The Fall of Bebo: What it Says About Social Networks and AOL’s Strategy

Date: May 23, 2010
Pages: 11
US$ 895.00
Publisher: Ovum
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: FA656A81762EN

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The Fall of Bebo: What it Says About Social Networks and AOL’s Strategy
In April 2010, AOL announced that it is set to sell or shut down Bebo, the social network site aimed at children and teenagers that it acquired for $850 million in March 2008. This was without doubt a steep price tag, but the acquisition did not seem too outlandish at the time as Bebo was seen as the rising star in social networking. But since AOL took over, Bebo has been in steady decline, and the last reported financials for the social network revealed a reversal in fortune that raises difficult questions about what exactly went wrong. Will anyone want to buy Bebo now?
Executive summary
In a nutshell
Ovum view
The extent of Bebo’s decline has taken the industry by surprise
Bebo was the victim of external forces, but AOL has played a role
Lessons we can learn from the fall of Bebo
Social networks are not an automatic advertising nirvana
Think carefully before taking on a social network
Social networks are not a natural fit for more traditional players
Social networks are not weeds – they need nurturing to make them grow
Bebo’s role in AOL’s changing strategy
Bebo looked like a good idea at the time
Armstrong gives Bebo the strong arm
AOL sets sights on a renewed content push
Will the business model stack up?
The causes of Bebo’s decline
AOL misunderstood what social networks are about and where they are heading
Lack of investment in keeping Bebo fresh
Bebo has suffered from the ‘Facebook effect’
Who, if anyone, will pick up Bebo?
A sale is looking increasingly unlikely


Table 1: Breakdown of Bebo visitors (age 15+, home and work locations)* by region, January 2008
Table 2: Global social network audience, February 2009 and February 2010
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