AOL may be pulling the plug on its social-networking acquisition. The Internet giant said it may sell or shut down Bebo, which it acquired in 2008 for $850 million in cash.
The social-networking site was supposed to form the centerpiece of AOL’s People Network business unit. But less than two years later, AOL is singing a different tune. In a memo distributed to employees Tuesday, AOL referenced “heavy competition” in the social-networking arena as a strong factor in its decision to shut down or sell the site.
“Bebo, unfortunately, is a business that has been declining and, as a result, would require significant investment in order to compete in the competitive social-networking space,” AOL Ventures’ Jon Brod wrote in the memo. “AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking.”
A Wasted Opportunity
Ironically, then-AOL President Ron Grant compared Bebo favorably to other social networks at the time of the acquisition. Unlike other social networks, which have a difficult time monetizing their sites without jeopardizing their user experience, he said, Bebo created an environment that let advertisers, brands and media companies engage in meaningful, relevant conversations with users.
But Grant fell by the wayside, and so did Bebo. Although Bebo has an estimated 12.8 million users, it pales in comparison to MySpace, Facebook and Twitter. MySpace has 100 million active users, while Facebook boasts 400 million, according to comScore’s February data.
“AOL wants what they paid for Bebo,” said Greg Sterling, principal analyst at Sterling Market Intelligence. “But since Bebo was acquired, Facebook has become so dominant that any buyer would need to totally reinvent the site. AOL overpaid and then wasted its opportunity with Bebo.”
Bebo Falls To Facebook
The opportunity was real. In 2008, AOL’s publishing network hit an all-time high in…