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What Does the Bebo Buyout Say About AOL and Time Warner?
March 14, 2008 05:03 PM
by
findingDulcinea Staff
Yesterday, AOL announced that it would buy the social networking site Bebo for $850 million, changing the way many view Time Warner's struggling child.
30-Second Summary
The buyout is the largest acquisition AOL has made for some time, and the most important of Jeff Bewkes’ new tenure as Time Warner’s chief executive.
Bebo is a social networking site in the mold of MySpace and Facebook. Bebo has the third largest U.S. network after the other two, is very popular in England and ranks number one in Ireland and New Zealand.
The acquisition surprised many analysts, who thought that Time Warner was looking to unload the floundering AOL.
Condé Nast Portfolio writes, “Time Warner has consistently blamed AOL for pulling down the company's financial performance, has halted investment in AOL, and recently collapsed the company's Netscape division.”
The move is either Time Warner’s attempt to revive AOL, or bulk it up to attract bidders who have been previously uninterested in the company.
AOL sees Bebo as a way to move from an “an Internet-access subscription business into an advertising-focused one,” reports The Wall Street Journal. AOL will use its Platform A online ad network to monetize Bebo’s international user base.
Dan Grabham of TechRadar writes that the buyout could be beneficial for AOL, asserting that “Bebo appears poised for greater growth.”
However, Kara Swisher of All Things Digital worries that Bebo is too small a presence in the “critical U.S. market,” and the social networking site boasts only “negligible profits.”
Bebo is a social networking site in the mold of MySpace and Facebook. Bebo has the third largest U.S. network after the other two, is very popular in England and ranks number one in Ireland and New Zealand.
The acquisition surprised many analysts, who thought that Time Warner was looking to unload the floundering AOL.
Condé Nast Portfolio writes, “Time Warner has consistently blamed AOL for pulling down the company's financial performance, has halted investment in AOL, and recently collapsed the company's Netscape division.”
The move is either Time Warner’s attempt to revive AOL, or bulk it up to attract bidders who have been previously uninterested in the company.
AOL sees Bebo as a way to move from an “an Internet-access subscription business into an advertising-focused one,” reports The Wall Street Journal. AOL will use its Platform A online ad network to monetize Bebo’s international user base.
Dan Grabham of TechRadar writes that the buyout could be beneficial for AOL, asserting that “Bebo appears poised for greater growth.”
However, Kara Swisher of All Things Digital worries that Bebo is too small a presence in the “critical U.S. market,” and the social networking site boasts only “negligible profits.”
Headline Links: AOL buys Bebo
The acquisition
AOL declared that it would buy the social networking site Bebo for $850 million yesterday. According to The Wall Street Journal, “The acquisition is the single biggest AOL has made in several years, as it attempts to transform itself from an Internet-access subscription business into an advertising-focused one.” The deal further signifies the idea that social networking is becoming a "major gateway for how people use ... the Web,” through “email, search and video.”
Source: The Wall Street Journal (registration may be required)
While Bebo is the third most popular social networking site in the United States behind MySpace and Facebook, it is very popular in Britain and Europe. The acquisition of Bebo could further AOL’s online ad network, called Platform A. “Bebo and similar sites are still trying to figure out how to bring in ad dollars without annoying users,” writes the New York Post.
Source: New York Post
AOL said it would use Bebo’s advertising inventory to “supercharge” revenues. A Bear Stearns analyst suggests that Bebo's cash flow was “very modest,” but said that “the likely dilution to Time Warner earnings was outweighed by strategic benefits,” according to the Financial Times.
Source: Financial Times (registration may be required)
The implications for AOL and Time Warner
Analysts on Wall Street saw the Bebo deal as an indication of Time Warner’s “financial support for AOL,” meaning that “a combination of Yahoo! and AOL looked less likely,” The Times of London reports. AOL hopes to boost the international presence of Bebo and promote it using its “AIM instant messenger and ICQ chat technologies.”
Source: The Times of London
An article form Condé Nast Portfolio explains what the deal means for the future of AOL and Time Warner. While it seemed as though Time Warner was trying to drop the struggling AOL, suddenly AOL is trying to “bulk up.” Time Warner has not been able to sell AOL recently, according to Rob Enderle, the principal analyst and founder of the Enderle Group in San Jose, Calif., so “they got Bebo to increase the value of the bundled property to a Google or a Microsoft, neither of whom have any interest in AOL the way it is."
Source: Condé Nast Portfolio
Opinion & Analysis: Was buying Bebo a good move for Time Warner?
Good Deal
Writing for TechRadar, Dan Grabham cites statistics that should bode well for AOL’s future. The international marketing potential is significant, as Bebo is the number one social networking site in New Zealand and Ireland, is near the top in Britain and is third in the United States. Grabham goes to on say, “And if that doesn’t sway you into thinking it’s a great move for AOL, what about this for a level of engagement: ‘users are heavily engaged and view an average of 78 pages per usage day [every 24 hours of use].’ Wow.”
Source: TechRadar
Clint Boulton of eWeek sees plenty of benefits to the Bebo deal. “Bebo could be what AOL needs to breathe life into its sluggish Platform A ad platform,” writes Boulton. He claims that Bebo “appears poised for greater growth,” and thet Bebo should double AOL’s “reach.”
Source: eWeek
Bad Deal
Kara Swisher of All Things Digital is skeptical about the potential success of Bebo for AOL. She calls Bebo “A small but growing business, with nice user engagement with strong page views and minutes spent per session, but little traction beyond Britain and Ireland, and too small a presence in the critical U.S. market.” However, she is not completely critical of the purchase, as she commends Bebo’s leadership and the fact that users spent “a lot of time” on the site.
Source: All Things Digital
Although Om Malik of GigaOm claims that he likes Bebo, he is not sure the buyout is in AOL’s best interests. He cites the difficulties the leading sites, MySpace and Facebook, have had “monetizing their audiences,” and is dubious AOL will be able to successfully combine AIM and ICQ with the social networking of Bebo. Malik writes how the “deal also shows the schizophrenic nature ... of Time Warner,” in that Time Warner would spend $850 million on Bebo for AOL less than a week after Time Warner Chief Executive Jeff Bewkes “was happy to talk about a deal with Yahoo and get rid of AOL.”
Source: GigaOm
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