Thoughts on AOL's Bebo acquisition

In a statement released this morning, AOL said it had acquired Bebo for $850 million in cash.
Written by Steve O'Hear, Contributor
Thoughts on AOLÂ’s Bebo acquisition
Rumors of Google or News Corp.-owned MySpace buying Bebo have proved to be a smokescreen for the social networking site's new owner: Time Warner Inc.'s AOL.

In a statement released this morning, AOL said it had acquired Bebo for $850 million in cash (pending U.S. and EU regulator approval), describing the service as "a perfect complement to AOL’s personal communications network and puts us in a leading position in social media." Bebo claims 40 million users and is particular popular in the UK, where it trails only Facebook, as well as ranking number one in Ireland and New Zealand, and number three in the U.S.

Bebo's $850 million price tag

Let's put Bebo's price tag in context. Nearly three years ago, News Corp. paid $580 million for MySpace, which at the time was seen to be on the high side but now looks a bargain. While Microsoft's recent investment in Facebook, if taken at face value (no pun intended), gives the "social utility" an almighty valuation of $15 billion. Like News Corp./MySpace, I think AOL's acquisition of Bebo will eventually prove to be good business.

In terms of user numbers, Bebo claims 40 million against Facebook's 60+ million members. The BBC's Rory Cellan-Jones did the back of the envelope calculation, noting that based on their current valuations, each Facebook user is theoretically worth $250, while "Bebo has just sold each of its 40 million users for a rather more modest $21.50 per head". Facebook users can't be worth 10x more than Bebo's.


Of course, it's not all about user numbers, certainly not when we're into the multi-millions. It's to what extent value can be extracted from those network effects, primarily through selling targeted advertising -- something that all social networks are reportedly struggling with. This is where Bebo has definite strengths and some weaknesses.

On the upside: Bebo claims its users are "heavily engaged" and view an average of 78 pages per usage day, and spend on average 33 minutes on the site per day. Rather than relying on traditional banner or text ads, Bebo has been pushing its "Engagement Marketing," strategy, an "initiative for brands to build long-term relationships with their target audience".

One area where Bebo has been indisputably on the cutting edge is through tie-ins with original episodic online video content, such as "KateModern", the lonelygirl15 spin-off. The video show hasn't been shy of sponsorship/product placements.

AOL also brings its ad network to the table, Platform A, which will be used to "supercharge" Bebo's monetization, according to the press call announcing the acquisition. Additionally, AOL wants to use Bebo to help turn its IM platform, AIM, into a fully-fledged social network (for the second or third time?).

On the downside: Bebo is a very youth-orientated social networking site. With the social networking sector as a whole being in its early days, it's a little too soon to tell if Bebo's current users will inevitably graduate to something else as they get older and whether or not Bebo can continue to attract new young users. It's the Fad versus Longevity question.

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