Maverick
March 13th, 2008, 02:41 PM
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.
Bebo does have momentum, at least in the United Kingdom. It has a well-designed product that mixes the functionality of Facebook with the focus on media and self expression through media of MySpace.
You’ve got to hand it to Jeff Bewkes, the chief executive of Time Warner, and Randy Falco, AOL’s chief executive. Amid all of the cutbacks and management chaos, they are willing to spend money to try to bulk up the best parts of AOL. Just as they are investing to expand Advertising.com, AOL’s successful advertising network, this deal gives AIM as good a shot as they probably can afford.
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.
Bebo does have momentum, at least in the United Kingdom. It has a well-designed product that mixes the functionality of Facebook with the focus on media and self expression through media of MySpace.
You’ve got to hand it to Jeff Bewkes, the chief executive of Time Warner, and Randy Falco, AOL’s chief executive. Amid all of the cutbacks and management chaos, they are willing to spend money to try to bulk up the best parts of AOL. Just as they are investing to expand Advertising.com, AOL’s successful advertising network, this deal gives AIM as good a shot as they probably can afford.