One look at AOL’s share prices over the pat few days indicate that investors are willing (looking forward to?) to letting the social network Bebo go the way of the Dodo. Announced on Tuesday of this week, the following day, AOL’s shares surged to a price they haven’t seen since it’s November spinoff, rising almost 4 percent to close at $27.44
There’s a couple of things going on here that have lead to Bebo’s epic fail. First and foremost, AOL executives obviously have their collective heads up their ass, as they clearly weren’t able to learn a thing from News Corp’s purchase of MySpace.com. AOL shelled out a massive $850 million to Joanna Shields of Bebo in 2008, hoping to corner the marketing on UK teen girls.
All of these girls are now, of course, are on Facebook.
The official memo that was distributed to employees states that, “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.”
Read: Bebo is a money pit, and we’re not going to sink another dime into it.
While AOL states that they are looking for a buyer for the ailing social network, they’ve also publically stated that a shutdown might allow them to write down some of the acquisitions costs, thereby yielding hundred of millions of dollars in tax savings. 3 guesses, the first 2 don’t count; which option to you think AOL is going to go with here? AOL has also stated that they’ve set a final hour of the end of May to either find a buyer, or they’ll pull the plug. Friendster anyone?
While based in San Francisco, Bebo never really gained traction in the US, but had, at one point, a strong user base in the UK. They got into the virtual goods market last year as part of a promotion for their Bebo Mobile service. And like many other social networking services, Bebo is a host for social gaming apps including titles from Zynga.
The sale of Bebo isn’t the only “Hmmm…maybe that wasn’t the smartest use of capital we’ve ever made,” issue going on at AOL. They’re also working on selling off the ICQ IM business, most likely to a foreign investor. This sale has been moving at a the pace of molasses, but once if completed, could net the company between $100 – $150 million in cash.
This pile of plunder could give CEO Tim Armstrong a nice position to sit in at the Google and Microsoft table when negotiations commence over a new deal for AOL’s search business. The Google deal is set to expire in December.
