In a world where every change, major and minor, sends shockwaves through the 540 million devotees of the social media phenomenon known as Facebook, it has become more and more difficult to recall that in the recent past, this coronation and subsequent royal treatment was not a foregone conclusion.
Only three years ago, MySpace, purchased by News Corp. in 2005, was still the king by most measures and other media conglomerates angled to snap up pretenders to the crown, desperate to remain in an online conversation that was otherwise going on without them. Among those acquisitions was the purchase of Bebo by AOL Time Warner for the sum of $850 million dollars. The Bebo service had 40 million members, enough to rank third among social networking sites at the time, with consistent traffic and a strong base in the UK, in particular. Microsoft has just paid $240m for less than a 2% share of Facebook and News Corp.’s $580 million dollar investment two years previous was estimated to have grown into a $15 billion dollar property, making the Bebo acquisition seem a bargain.
However, hindsight being 20/20, the purchase is considered a clear failure, yet another in a long string of missteps by the dotcom titan, now divested from the Time Warner empire. The experiment that was supposed to provide AOL with a quick fix solution to its absence from the growing social media space culminated in June when Bebo was sold to Criterion Capital Partners, a Los Angeles private equity firm, for a reported $10 million dollars. Clearly something went very wrong. But what was it?
AOL immediately lumped Bebo in with other online communications tools and gave the business unit the name “People Networks” with Bebo’s president taking the reins. The group would also include the popular AIM and ICQ applications, with an eye to integrating the key features of each service. However, reports from the UK, where Bebo was strongest pre-acquisition, indicate that, financially, things went south immediately, with the London office posting major losses in place of substantial profits with sales down almost 30%. In the US, the opening of Facebook to non-university accounts lead to its meteoric rise, whither all other comers. AOL’s integration strategy continued with implementation of “lifestreaming”, the Lifestory, then a Social Inbox, all trying to answer to the status update and messaging options that were becoming ubiquitous with other services. They even offered users the option to aggregate feeds from competing sites like Twitter, YouTube and MySpace on their Bebo profiles. Nothing, however, seems to have stemmed the tide, as users worldwide flocked to Facebook en masse and rumors began circulating that AOL regretted the Bebo purchase and that the service would not be a part of their long-range plans. Was the installation of new AOL CEO Tim Armstrong in March 2009 the real beginning of the end for Bebo? Given multiple opportunities to defend the purchase and future of Bebo, Armstrong grew increasingly reticent, right up until the announcement of the sale to Criterion.
Some posit that purchase by an investment firm is the worst thing that could happen to a company like Bebo, as the modus operandi for most business in that industry is to cut costs, streamline and re-sell for a profit. However, Criterion executives have gone on record indicating that they’ll actually have to hire more engineers to help innovate and make the product more attractive for a profitable resale. That’s good news for the remaining Bebo users around the world as AOL had long since ceased support of the service. In my own experience, I’ve found Bebo to be attractive, with many of the gaming and communication tools that you’ll find elsewhere in a neat, visual package. I also didn’t find any friends who had used the service in the past grew years. The question of how this service failed was the impetus for the researching of this post, but leads to only more questions. As even MySpace fades to the still-profitable periphery of essential corporate web presence, is there room in the hearts of Americans for a Facebook competitor? Only time will tell. Certainly in the case of Bebo we’ve witnessed an epic faltering, even in the face of considerable investment. Was it just a matter of misreading the consumer’s desires while Facebook made all the right moves? Or is there something more we can learn about the heart of a successful social network? I’m interested in your thoughts and comments, leave them below or email me @ Thomas AT FeedbackAgency DOT com.