Thursday, 8 April 2010

Bebo - AOL's Loss, But Who Will Gain?

We all remember AOL, don't we? Well, I do at the very least. I remember painfully slow dial-up connections, ICQ and AIM from back when I was a teenager. Oh, the fun I had with that, waiting an eternity to log in, hearing the familiar call from my mum downstairs.

"Nan's trying to call! Get off the internet!"

And then I moved to London, got broadband and never looked back, or used AOL services again. And it seems I'm not the only one - check this graph out (courtesy of Neoseeker.com)



That’s a pretty sharp decline isn’t it? And it coincided with the widespread proliferation of high-speed broadband. AOL was viewed as an Anachronism, and as it was merged with Time-Warner, a large, corporate one.

In 2008, in an attempt to reach out to a new audience and look for new avenues, AOL bought British social networking site Bebo for $850 million dollars. That’s a lot of wonga.

And what did that do with it? Well, nothing. No relaunch, no development, no integration into their other services (bar that lame duck AIM). As a result, the site has been left to stagnate, and trails Facebook’s 35 million active users (active being defined as updating your status every day) with 12 million active users, a large majority coming from Scotland, Ireland and the UK.

So, now AOL want to get rid of something that they paid close to a billion for, and have since spent nearly nothing on, yet still has 12 million active (mainly under 18) users.

In a memo sent to AOL staff yesterday, they stated:

"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."

The long and the short of this is that AOL rushed into the purchase of Bebo. It wasn’t fully aware of Bebo’s demographic, and once they realised that these kids were hard to sell to (as they don’t have their own money yet), they didn’t know what to do with it. So they pulled the plug financially.

This has been a long time coming, and is not necessarily a surpise, but talk of Bebo shutting down is pretty premature in my opinion. I know a lot of companies that would kill for an active userbase of 12million teenagers, and would know exactly what to do with it.

Disney?

Sony?

Nintendo?

The choices are limitless, and the rewards of purchasing this network could potentially be huge if somebody buys it with an open mind to ‘re-skin’ the brand as something to really appeal to teens, something AOL have failed dismally in doing.

Watch this space.