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By Cara Garretson
AOL earlier this week confirmed that it plans to either sell or shut down Bebo, the social networking site it acquired two years ago.
According to an e-mail to employees from Jon Brod, executive vice president of AOL Ventures -- the investment arm of the company -- AOL has recognized that the social networking space is highly competitive. And, while Bebo isn’t holding its own, the company isn’t planning to dedicate the capital required to improve its odds in competing against sites such as Facebook and MySpace.
“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,” said Brod in a memo to employees. “AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking.”
AOL will take until the end of May to evaluate whether Bebo can be sold off to another company, Brod said. If not, the assumption is that Bebo will be shut down.
The Internet company bought Bebo in March 2008 for $850 million in cash.
While popular in the U.K., Bebo’s user base in the U.S. has been decreasing. According to ComScore, the site had 5.1 million U.S. users in February, down from 5.8 million users in the U.S. at the same time a year ago. Those figures pale in comparison with Facebook’s more than 200 million users in the U.S.
In July 2009, when Time Warner was in the process of spinning off AOL, CEO Tim Armstrong said Bebo still had “great value” and moved the social networking site to the AOL Ventures division. Armstrong, a former Google executive who took over AOL in March 2009, said this during his 100-day evaluation of all of the AOL brands. Time Warner completed its spin-off of AOL in December.
Times have changed for AOL, once considered the dominant Internet company in the U.S. When AOL and Time Warmer merged in January 2000, AOL was valued at $163 billion; when Time Warner spun off AOL in 2009, the company’s market capitalization was estimated at around $3.44 billion.
AOL, headquartered in Dulles, Va., is also said to be looking for a buyer for its ICQ instant messaging service. Reuters says that a Russian business publication reported three companies to be in the running, and all have placed bids to buy ICQ; Russia's ProfMedia and DST, and also China's Tencent. ICQ’s value is at a reported $300 million, and the chat service currently has 42 million users around the globe.
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