14 DAY TRIAL // AOL is now officially ready to let go of Bebo, the UK-based social network it acquired two years ago. The site has been declining in user numbers and is in no position to compete with the likes of Facebook. AOL now plans to either sell the social network or shut down the site, depending on which path makes the most sense. Either way, AOL is not likely to recoup much of its original investment.
"As we evaluate our portfolio of brands against our strategy, it is clear that social networking is a space with heavy competition, and where scale defines success. 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. AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking," AOL said in a memo emailed to Bebo employees.
AOL has been contemplating the move for a year now and the social network has been sidelined since about that time. Bebo doesn't fit into AOL's new strategy, which focuses on content and ad revenue. CEO Tim Armstrong has been trying to set AOL on the new path and is slashing expenses. The company is unlikely to find a suitor for Bebo, not one that would pay a significant amount of money for it, anyway.
In fact, in the short term, shutting down the site may be the most profitable option for AOL, as it would allow the company to get a significant tax reduction. AOL paid $850 million for Bebo in 2008, a move that had its fair share of critics from the beginning. It didn't take long for AOL to realize its mistake, but it had worse things to worry about at the time, like becoming an independent company. AOL is also looking to shed ICQ, one of its two IM services popular in Russia and some parts of Europe.