Pioneering online service provider AOL – subsidiary of Time Warner Inc. – yesterday announced that it will take over California-based social networker Bebo, for an estimated $850 million.
The deal comes as part of an attempt by AOL to re-establish itself in the face of falling web traffic and an ever-revolutionizing web.
The ISP and web application provider is expected to be subject to a sell-off by parent Time Warner unless it can make marked improvements and reassert itself as a competitor online. It hopes that the move into a rapidly growing social networking field will trigger that turnaround.
Facebook effect
Social networking sites have helped drag the web into a more dynamic future as companies seize upon the need to move away from static information and encourage user-interactivity. Labeled by many as the “Facebook effect”, social networks have become as essential to social communication as cellphones and email.
AOL expects this to be a massive financial opportunity, as Bebo is the third biggest social network in the US behind market leaders MySpace and Facebook, with an estimated 40 million active users worldwide.
“It’s the next piece of our strategy of our turnaround,” said AOL chief operating officer Ron Grant. “If you look at what AOL has always been at its core – a way to connect with people, to be in touch with their lifestyles – this can provide a social media experience.”
Crucially, many analysts suggest that the power of social networks remains largely untapped. “No-one has cracked the code yet on monetizing social networks,” said Andrew Frank, analyst at Gartner Inc. AOL will hope that this deal can move its innovative thinking into a new area.
This purchase adds to the $1 billion already spent by AOL on acquisitions into its ad-buying network, as they fight to remain competitive in a powerful online market.
March 14, 2008