AOL bought the social network Bebo in 2008 for $850 million. However, the network has not been doing too well and has been losing ground against its more popular competitors. It is believed that AOL is likely to sell the social network or shut it down.
Executive Vice President, Jon Broad, stated in a memo to employees, “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 has recently separated from its parent company, Time Warner, and is itself struggling to compete against other dial up services.
A strategic evaluation of Bebo is underway, and the results are expected to be out by the end of next month. It is reasonable to expect that the estimated selling price will be much lower than what AOL paid for it.
According to comScore, Bebo had 5.8 million users at this time last year, but has only 5.1 million users at present, which itself is a bad sign. Compare this with the hundreds of millions of users that other sites like Facebook and Twitter have gained, and Bebo’s figures seem miniscule. It is highly likely that Bebo has been a casualty of the growing popularity of Facebook and Twitter.
It is also possible that AOL may eventually decide to abandon Bebo, instead of selling it. This would allow AOL to avail of certain tax incentives, rather than selling Bebo at a very low price and showing a capital loss on their accounts.
