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.

According to comScore research, the total number of ad impressions on all social sites put together accounts for 21.1% of the total online ad displays in the U.S.

The most popular social sites, MySpace and Facebook, together received the vast majority of ad impressions. Individually, MySpace received 9.2% and Facebook received 8.2% of all online ad impressions.

Less popular sites like Tagged.com, Hi5, Bebo, Classmates.com and many others account for the remaining 3.7% of all online ad impressions. Each of them receives about 0.1% of the total, with the exception of Tagged.com which has 0.6% and MocoSpace.com which has 0.2%.

The popularity of social networks has increased rapidly in the last few years, so it is quite natural that advertisers would try and make use of this medium to reach the maximum possible target audience. Another motivating factor for using the social networks is the high reach and frequency of usage among target segments against low costs .

Jeff Hackett, Senior VP at comScore, says, “Social media is becoming an increasingly attractive vehicle for major advertisers seeking to optimise campaign reach and frequency, and small advertisers desiring to reach a highly targeted audience.”

One should, however, note the fact that although the number of ad impressions on social sites is over 20%, the actual number of clicks and conversions received from social networks could be significantly lower. If that is the case, social networks are no more than excellent branding channels.

A recent story run on TechCrunch says that according to trusted but anonymous sources, AOL is planning to sell Bebo as its performance has been far below expectations.

Both AOL and Bebo have denied this, saying “there is no truth to this rumor”.

According to sources, when AOL bought Bebo last March, Bebo was marketed as a clever startup that was able to win over ad agencies and clients by presenting itself very well. Ad agencies convinced their clients that they must get on to Bebo, which was growing more popular by the day in the relatively new social network market.

When AOL saw this, they obviously felt that it would be a wise move to buy Bebo, and accordingly they did so on March 13 2008 for $850 million.

Time, however, proved that Bebo did not perform as well as expected. While Bebo is popular in the U.K. with 10.5 million users, its worldwide user base is just 22.6 million.

Facebook’s meteoric rise in popularity is the biggest factor contributing to Bebo’s failure. That, and the fact that singular social networks are no longer as popular as they were, due to the growing popularity of the open social platforms is partly responsible for this. The current economic climate makes the performance of the company look even poorer. While Facebook is believed to have earned $250 million last year, and MySpace much more than that, Bebo has managed only $20 million.

A spokesperson at Bebo, however, rubbishes the rumors of a possible sell off by AOL, saying that Bebo has launched a new tool, Social Inbox, just last month. It is doing very well and will allow users to read emails from various sites and also access other social services like Twitter and Flickr. It will also integrate AOL’s instant messaging service. AOL is also reportedly planning further expansion with Bebo.

Only time will tell whether the rumors turn out to be true or not.

The annnouncement came just one day after Yahoo! announced its intention to support Google’s OpenSocial platform. Microsoft has never been truly open, and so joining any alliance like OpenSocial or even forming a truly similar initiative of its own is out of the question. Microsoft has however taken some big strides to improve data portability and allow users better control over the use of their information.

Several new APIs and tools that help third-parties develop more applications were announced during MIX08 last month. And now a new ‘Windows Live Contacts API‘ has been launched to allow users to transfer and share their contact lists, without any security concerns.

Social networks partnered with Microsoft through this initiative will gradually shift to using Windows Live Contacts API instead of using the method called ‘screen scraping’, which was not a very secure means and exposed users to spam and, worse still, identity fraud.

Users will be given ultimate control in deciding which of their contacts, if any, get shared with each of the participating social networks.

Read the full announcement from Microsoft

Microsoft has also created a new site where users from the partner social networks can download Live Messenger and invite their friends from the social networks to chat with them. This would normally seem a surprising move from Facebook, given that they are likely to launch their own chat client in the near future. However, Microsoft’s stake in the company has probably influenced the decision to support a competing product.

www.invite2messenger.net

This acquisition will enable AOL to secure a prominent place in the ever-expanding world of social media. Bebo is believed to have a membership of over 40 million users and about 100 employees. According to Falco, “Bebo is the perfect complement to AOL’s personal communications network and puts us in a leading position in social media.”

Last year Bebo was the 2nd most popular social network in the UK, behind MySpace. This year, though, it has been overtaken by Facebook, but continues to be favoured by teens and young adults.

Joanna Shields President of Bebo will continue to head the organization, and will report to Ron Grant, President and COO at AOL. Market analyst eMarketer estimates that $4.1 billion will be spent on social network advertising by 2011, compared to $480 million in 2006.

AOL official press release

AOL is expected to further benefit from this latest move, as today brands like Apple and Nike are using Bebo as a platform to develop and maintain interaction with their target customers. AOL has plans to coordinate the services of their products AIM and ICQ with Bebo, thus allowing users to express themselves freely, while at the same time extending their existing relationships. AOL’s advertising service Platform A will also be very attractive to brands advertising through Bebo as it will allow them to keep track of the performance of their ads.

TechCrunch reports that AOL and Bebo had been negotiating this deal since September 2007, but the merger is yet to clear the U.S. and E.U. antitrust regulators before it can be finalized.

According to this study, 20.8 million Internet users in the U.K. have visited at least one of the 10 most popular social media websites in January 2008, accounting for 63% of the country’s online population. Compared to 17.1 million (42%) visiitors in January 2007, the figure represents a 21.6% growth in popularity of social media.

YouTube has overtaken Wikipedia, to become the new most popular social media website. Also Facebook and Slide, which were nowhere in the top 10 list last year, are now prominently figured in it at position 3 and 7 respectively, while Friends Reunited and Google Video which were in the top 10, have slid down to 16 and 14 respectively.

Social media sites that started out as a tiny part of the Internet have grown to become its main lifeline, which is proved by the fact that about two thirds of online Britons visit these sites.

Last year’s stars MySpace and Bebo, which was acquired by AOL today, have lost favour with UK audiences. Facebook is the most popular social network, but it too seems to be loosing its glamour as its growth has reportedly slowed down.

Social network PerfSpot, instead took the top spot as the fastest growing social media site, having grown by 713% in the last 9 months, which is even more than Facebook’s 712% over the last year.

Six of the fastest growing 10 sites are video sites, of which vidShadow has grown by 639% in just 2 months from November 2007. While most of the social media sites in the top 10 ranking are networks, the video sites are the fastest growing, which means they could even overtake the networks during the course of 2008. With the rapid improvements seen in video technology and easy accessibility, video sites seem to hfave become the hot favorite in the U.K.