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phanfare.jpgPhanfare, one of dozens of photo-sharing companies hoping to stay alive amid extreme competition, has raised $2.5 million more in capital and promises a big change in its business model.

Phanfare isn’t profitable yet, but its offering distinguishes it: It allows you to store your photos — and videos — in an application on your desktop, and then syncs the content to the Web automatically. That means your collection of videos and photos is available wherever you go: They’re stored online so that they’re easily accessible if you change computer. No other service, to our knowledge, does this for both video and photos. The company focuses on private sharing among families, and so the Web contents aren’t available for view by outsiders.

The site has had favorable reviews. Yet despite its 10,000 customers, Phanfare is still not profitable — which points to the big economics problem of photo sharing: There are simply too many other sites offering people unlimited, free storage for photos. “A large number of players are willing to take perpetual losses,” says Phanfare’s chief executive Andrew Erlichson. “As these companies get out of the space, there will be a healthy shakeout.”

Erlichson said the company is about to do something radically different within a month or two, but said his plans are secretive. “Our whole business model is changing. We have big plans for the service”. However, he ruled out a move to offer the service for free. Phanfare users pay $7 per month, or $55 a year, and get unlimited storage.

The third round of funding was led by Azure Capital Partners, and included other undisclosed investors. Previous backers include Acadia Woods Partners, and DoubleClick co-founder Dwight Merriman, former DoubleClick chief executive Kevin Ryan, and founder of ringtone company Zingy, Fabrice Grinda. Azure’s Paul Ferris joins the board.

Erlichson founded the New Jersey company three years ago with Mark Heinrich. They did so after studying at Stanford and launching a company called Flashbase, which was bought by Doubleclick in 2000.

A host of other players offer desktop photo storing and management applications, including Kodak, Shutterfly and Snapfish and Picasa. Online players include Fabrik, Flickr, Fokti, Pbase and SmugMug, among many others. Phanfare converts the videos to Flash for you so they are easily viewed online, and you can download them in their original form (update: SmugMug does this too; remarkably, SmugMug also says it’s profitable). Phanfare also works well the new Eye-Fi card. Sharpcast has a version of the online-offline sync, but only for photos so far.