AOL gets down with the Bebo kids

AOL wants to be cool again. But it might take more than the acquisition of Bebo to pull that off.

Last Updated: 07 Feb 2011

AOL said yesterday that it’s spending $850m to acquire Bebo, the social networking site beloved of text-speaking teenagers everywhere. The US firm, which has never quite recovered from its disastrous merger with Time Warner and has been left eating dust by more nimble rivals (particularly Google) wants to re-establish itself as a pre-eminent online force – and thinks that buying access to Bebo’s big global user base is the way to do it.

With 40m users worldwide (including more than 4m in the UK), Bebo is now the third most popular social networking site behind Facebook and MySpace, targeting a slightly younger user base. Its success has been due to its clever mix of the usual user-generated nonsense (usually teenagers swapping incomprehensible messages that we’re far too old to understand) with original content – like Kate Modern, an online drama series that gets over 3m hits.

AOL presumably sees two opportunities here: lots of potential users of its market-leading instant messaging and personal-communication software, and (more importantly for its bottom line) a huge audience for its online advertising services. Although this might not be quite as attractive to advertisers as Facebook’s young professional demographic – don’t all teenagers spend their money on ringtones, alcopops and flick-knives these days?

Still, with online advertising on the increase, the move could prove well-timed for AOL – and although it’s a hefty price tag, it’s not the kind of ludicrous valuation attached to Facebook by Microsoft’s recent stake purchase. AOL certainly sounds excited – it says Bebo will be ‘the cornerstone of our strategy’.

But is it getting into social networking too late? Recent figures have suggested that these sites are finally starting to see their popularity plateau – or even decline. There has to be a chance that Bebo and co will be supplanted by the Next Big Thing before they actually start making any decent money. Let’s face it: AOL doesn’t exactly have the best track record when it comes to timing acquisitions.

One positive is that Joanna Shields, the highly-rated ex-Google executive credited with masterminding much of Bebo’s success, is expected to stay on to run the business under AOL. However Michael and Xochi Birch, the husband and wife team who set up Bebo in 2005 and are now due a £300m payday, are apparently heading straight off the beach to start spending it. History may show that they got out at just the right time...

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