849 million reasons why Bebo was a mistake for AOL

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Michael Birch, one of the nicest guys to win the startup lottery, has bought back Bebo for $1 million. He announced the deal via a tweet, a sharp contrast to the big splashy press events organized by AOL (then part of Time Warner) five years ago.

AOL had sold the company to LA private equity firm Criterion Capital Partners in 2010 for somewhere between $2.5 million to $10 million. It had been having trouble and in May 2013 it had filed for bankruptcy protection, according to a report in The Los Angeles Times.

In 2008, overcome by Facebook envy, arguably the worst internet company executive I’ve ever seen — AOL’S Randy Falco — bought the company for $850 million. It bought Bebo, but it didn’t know why and how to make it work. The acquisition was a disaster on many fronts. AOL was and remains a non-social web company. I was pretty skeptical of the deal and believed that it was going to get Friendster-d.

This deal cost AOL a lot — and not just cash. First, it could have easily used the $850 million for better & smarter acquisitions in the future. But more importantly, the failure of Bebo acquisition made AOL (Time Warner) gun shy in making further big acquisitions, however rational they might have been. As far as I am concerned, Bebo is and will always remain a shining example of fallow thinking of executives overcome by corporate envy and a desire to look sexy.

Birch’s tweet made me think about the time when social networks were all the rage. Bebo was one of the highest profile exits amongst half a dozen social networks that popped up in mid-2000s. With the exception of Facebook, almost all have flamed out — Friendster, MySpace, Bebo, Friends Reunited. Like dance clubs, these faded (and forgotten) social network marquees are a rude reminder that social web is about people and people are fickle. And younger people are even more fickle. That is why we have SnapChat and Instagram.

Actually, I am excited to see what Birch is going to go next — I mean apart from mining the email list to promote whatever products his 21-person San Francisco-based incubator, The Monkey Inferno, ends up building!

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