Social networking has had its hay day it would seem; big social networks seemed to be a dime a dozen, and there was plenty of pie for everyone. Now it seems that unless your name is Facebook, it doesn’t matter how popular you may be in one or two countries, you have to be a dominating force globally or you just don’t matter.
Two years ago Bebo was an up and coming social network on the international scene, and it already controlled a large portion of the United Kingdom’s social networking traffic. AOL decided it wanted to try its hand at social networking and plunked down a fairly surprising check for $850 million to purchase the company. Everyone thought the price was too high at the time, but what was done was done, and the world moved on.
It was about this same time however that Facebook was really starting to take off. The mass exodus from MySpace was in full swing, and Facebook was growing into a monstrosity that was doing something no other social network had done yet in that it was going truly global by becoming the number one or two in every country it touched. The criteria for what qualified as a “successful” social network was rapidly changing, and having a strong portion of just one or two countries just didn’t matter any more when Facebook was well on its way to 350 million members.
Talk of Bebo pretty much disappeared from everywhere, but it was still quietly chugging along in the UK, and it certainly was still relevant there as it even garnered a mention in the recent season five premiere of Doctor Who television series So the news this past week of a leaked e-mail to its media partners took everyone by a bit of surprise:
Date: Fri, Apr 9, 2010 at 1:22 PM
Subject: Important News From Bebo
Dear Open Media Partners,
First, I’d like to thank you for your support of Bebo.
The end of last year brought with it many changes to our business, both difficult and exciting, including the successful spin-out of our parent company AOL and a new strategic direction. Set out in May 2009 this strategy leverages AOL’s core strengths and scale in quality content, premium advertising and consumer applications, positioning it for the next phase of growth of the Internet.
We also made a commitment to keep the lines of communication open as we worked to arrive at a strategic resolution for Bebo and today I’m reaching out to let you know that in an annual filing for Bebo made this week, AOL indicated that it is currently evaluating strategic alternatives with respect to the Bebo business, which could include a sale or shutdown of Bebo in 2010.
Social networking remains a space with heavy competition, where scale defines success, and unfortunately AOL is not in a position to further fund and support Bebo in pursuing a turnaround in social networking.
The decision to move forward at this point on Bebo was not made lightly and AOL is committed to working quickly to determine if there are any interested parties for Bebo. The company’s current expectation is to complete our strategic evaluation by the end of May 2010 and we hope that by sharing what we can, when we can, it helps to relieve any uncertainty about what’s ahead.
In the interim I wanted to assure you of our continued commitment to your organization and we will come back to you as soon as we are able to move forward.
After only two years, it seems that AOL is ready to throw in the towel, and although the letter mentions the possibility of selling the service, the tone seems to be leaning much more towards shutting it down. The advantage to a closure would be large tax breaks for the company as it could write off the loss.
While it is not a company’s duty to stay open for its customers if it isn’t making money, it would also be sad to see Bebo be shut down because AOL overspent for the service. Though many people call it a MySpace clone — and it really is — it has a very dedicated user base, and it isn’t their fault AOL spent a stupid amount of money on it
It does make you ponder if it is possible for any social network to even have a shot any more at competing with the 800 lbs gorilla known as Facebook sitting in the corner of the room. What can they potentially do to differentiate themselves enough to make them intriguing to a critical mass of users that the site can be a profitable, ongoing concern?
Or, and call me crazy if you must, perhaps a bigger company shouldn’t come along and throw an insane amount of money at a site that it has no business buying? I know … crazy talk.
What say you? What can smaller social networks do to make sure they don’t end up in a similar boat?