Another one bites the dust
The short history of social networking is littered with examples of large corporations trying to buy a piece of the action, only to get their fingers burnt.
MySpace was bought by Rupert Murdoch's News Corp for $580 million back in 2005, while pioneering UK social networking site Friend Reunited was bought by ITV for £120 million in the same year. More recently AOL shelled-out $850 million for Bebo a couple of years ago.
Murdoch has struggled to monetise MySpace as its membership dwindles, but is continuing to invest in things like a streaming music service. ITV didn't really have a clue what to do with Friends Reunited and ended up flogging it for £25 million last year. Now it looks like AOL is looking to cut its losses on Bebo too.
Several sites have reported on a memo to staff from AOL Ventures EVP Jon Brod, which was published in full by paidcontent.org. Here it is:
The strategy we set in May 2009 leverages our core strengths and scale in quality content, premium advertising and consumer applications, positioning us for the next phase of growth of the Internet. As we evaluate our portfolio of brands against our strategy, it is clear that social networking is a space with heavy competition, and where scale defines success. 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 is committed to working quickly to determine if there are any interested parties for Bebo and the company's current expectation is to complete our strategic evaluation by the end of May 2010.
All of these acquisitions have essentially fallen foul of the success of Facebook, and to a lesser extent Twitter. You could argue that one dominant social network renders all others redundant, although Bebo has done alright in some geographies, like the UK and among the teen demographic. But such is the market potential of social networking, don't expect competition with Facebook to die down any time soon.