AOL Admits Bebo To Be Sold Or Shut Down; Memo Sets May Target For Decision
AOL (NYSE: AOL) told employees today that it may sell or shut down social network Bebo this year after deciding it would take too much additional investment to make keeping it worthwhile. Here's the memo from AOL Ventures EVP Jon Brod...
Context & Ripple Effects
Bebo has been on borrowed time inside AOL almost since arrival: when BoomTown ran the numbers on Bebo's scale back in March 2008, the audience figures already looked thin relative to what a buyer would need, and a year later AOL's own answer was to route social ambition around the standalone network entirely, betting instead on lifestreaming and chat aimed at Facebook Connect.
The memo from AOL Ventures EVP Jon Brod lands mid-purge under CEO Tim Armstrong, who spent late 2009 reshuffling executives, hiring Saul Hansell to launch Seed.com, and in March 2010 put $10 million behind local startups — a portfolio being rebuilt around content and local while legacy bets get marked for exit. Setting May as the decision date turns a slow fade into an auction-or-wind-down with a clock on it.
First-order effects
- Bebo's staff and users now operate under an explicit May deadline, with Jon Brod's memo leaving sale or shutdown as the only two live outcomes.
- Any further product investment in Bebo is effectively frozen pending that call, redirecting budget toward the content and local initiatives AOL is actively staffing.
Second-order effects
- A hard public deadline makes AOL a motivated seller, compressing whatever price a buyer might otherwise pay for a shrinking social network.
- Advertisers and developers still spending on Bebo have reason to move budgets to larger networks now, deepening the audience erosion that made the asset marginal in the first place.
Third-order effects
- If the pattern holds, the portal-era wave of second-tier social network acquisitions becomes a class of stranded assets, with engagement concentrating on a single dominant graph and everyone else facing write-offs rather than turnarounds.
- It also sets a discipline template for new-media owners: communities they cannot win get treated as disposable lines on the P&L, not long-term fixes — a standard other acquirers of social properties will be judged against.
The trend: The 2000s land-grab of second-tier social networks is entering its cull phase, as engagement consolidates around a single dominant graph and weaker graphs get sold off or switched off.