AOL is denying rumours that it is looking to sell Bebo, the social network it bought for USD850m less than a year ago.
The denial comes amid claims Bebo has underperformed since it was acquired last March and may be sold off at a fraction of its price.
Commenting on the report, Bebo's communications director Sarah Gavin dismissed the rumours as "ridiculous" and said "there is no truth in it". The company claims recent platform upgrades, such as the roll-out of Bebo's Social Inbox, are all part of a wider growth strategy for the social network. AOL has also separately denied the sale.
Rumours began to circulate after TechCrunch ran a report claiming AOL is seriously considering a sale, pitching Bebo at USD200m – less than a quarter of what it paid for the social network. Citing three sources close to the firm, the story claims Bebo was bought on an inflated appraisal of its ad capabilities and, with the overall downturn in the advertising market, is struggling to live up to expectations.
The report is not the first of its kind to appear. In December, GigaOm wrote that AOL may have regretted the decision. Jeff Bewkes, CEO of AOL's parent company Time Warner, had said that acquisitions "have been the cause of most of the value destruction in media companies, and that certainly has been the cause for a lot of value destruction at our company."
In June, Bewkes also reportedly said that AOL "may have overpaid", when buying Bebo, but defended the deal by saying the social network would be easier to monetise than most due to the rich media employed on the site.
However, this monetisation relies not only on ad spend, but also on the popularity of the site. While Bebo has a strong user base in the UK and Ireland, it is yet to make significant gains in the US, a key market for driving ad spend.
Overall, Bebo had 24.15m users worldwide in November 2008, according to comScore data. While this showed 20% growth year-on-year, it leaves in in sixth place in terms of market share, behind Facebook, MySpace, Hi5, Orkut and Friendster.
In addition, there is evidence that growth is slowing at the social network. ComScore's June 2008 figures put Bebo's unique users at 24.01m, implying that the site picked up very little new traffic in the second half of 2008. Meanwhile, HitWise data, demonstrating US-only visits to the site shows that the site accounted for just 0.94% of the social network market in August 2008. This was down 32% year-on-year.
Bebo overhauled the site in December, widening its scope with its Social Inbox function. Users are now able to access a range of social feed and email services, including Twitter, Flickr, Del.icio.us, AIM, YouTube, Gmail and Yahoo! Mail, from within the Bebo site. Speaking at the launch, AOL’s SVP of people networks, David Lui, said the strategy is aimed at converting AOL's AIM messenger users to Bebo. AIM has around 30m monthly active users worldwide.
Whether the upgrades can help to boost profits or help Bebo compete with rival networks is yet to be seen.
StrategyEye's related categories: Social Networks - Consumer
StrategyEye's related companies: Time Warner Cable, Bebo, AOL
