Print 14 comment(s) - last by animedude.. on Mar 15 at 5:34 AM

Is AOL's purchase of Bebo a clever competitive move, or another nail in its own coffin?

Bebo in the U.S. remains a lesser known name in the social networking scene.  Internationally, though, particularly in the United Kingdom, the network vies for the number one spot.  Its interface looks somewhat akin to a cleaner MySpace layout.  It features user-generated TV show content, such as the popular video blog "Kate Modern" and content from MTV and CBS featured on an open digital platform.

The site has garnered 40 million total members.  This is relatively strong, though still lagging behind Facebook, which at last counts had 67 million members, and MySpace, which in late 2006 hit 106 million members and has been growing since.  The site does average a healthy 33 minutes per visit, one of the best totals on the internet, and an indicator of potential ad revenue.

AOL meanwhile appears to be slowly dying.  The company’s online and internet services are being split up into separate entities and possibly sold by owner Time Warner.  However, AOL with Time Warner's approval reached a final deal to purchase Bebo for $850M USD.  AOL hopes desperately that with the site and instant messaging program, which remains popular, it can turn the corner and return to growth.  It thinks that it will be able to increase Bebo's user base to around 80 million by tying it to its AIM messaging network.

AOL CEO Randy Falco states, "I've said many times that my vision for AOL is that we become a global, market-leading ad-supported digital media company. Today, we're taking a major step toward realizing this ambition."

The merger is a friendly one and Bebo President Joanna Shields will be staying on as Bebo's leader.  Falco states in his open letter to his company that he believes that the move puts AOL in a leading position in social networking.

Whether the move can salvage the train wreck that is AOL remains to be seen.  Last October, AOL cut 20 percent of its workforce.  It also killed the historically significant Netscape browser, which once was king of the browser market.  AOL had previously spent billions over the last couple years acquiring and Tacoda, with little gains. 

Many point out that social networks are not as profitable as believed.  Facebook CEO Mark Zuckerberg recently stated that his company was "close to breaking even" -- in other words, it wasn't profitable.  Meanwhile Google, which has a $900M USD ad deal with MySpace, is unhappy with MySpace's ad-revenue, which was well below expectations.

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How is this still surprising?
By Cygni on 3/14/2008 1:02:58 PM , Rating: 3
I find it hillarious that people are still sinking hundreds of millions into banner ads, and then they are 'shocked' when they don't generate any revenue. I thought we learned this lesson 10 years ago?

Nobody clicks on banner ads, no matter how many you cram into the average myspace page.

RE: How is this still surprising?
By Polynikes on 3/14/2008 1:36:01 PM , Rating: 2
One can always hope, right? ;P

RE: How is this still surprising?
By RamarC on 3/14/2008 2:34:11 PM , Rating: 2
banner ads are weak. interstitial ads are where the money's at. they allow tv-style advertising and don't need click-thru or any other performance metric. they're easily verified and pricing is all about the eyeballs that saw it.'s 'commercials' before web video clips are estimated to generate over $12M monthly. MSN video is almost as lucrative with $8M in revenue. so web advertising definitely ain't dead.

RE: How is this still surprising?
By pauluskc on 3/14/2008 3:07:53 PM , Rating: 2
I hate interstitial ads.

I am an expert at picking out the "Skip This Ad" link on those pages. And if there isn't a really good Skip this Ad link, then I end up going somewhere else and that company/whatever just lost my potential business to an advertisement.

Did they make $0.54 on that ad just for showing it to me? Or would they have rather had that $1,000+ revenue from me over the lifetime of our b2b/b2c relationship?

This is a metric I'd love to see some numbers on: how much real revenue was lost (or business the competition got instead) due to annoying ads. Or how many jobs have been lost because a company prioritized advertising revenues instead of its own products (ahem, AOL - 20% labor force)?

RE: How is this still surprising?
By eye smite on 3/14/2008 3:30:21 PM , Rating: 3
I'm not sure it matters. If the inept management at AOL train wrecks like they did netscape, can we officially call it the blackhole of he internet?

RE: How is this still surprising?
By RjBass on 3/15/2008 2:10:42 AM , Rating: 2
What I find funny is that somehow AOL came up with $850M to buy anything. Last I heard they were in serious financial trouble.

RE: How is this still surprising?
By animedude on 3/15/2008 5:25:26 AM , Rating: 2
I find it hilarious that you have no idea what you are talking about, but you are pretending to be like an expert.

If you do not know, most advertisers can make a profit with a 0.25% CTR - 0.50% CTR with banner ads. While others are paying for the branding. If like you said, advertisers are sinking money into this dead advertising model, why would the banner ads market still account for 35% of the total online advertising revenue?

AOL has cash?
By jskirwin on 3/14/2008 12:50:54 PM , Rating: 5
Where'd they get it? Did they flog their Aero chairs on Ebay or something?

RE: AOL has cash?
By tdawg on 3/14/2008 1:59:11 PM , Rating: 3
I hope not. If my company took my Aeron chair away from me without replacing it with a newer, better Herman Miller chair, I'd quit right there! :)

RE: AOL has cash?
By xti on 3/14/2008 3:41:00 PM , Rating: 2
i got a feeling they are just gonna bloat bebo like facebook got bloated, and then bloat aim more...and just be the nail in the coffin like the article stated.

I mean, they didnt buy them just to have it sit there.

Advertising on the Internet doesn't pay off?
By pauluskc on 3/14/2008 1:01:11 PM , Rating: 4
Hmmm.... so Google spent its $900m on ads on MySpace thinking people going there to review friend's information would click advertisements... Now they're finally getting it that people aren't going to these sites to shop. DUH!

this is exactly why AOL buying a social network site won't pay off either. Especially a social network targetting people who can't buy anything (kids/teens).


$850m coulda been used to feed the hungry and get them some positive publicity for a change. Coulda been used to invest in the gold market and gotten them some valuable returns in just today's trading. Coulda been used to pay off some of their debt.


By animedude on 3/15/2008 5:34:21 AM , Rating: 2
You have no idea what these social network sites are worth to advertisers. Advertisers can target these people base on their age group, interests, language, ethnicities, and the list can go. It is like a gold mine for them.

It is "according to you" that social network sites are composed of all kids/teens only, not research. If you have taken even a class of marketing you would know that the age group 16 - 25 is the best market to sell stuff to.


Too bad.
By FITCamaro on 3/14/2008 3:03:59 PM , Rating: 2
AOL CEO Randy Falco states, "I've said many times that my vision for AOL is that we become a global, market-leading ad-supported digital media company. Today, we're taking a major step toward realizing this ambition."

Saying something doesn't make it true.

RE: Too bad.
By 67STANG on 3/14/2008 3:39:25 PM , Rating: 4
The only thing they to a step toward was red ink. Seriously though, did they have that much money left over from the 90's when people actually still used their service?

Perhaps they should have just bought google shares if they wanted to make money with online advertising.

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein
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