Could AOL’s purchase of Bebo threaten Facebook?

March 14, 2008

Sorry Mitch, I guess I’m going to be talking about the same thing as you. I had it half written when I noticed yours went up and I really don’t feel like choosing another topic and researching that one too. I guess if we have to write on the biggest news of the week there will be some overlapping anyway.

So the big news I’ve been hearing about is AOL’s purchase of the social networking website, Bebo. The price? $850,000,000. That’s a lot of zeros. Especially when AOL is slowly dying a painful and horrible *potential* death. I’ll go into a little more depth on both companies.

AOL (formerly America Online) was once mainly in the Internet Service Provider industry, with 30 million subscribers (down to 10.1 million as of Nov. 2007). Due to the dramatic decrease in dial-up (resulting in a decrease in their subscribers) the company has been trying to change their image to an Internet Content Provider rather than a service provider. As of February 2008, there was an announcement that AOL would split into two different sections: internet access and advertising. This is where the acquisition of Bebo comes in.

Bebo (Blog early, blog often) is a social media network (much like MySpace, Hi5, and Facebook) that has a substantial claim on the market. Although they aren’t quite as big as Facebook or MySpace in North America, it is extremely competitive in other countries, such as Britain and Ireland. It is actually the 66th most popular English-language website (MySpace = 5th, Facebook = 6th, Hi5 = 8th) according to Alexa Internet. *Sidenote: There are a few porn sites in the top 100, as well as Google having a bunch there too).

What makes this such a dangerous merger for other social networks is that AOL has the software that Bebo needs to grab top market share. AOL has the 10 million subscribers that could extremely benefit Bebo’s population, as well as the advertising software that Facebook has been struggling so much to make effective. With AOL’s AIM and ICQ potentially growing Bebo, and with Bebo a great site for mass advertising, this could be a great way for AOL to rebound and become one of the star online advertising companies.

A problem with this merger is that Yahoo runs the display advertising for Bebo in the UK and Ireland. If Microsoft is successful in the bid for Yahoo, what will be the outcome? Microsoft has put heavy support behind Facebook with their 1.6% purchase, so how can they justify a part of their company (if Yahoo is purchased) supporting the rival of their Facebook? Can Microsoft support two social networks?

Also, with Yahoo running the advertising display for Bebo, Google running the advertising of MySpace, and Microsoft running the advertising for Facebook, it makes the market pretty competitive. If Microsoft purchases Yahoo, then it gives Microsoft a great deal more advertising power, controlling both Facebook’s and Bebo’s advertising. Will this finally make Microsoft competitive with Google’s advertising power? I guess we will see in the coming months.

*UPDATE* Facebook has just announced that it will be having an instant message service built right into Facebook.  This is announced right after AOL has been talking about combining their AIM service to Bebo. *

Cheers,

David McKenna

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One Response to “Could AOL’s purchase of Bebo threaten Facebook?”

  1. Tasia Says:

    Okay, so where the heck is AOL coming up with close to a billion dollars to pay for Bebo? What kind of security are they going to place on that?!? It would be pretty amazing if AOL actually succeeded in using it’s technology to help Bebo…but my guess is that AOL will take Bebo with it to the digital grave, along with Nanos, Ferbies, and ICQ.


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