AOL to Sell or Shut Down Bebo in 2010

Move Comes Just Two Years After Portal Spent $850 Million to Acquire Social Network

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NEW YORK (AdAge.com) -- AOL will shut down social-networking service Bebo if it can't find a buyer, the company said in a memo to staff today.

AOL is expected to disclose to regulators that it is "pursuing strategic options" for the company in a filing in London tomorrow. Among those options would be to shut down the social network in 2010 if a buyer cannot be found.

"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," Jon Brod, exec VP of AOL Ventures, said in a memo to staff. "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."

Further, he said it is not in a position to "further fund and support Bebo in pursuing a turnaround in social networking."

Former AOL CEO Randy Falco bought Bebo in the summer of 2008 for $850 million at a time when News Corp. chief Rupert Murdoch was still being lauded for his canny purchase of MySpace in 2006.

Bebo has languished on AOL's watch. Global visits to Bebo.com dropped 45% over the past year from 23 million to just less than 13 million, according to ComScore. Meanwhile, visits to Facebook increased 68% from 686 million to 847 million.

Bebo was to be the big, transformative acquisition for AOL, a deal that would bring social connections and deeper engagement with the portal, but it was a failure from the start. First the economy imploded and Time Warner showed Mr. Falco the door and named ex-Google exec Tim Armstrong as CEO.

Former Bebo President Joanna Shields left the company in 2009 and resurfaced at Facebook last week after being named VP-sales for Europe.

Bebo at one time was one of the largest social media networks in the U.K., similar to MySpace in its close ties to entertainment and the music industry. Two of the earliest web series, "Kate Modern" and "Sophia's Diary" aired on the site. That was before Facebook truly exploded outside the U.S., taking scale away from both Bebo, MySpace and many other social networks.

Since then, Mr. Armstrong has repositioned AOL as a content company, and is jettisoning businesses that do not fit the portfolio. Initially, Bebo was placed in AOL Ventures, along with video search play Truveo, for businesses that might not fit but could have growth potential.

But that was before AOL determined significant investment would be required to keep Bebo competitive.

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