Infinite Path

Social networking has become increasingly popular over the last five years and this has generated an extremely competitive industry. In any burgeoning market there will be casualties, particularly during times of economic slowdown, so AOL’s admission that its Bebo site is set to close if it is not sold comes as little surprise.

It could be argued that Bebo was a failed venture for AOL. They bought the social networking site two years ago for the princely sum of $850 million (£560 million). Back in 2008, the markets were still buoyant and Bebo’s traffic had peaked, but many analysts still believed that the site had been overpriced. Now they believe that AOL will be lucky to get a fraction of the price that they paid for it, if any buyers come forward at all. It is understood that no one is interested at the moment.

AOL has admitted that it will review the situation in May but Jon Brod of AOL Ventures told employees in an email that “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.”

Bebo has been beset by numerous problems, one of which is of AOL’s own making. Generally, people don’t like large companies encroaching on their personal time and many have chosen the more independent Facebook in order to get their social kicks. Furthermore, many believe that AOL could never replicate the verve and vivacity that Bebo’s founders once had and that this was reflected in an inferior product.

Many Bebo users have admitted that they moved over to Facebook because the latter is more interactive. The fact that it has more features raises questions about Bebo’s development strategy and whether AOL had a plan for the site after they purchased it. Furthermore, making money from social networking sites is notoriously difficult. It is believed that Facebook only just breaks even and in a market that has seen online advertising revenues collapse, even the mass visitors to these sites haven’t encouraged companies to invest.

If more people are leaving Bebo for Facebook, it’s only going to make the advertising potential even worse. Bebo used banner advertising, which clearly failed, whereas Facebook’s targeted advertising has been a greater success. Even so, no one has developed a profitable marketing plan for social networking sites and this represents a significant problem for companies like AOL, whose aim is to make money.

Bebo’s target audience is the 18-24 age group and 18 months ago, its market was huge. But just like the comparitive demise of Myspace, it is clear that trends in social media and online marketing are fluid and change rapidly. Many users complained that Bebo was not as mature as Facebook and the danger with social networking is that all it takes is a few people to move over and whole communities soon follow.

Bebo is still relatively popular in the UK and Ireland; it is the failure to break into the American market that analysts believe has contributed to the demise of the site. On the face of it, 5 million users in the US sounds encouraging but when compared to Facebook’s 210 million, it pales into insignificance.