San Francisco Chronicle
AOL Inc. paid $850 million two years ago for Bebo Inc., but on Thursday unloaded the slumping San Francisco social-networking firm in a deal reportedly worth less than $10 million.
Criterion Capital Partners LLC, a Los Angeles private investment firm that specializes in turnarounds, takes over a company that is more popular outside of the United States, but by far is overshadowed by social-networking rivals Facebook, MySpace and Twitter.
Exact terms were not disclosed, but AOL chief executive officer Tim Armstrong said in a memo to employees that the deal for AOL "will also create a meaningful tax deduction, which should allow us to more effectively manage our tax strategy."
Bebo has 30 employees working in offices in the same South of Market building that houses Twitter Inc. Bebo also has three workers in the United Kingdom. Its headquarters will remain in San Francisco.
In April, Bebo's future didn't look bright after AOL said it would either sell or shut Bebo down.
AOL was still part of Time Warner Inc. when it bought Bebo in May 2008 for $850 million, although Time Warner chief executive officer Jeff Bewkes has later said the company "may have overpaid."
At the time, Bebo was particularly popular in the United Kingdom, but Bebo's fortunes waned as Facebook Inc. overtook MySpace as the world's most dominant social network.
According to ComScore Inc., Bebo had 12.6 million unique visitors worldwide in April, down from 26.9 million one year before. Bebo's U.S. traffic dropped to 4.9 million visitors in April 2010, from 10.2 million the previous April.
Meanwhile, traffic to Palo Alto's Facebook zoomed from 307.1 million worldwide and 67.5 million in the United States in April 2009 to 519 million worldwide and 121.8 million in the United States in the same month this year, according to comScore.
AOL said Bebo also has members in Ireland, Australia, New Zealand, Canada, Poland, France, Germany, Italy, Spain, India, Pakistan and the Netherlands.
Criterion Capital Managing Partner Adam Levin led the acquisition, joined by business strategist Paul Abramowitz and Web entrepreneur Richard Hecker, a news release said.
"The young, highly active user base, revenue history, presence in countries throughout the world and solid technical infrastructure make it an attractive media platform both as a stand-alone entity and in the context of our broader investment objectives," Levin said in a statement.
But AOL founder Steve Case, who is no longer with the company, used his Twitter account to voice his skepticism about the deal.
"AOL buying Bebo for $850 million and then selling 2 years later for $10 million doesn't seem like a winning strategy," Case said in the tweet.
Augie Ray, a social-media analyst with Forrester Research, said that "at this point, it does not seem Bebo has any serious chance to compete as an all-purpose social network."
However, he said, Bebo's best chance could be to concentrate on a niche audience, in the same way MySpace "is focusing more on social sharing around entertainment."
Or Criterion could "simply let Bebo run the course that it's on. It still receives several million visitors per month, and even though Bebo continues to shrink, those visitors still represent ad revenue," he said.
Criterion Capital Partners LLC, a Los Angeles private investment firm that specializes in turnarounds, takes over a company that is more popular outside of the United States, but by far is overshadowed by social-networking rivals Facebook, MySpace and Twitter.
Exact terms were not disclosed, but AOL chief executive officer Tim Armstrong said in a memo to employees that the deal for AOL "will also create a meaningful tax deduction, which should allow us to more effectively manage our tax strategy."
Bebo has 30 employees working in offices in the same South of Market building that houses Twitter Inc. Bebo also has three workers in the United Kingdom. Its headquarters will remain in San Francisco.
In April, Bebo's future didn't look bright after AOL said it would either sell or shut Bebo down.
AOL was still part of Time Warner Inc. when it bought Bebo in May 2008 for $850 million, although Time Warner chief executive officer Jeff Bewkes has later said the company "may have overpaid."
At the time, Bebo was particularly popular in the United Kingdom, but Bebo's fortunes waned as Facebook Inc. overtook MySpace as the world's most dominant social network.
According to ComScore Inc., Bebo had 12.6 million unique visitors worldwide in April, down from 26.9 million one year before. Bebo's U.S. traffic dropped to 4.9 million visitors in April 2010, from 10.2 million the previous April.
Meanwhile, traffic to Palo Alto's Facebook zoomed from 307.1 million worldwide and 67.5 million in the United States in April 2009 to 519 million worldwide and 121.8 million in the United States in the same month this year, according to comScore.
AOL said Bebo also has members in Ireland, Australia, New Zealand, Canada, Poland, France, Germany, Italy, Spain, India, Pakistan and the Netherlands.
Criterion Capital Managing Partner Adam Levin led the acquisition, joined by business strategist Paul Abramowitz and Web entrepreneur Richard Hecker, a news release said.
"The young, highly active user base, revenue history, presence in countries throughout the world and solid technical infrastructure make it an attractive media platform both as a stand-alone entity and in the context of our broader investment objectives," Levin said in a statement.
But AOL founder Steve Case, who is no longer with the company, used his Twitter account to voice his skepticism about the deal.
"AOL buying Bebo for $850 million and then selling 2 years later for $10 million doesn't seem like a winning strategy," Case said in the tweet.
Augie Ray, a social-media analyst with Forrester Research, said that "at this point, it does not seem Bebo has any serious chance to compete as an all-purpose social network."
However, he said, Bebo's best chance could be to concentrate on a niche audience, in the same way MySpace "is focusing more on social sharing around entertainment."
Or Criterion could "simply let Bebo run the course that it's on. It still receives several million visitors per month, and even though Bebo continues to shrink, those visitors still represent ad revenue," he said.
