AOL prepares to shut down Bebo
Published 07/04/2010 | 10:57
Bebo, formerly one of the largest online social networks, is to be shut down or sold by AOL, just two years after it was purchased for close to $1bn.
In an email to Bebo’s 40 remaining worldwide employees yesterday, Jon Brod, head of AOL’s start up acquisition and investment unit, said: “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.”
The British-born company is in the process of scouting out any potential buyers for the beleaguered social network, but it is understood that Stephane Panier, global head of Bebo, has been in conversations with both Brod and AOL’s chief executive, Tim Armstrong over the last six months about abandoning the network altogether rather than selling it.
Bebo’s UK office, based in central London, is to be closed at the end of this month, after all 30 employees were either made redundant or have subsequently taken the redundancy package.
A source close to Bebo’s UK operations said they had been expecting the announcement as user figures had dropped from nearly 40 million per month worldwide, to just 12 million as of February 2010.
They also said that AOL needed to take the blame for the Bebo’s reversal in fortunes.
“The company was not that good at listening to user feedback, doing market research or beta testing. Too many resources were put into the AIM [AOL Instant Messenger] integration and not enough into keeping Bebo bug free and keeping its core features up to date.”
AOL plans to have its strategic evaluation of Bebo's future completed by the end of May 2010.
Bebo, as well as MySpace, has fallen prey to the growing popularity of Facebook, which currently has more than 400 million users worldwide.
AOL, which spun off from Time Warner last December, bought the site for $850m in 2008 from British-born Michael Birch and his partner Xochi.
Joanna Shields, the then chief executive of Bebo, who has recently been hired by Facebook to head up its European sales business, engineered the deal and let AOL last May.
After the sale went through, Jeff Bewkes, Time Warner’s chief executive admitted that the company had overpaid.
Since Armstrong, Google’s former head of US advertising sales, took over as chairman and chief executive in March last year, AOL has cut 2,000 jobs and closed down many of its European and international offices.
In an interview last month, he said: “There were problems at the company. First and foremost AOL was not competitive from a productivity standpoint.”
He added that decades of acquisitions left AOL with “massive amounts of inefficiencies” with hundreds of people running different content management systems in dozens of countries.