AOL Pays High Price for a Mistake with Bebo

Two years ago, AOL bought the Bebo social network for a cool $850 million. What seemed like an excellent move at the time is now being seen as a very costly mistake. AOL sent a message to their employees today, acknowledging that they are “not in a position” to support the service.

As we evaluate our portfolio of brands against our strategy, it is clear that social networking is a space with heavy competition, and where scale defines success. 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. AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking.

Bebo will now either be sold (likely at a huge loss) or simply shut down. It’s hard to imagine that in this competitive industry that anyone will pony up enough dough to make a sale worthwhile for either side. With AOL changing their focus so much in recent months, could other services (such as ICQ) be next up on the chopping block?