quality products and services that make it easy and enjoyable for customers to preserve their digital photos. Headquartered in Redwood City, California, the company allows customers to organize all their photos in a single, safe, easily accessible location.

With their photos uploaded onto the Shutterfly site, customers can produce photo-based communications and gifts. It’s a way for consumers to produce products that allow them to send personalized gifts to family and friends. Shutterfly Inc.’s popular line is their Photo Books. With these, their customers can preserve and celebrate memories by telling their own stories with photos and text. Shutterfly combines these into a professional bound coffee table book.

Shutterfly has over 1.5 billion images stored in their digital archive. They foresee greater growth in their

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