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AOL Admits Bebo To Be Sold Or Shut Down; Memo Sets May Target For Decision

AOL (NYSE: AOL) told employees today that it may sell or shut down social network Bebo this year after deciding it would take too much additional investment to make keeping it worthwhile. Here’s the memo from AOL Ventures EVP Jon Brod…

“The strategy we set in May 2009 leverages our core strengths and scale in quality content, premium advertising and consumer applications, positioning us for the next phase of growth of the Internet. As we evaluate our portfolio of brands against our strategy, it is clear that social networking is a space with heavy competition, and where scale defines success. 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 is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking.

“AOL is committed to working quickly to determine if there are any interested parties for Bebo and the company

8 Responses to “AOL Admits Bebo To Be Sold Or Shut Down; Memo Sets May Target For Decision”

  1. I think it is becoming obvious that failing to follow the basic principles of business is a recipe for disaster. Companies such as Bebo amplify the notion that entrepreneurs can make it using the “eyeball” exit strategy. Basic business 101 dictates: Profit = Revenue – Costs

    Not everyone can be a Facebook, Myspace, Youtube or For everyone of those there are hundreds if not millions of new ventures following that pattern. Just claiming advertising will save the day and that the goal is the exit strategy is not a wise move to make for any starting entrepreneur or seasoned one to say the least.

    People can say Facebook and Youtube are success stories but be careful with what you wish for. They have been around for half a decade or so and now are barely figuring out how to monetize. If you figure out the ROI on every visitor you will see that there is a problem with the whole equation. Look at Amazon. How long did it take them to turn in a profit? A decade? How about Microsoft? All their new ventures have not been as profitable as their core products: the operating system Windows and Office.

    The bubble is going to burst at some point again. Outliers have spent millions of dollars to keep pace with the eyeball syndrome and fast growth. How has that translated into profits?

    I think the demise of Bebo is an indication of what not to do as company. Think value and making a difference that matters and actually makes money. Business model first then worry about the rest.

    Constantine Roussos

  2. johnblossom

    I wonder whether this isn’t another instance of a media company shooting the messenger rather than considering the message. It seems as if AOL hoped that Bebo would grow miraculously on its own and become the core of its social media strategy. But with little in the traditional AOL syncing with that strategy, what was there to encourage it? Social media integration is key to media strategies today, but as the slow death of MySpace demonstrates, social media in and of itself cannot change media companies already dedicated to traditional models. But looking at AOL acquisitions such as Patch, perhaps there are more media-centric ways that AOL will hope to succeed with social media.

    • Staci D. Kramer

      @John Blossom I think part of the issue is you’re dealing with multiple AOLs
      and multiple theories. If the execs AOL who acquired Bebo had left it to
      grow on its own with AOL as an additional platform, it might be a different
      story. (Maybe not much better but different.) Instead, they pushed it into
      an integration that seems to have dismantled much of what made Bebo work
      independently. By the time the new team was in and the unwinding was undone,
      the damage was done and the interest in making Bebo work in any form was

  3. undertoad

    If it wasn’t dead before, it should be now. Telling a community that it will be moved or shuttered is kind of an immense faux pas. It’s sort of like parking your pesticide van in front of your fancy restaurant. Coming from an EVP, too. Clueless!

    The things that make a community prosper seem at odds with what makes businesses prosper. One notices that some of the most annoying things about Facebook are found where money is being chased. You can only mine a community for so long before the good will of the contributors is worn out. People aren’t friends on the basis of a business plan. People don’t hang out on a website because some guy in a suit got second round funding.

  4. None of the social networks were set up with a solid business plan. In other words, they developed a cool idea, but did not think through the end game. This applies to Facebook and MySpace as well as the smaller or more specialized social networks. Some have the time to figure it out (and the resources) and some do not. Those linked to traditional media companies are probably suffering from a mindset which is not conducive to success! Let’s see how Murdock’s plans to monetize content for some of his newspapers works. Unfortunately, most people have the concept that content should be free, and tune out from advertisements, so that path to monetization will not work well in a social network environment in particular!

  5. “it is clear that social networking is a space with heavy competition, and where scale defines success….”

    This is not clear, in fact this statement is BS. None of these guys are going to admit they spent more time early on bragging about VC funding and early Web 2.0 blogosphere hype instead of having a long term self-sustaining business model. This is why I outright ignore “ooooh…they got VC funding!” type of headlines that make the dotcom industry looks like a “chosen” game…

    I believe Jon “scale” is referring to audience member size to peddle ad rate cards and not contextualization. If he was talking contextualization then you can provide depth that is just as scalable as audience size with a social network.

    Everybody, please understand we are going through a digital content monetization revolution so expect people like Jon to try to apply their outdated Madison Avenue thinking to new paradigms and blame it on everything except their dinosaur methodologies…