AOL Acquires Bebo - Why?

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Just when you thought AOL couldn't age itself any more than it already has - they go out and buy Bebo. For a whopping $850 million. They must have a lot of faith accross the pond, because nobody uses the social network in the U.S.

When NewsCorp bought MySpace in 2005 - for the low low price of $580 million - they were on the upswing in a big way. Social networking was growing at a rapid rate. It made sense. But you'd be hard pressed to find an analyst these days that doens't believe social networking has peaked. As the Web continues to grow and become more personalized, social networking is taking a back seat to micro-networking. People are looking for smaller, more intimate networks devoid of spam and unwanted requests and solicitations.

Unwanted solicitations includes advertising. And that's a big issue - remember Facebook's Beacon advertising flop? All these social networks have been able to prove over the last several years is that they can suck up large amounts of venture capital funding without finding a way to ultimately monetize these sites.

comScore has shown double-digit percentage drops in the amount of time people are spending on social networks in the last few months of 2007. Specifically, Bebo visitor's average time on the site was cut in half. And when you're not engaging visitors, you're not making money for advertisers.

But perhaps the most damning of all is this - Bebo has never been able to make so much as a dent in the armor of MySpace and Facebook. What makes them think that they will now? When social networking is on the decline - especially the large networks - it doesn't mean the guy in third place will suddenly jump in the lead. It means the guy in third place will fall the fastest.
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