AOL and Bebo: Missing The Beat On SNAs

San Francisco: AOL is floundering, and has whiffed on a number of attempts at building its AIM instant messaging community into something that can contend with the Web 2.0 social application explosion. AIM Pages bombed, and my own attempt at working with them -- Nerdvana -- has been lost in the sauce, never having gotten past second base (bra, but no panties). Now, the new regime -- led by Randy Falco -- is following in the footprints of other Web giants who will likewise rue the day they spent hundreds of millions or billions for successful social apps to vault them into the game. eBay's purchase of Skype, and the YouTube buy, are just the most gargantuan of an endless series of these acquisitions.

[from Bebo: Randy Falco’s Million Rescue Plan for AIM - Bits - Technology - New York Times Blog by Saul Hassell]

AOL has announced it will spend $850 million in cash to buy Bebo, the social network that dominates the United Kingdom and is an also-ran in most of the rest of the world. The deal keys on instant messaging, which is closely related to social networking as a method of communication among young (and not so young) people.

As AOL has search for a growth strategy over the last decade, one of the biggest puzzles has been what to do about the AIM system, which allows anyone on any computer to send instant messages, whether they were paying AOL customers or not. Even as AOL’s access service declined, AIM remained the preeminent IM system in the United States, fending off competition from Microsoft, Yahoo, and later Google.

But AIM’s market leadership has produced very little financial benefit. There are ads, but these are not very attractive to marketers. At one point AOL wanted to charge business to set up storefronts interacting with customers through AIM (much like Facebook wants to do with business pages on its network). This didn’t work for AIM.

Later as the social network phenomenon grew, AOL considered and rejected a potential deal to integrate AIM into MySpace, a former AOL executive tells me. Instead, it tried to build its own AIM pages social network. Despite AIM’s reach, this was ignored by nearly all of its users.

Clunk.

This won't work. AOL shareholders will watch their $850M be written off in just a few years time, but Falco will have moved on by then, I am sure.

Twitter and Facebook have appeared on the scene, and have changed the expectations of young (and not-so-young) Web denizens forever. The deep structure of social interaction has moved from the buddy list and chat to followers and streaming.

Comments

[Avatar]

I disagree, it will work because of the following simple reasons:

1.-AOL strongest market left (overall) is not the USA anymore but the U.K where Bebo is still king.
2.-Bebo has a agreement with Microsoft to implement Live Messenger as the main IM platform for Bebo users, the announcement of OpenAIM fits perfectly with the line of thinking AOL is going on right now.
3.-850 million for bebo when they wanted up to 1500 is not a bad deal actually.
4.-AOL is restructuring, so i think they can make it work this time around.
5.-when(more than likely) the Microsoft-Yahoo merger goes through there is a window of opportunity in the adjustment year it will take to merge yahoo into Microsoft for AOL take as much advantage as they can since they will be the new #3.

I even predicted this would happen over a month ago:

http://www.widgetslab.com/2008/02/07/bebo-platform-gains-momentum-just-in-time-to-sell/

so, unless they screw this up big time with a deal that is all gain (could happen, this is post Time warner merger AOL after all) i see AOL making a small comeback.

[Sally Wu]

I think AOL's aquitision of bebo portends the end of bebo…
http://webpoet.wordpress.com/2008/03/13/bebo-aol/

TWL