When AOL bought Bebo for $850 million last week, CEO Randy Falco and COO Ron Grant believed the social network would help save AOL from its downward spiral. Social networks are where pageviews are generated these days, and AOL’s own attempt to turn AOL Instant Messenger into one (via Aim Pages) was a dud on arrival. Bebo, with 22.9 million unique visitors in February and 10.3 billion pageviews (per comScore), was growing and it was for sale. Even though AOL is trying to transform itself into an advertising network, it makes much higher margins on the ads it places on its own pages. The formula for its business is pretty simple: Unique visitors X page views = advertising inventory. If social networks are the future of the Web, AOL needed to own one.
But was Bebo the right one, and did AOL pay too much for it? Those are questions that other AOL executives below Falco and Grant are asking themselves, reports Silicon Alley Insider. The concerns of the senior executives who actually run AOL (and reportedly were not consulted on the top-secret acquisition) include: the general difficulty of making money placing ads on social networks (see Google’s missed quarter), “flattening traffic growth at Bebo” (see chart below), overly-rosy revenue projections for Bebo that might have been three times too high, and the likelihood of losing Bebo’s most talented employees (the founders are already out of there).
From my own sanity-checks with sources, there is definitely the sense that AOL was not Bebo’s first choice. Initially, it was aiming for a valuation above $1 billion. But then the ground started falling out beneath it, and AOL’s $850 million offer started to look real good. AOL was a desperate buyer. Even if it bargained Bebo down on price, it may still have paid too much. Bebo’s growth is indeed flattening relative to other global social networks like Hi5 or Friendster. And while social networks generate a lot of pages, they are not yet particularly valuable pages.
There is a silver lining here, though. If AOL can use its targeted advertising assets (Advertising.com, Quigo, Platform A) to make that Bebo inventory pay out, it will surprise everybody. And that will be good for Platform A because it then will be able to grab more advertising business from other social networks. (That is, if New York State does not outlaw targeted advertising before then). The likelihood of that happening is not great, but AOL employees need at least a glimmer of hope to keep showing up to work every morning. (I do what I can).
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Well the outcome doesn’t sound as bad as the title of the article suggests…
It is cool to see everyone’s favorite whipping boy, friendster, suddenly being held up as a comparative success. Persistence is underrated in the startup world.
Erick,
How do Multiply’s numbers stack up against those 3 sites?
gah! pre-scale your images! Or just suck it up and thumbnail it, if you expect us to click it to view anyway.
“I do what I can” - aol and its many minions thank you kind sir
AOL has no problem with the domestic advertising reach — in fact, they reach something like 90 something percent of US internet users.
Where AOL needs to improve is internationally. Bebo has a strong european presence and gives AOL extended reach beyond their US borders.
It’s not just about the traffic - its about where that traffic comes from.
Somebody needs to develop a system to track “quality” page views versus simply “quantity”. I laugh out loud when here numbers like 10 billion page views. Most of those pages views are coming from users simply checking their profiles or adding content…NOT CLICKING ON ADS! Advertisers will start to look at placing ads within video content to ensure their getting the most bang for their buck. Also, why would any company pay this amount to acquire another company THAT DOES NOT EVEN OWN THEIR OWN CONTENT! Social networks are risky in my opinion considering the users control the site. If all users decided to migrate elsewhere there would be no more BEBO, YouTube, Myspace, ect.. Just ask DIGG how the users can call the shots. Content will always be KING!
The “growth” comparison is weak at best since Bebo’s flat traffic is significantly more valuable than the third world supported Hi5 and Friendster traffic.
From Alexa (not always the most accurate, but not a bad barometer):
Hi5.com users come from these countries:
Peru - 12.7%
Thailand - 10.8%
Mexico - 8.0%
Dominican Republic - 6.5%
Colombia - 6.2%
Friendster.com users come from these countries:
Philippines - 34.4%
Malaysia - 18.8%
Indonesia - 16.7%
Singapore - 13.6%
United States - 3.6%
Bebo.com users come from these countries:
United Kingdom - 39.0%
United States - 11.4%
Ireland - 8.2%
Australia - 6.5%
New Zealand - 5.6%
Wow, Grant is a midget.
Hi5 is not valuable to ecommerce players…their customers are not attractive; traffic means little, quality means alot.
bebo only makes sense if aol is selling its UK operations to a telco there! i hear thats under discussion…
Calling BS– that’s Fred Willard on the left.
Someone needs to educate AOL UK Networks since it move ISP Backbone Network in Europe, Broadband keeps crashing more than running and over loaded at evenings and weekends with school children using the network the most during these hours. AOL network based at Ammanford Telephone exchange has been the investigation of more users reporting major outages than the rest of the UK.
AOL Helpdesk in India was unable or unwilling to comment that the new IP address is under-funded and incapable of supporting all their customers throughout the UK and mainland Europe. The Bebo deal is just another failed project of AOL, as is their New European network.
bubble,bubble,bubble
“The formula for its business is pretty simple: Unique visitors X page views = advertising inventory.”
Really Erick? I would’ve thought a Techcrunch writer would have not be so naive. If anything, social networks have shown us how over-rated the page view stat is.
It seems that AOL got a better deal with Bebo than Microsoft did with Facebook. It might be comparable to the deal with News Corp and MySpace. At least on acquisition price per user. Now it’s upto AOL to execute correctly to make this profitable, but that is a BIG if: http://fishtrain.com/2008/03/1.....valuation/
Well, the outcome was great for the Birches and Beebo employees. And honestly, that is all that matters.
Major props and respect to them for pulling this off!
Whether AOL got a good deal — who cares, it’s just a lame old company on the way out
Pretty obvious really, we predicted it last week:
http://broadstuff.com/archives.....ation.html
Santayana moments…..
Jason Jenkins:
Bebo does have “content”… KateModern and other shows in production.
Big following, check into it if interested.
Nice one, Erick. You ripped this off from SiliconAlleyInsider. Bad form, dude
JACK
PROPRIETARY CONTENT! SOMETHING THEY CONTROL AND DISTRIBUTE!! NOT SOMETHING THEY LICENSE…
Is this deal at risk of not closing?
Clem, it’s called a conversation. Do you not see the link and attribution to Silicon Alley Insider? Learn how to read.
Look at those corporate suit dudes. Another social network goes to “big media.” I guess there’s nothing wrong with it, it just seems funny. I don’t particularly see how “cool” and “corporate” are the same thing. In fact, “corporate” kills “cool” the way rock kills scisors in a game of rock, paper, scisors. But maybe social networks don’t need to be “cool.”
I think all these corporate deals are good for independent social networks, though. The leading edge trendsetters prefer unique and different. NewsCorp + MySpace, Microsoft + Facebook, Bebo + AOL. These are all “cool killers.”
MySpace, McDonalds, and now Bebo are all becoming one big boring corporate mass-market consumer product. The P&G, Pepsi, and McDonalds of online.
They are set on one thing, which is figuring out all the ways they can monetize and market to the poor souls on their networks, who have their privacy walked all over so every ounce of their personalities can be turned into another niche marketing message to sell them another consumer product or service they don’t need.
Oops, that turned into a a rant
Oops, “MySpace, McDonalds, and now Bebo” (above #23) is supposed to read “MySpace, Facebook, and now Bebo.” Excuse the slip
i dont understand why if somebody cancel there bebo page you cant cancel your qwn e-mail address off of bebo.com????????????????????????????????????
Do you any of you know how Bebo got started by the way?
Google “Bebo Virus” and do your research!))
Also - my comments - AOL taking a big risk. 850 is too much and if they don’t monetize the billions of pages of content (and where the hell are they going to get their advertising “content” from to do this) then they fail - as a company - period.
The bottom line is this - people on a social network do not click on traditional advertising and never will. NO social network that relies on advertising is going to make money. It is a traffic hub, pure and simple.
P.S. gotta love the AOL men in suits….er….WRONG INDUSTRY PEOPLE!!!