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Bebo On The Cutting Block

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David Silversmith
David Silversmith

Two years after acquiring social network Bebo, AOL has decided to abandon its social networking investment, either by selling it or simply shutting it down.

Considering that AOL paid a whopping 850 million (USD) for Bebo, there is little doubt that they overpaid by a huge margin.  From the point of acquistion to today, the social network has fallen from 22 million monthly unique visitors to just 14.6 million today (Comscore worldwide).  Indeed, Jeff Bewkes, chief executive of Time Warner , admitted that the deal had been overpriced.

In a letter to business partners, AOL said that "social networking remains a space with heavy competition, where scale defines success, and unfortunately AOL is not in a position to further fund and support Bebo in pursuing a turnaround in social networking." While you would think that a website with close to 15 million visitors would have some value on the open market, it looks like AOL’s best financial option for Bebo will be to abandon it rather than sell it!  A series of complicated US tax rules will let AOL write off the purchase price and save around $380 million in taxes - way more than they are likely to make in a sale of Bebo.

Alexa reports that Bebo is the 17th most visited site in New Zealand so there will be many folks, estimates are that 600,000 New Zealanders will be looking for a new social media home.  They could go to MySpace, but it too is suffering severed declines.  The social media site myYearbook is growing by leaps and bounds - but it is almost 100% US based traffic. Almost by process of elimination, Facebook is most likely to gain from Bebo's demise.

Bebo spokeswoman Sarah Gavin reports that Bebo has no official statement on what will happen to content posted by members on Bebo – including personal information, photos and videos – if the site is shut down.  With this in mind, it would be wise for Bebo users to begin the migration of any data that they want to hold onto.  While it is doubtful that AOL would shut the site down cold - there is not much reason to wait until the lights are shut off.

Both MySpace and Bebo have suffered under the ownership of a larger corporate giant.  Many have wondered why Facebook has turned down generous offers for the company.  However, when you look at AOL and Bebo and then MySpace and News Corporation - both these case studies certainly point to social media sites flourishing as independant businesses. 

Bebo is an acronym for "Blog early, blog often" but the often looks to be longshot.


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