How Bebo Fits Into AOL's Strategy — May 7th 2008

By Dakota Smith

When AOL announced in March that it would acquire social-networking service Bebo for $850 million, there was a collective gasp from those watching the company. At the time, news headlines bluntly suggested that the flailing corporation could be spun off into parts (Variety: "AOL Seeks Reinvention") or suggested a Yahoo-AOL joint venture. While social media sites are all the rage (just last week, LinkedIn valued itself at $1 billion), no one expected AOL to gobble up the third-largest social networking service in the U.S., which trails only MySpace and Facebook.

An acronym of the phrase "Blog early, blog often," Bebo was founded in 2005 by a San Francisco-based husband and wife team, Michael and Xochi Birch. The site remains more popular in Europe than in America, but as analysts saw it, AOL was wise to focus on a younger audience (and to acquire a venue that might bring in substantial advertising dollars). Anthony Valencia, an analyst for TCW Group in Los Angeles, told the Los Angeles Times that "AOL was in danger of becoming your father's Oldsmobile. This acquisition is designed to prevent that."

But how would Bebo fit into AOL's larger strategy? At the Economics of Social Media conference, held at Los Angeles' Skirball Center earlier this month, AOL President and COO Ron Grant addressed that very question, albeit in rather vague terms. "About 14 months ago, we took a look at the space," Grant told the 400-plus attendees at the conference. "And we believe that engagement is one of the critical things to look at."

According to Grant, he and other executives had heard Bebo president Joanna Shield speak at a conference about a year and half ago, which piqued their interest in the company. Shield herself also appeared on the panel (via satellite) with Grant, and talked about how the company is engaging teens. "[Teens] are using Bebo to live their life online," said Shields. " It's a platform for self-expression."

Self-expression, community, and letting users determine their own experience online--these seem to be the fundamentals of AOL's new strategy. "Bebo is at the center of our international expansion," said Grant, who also noted that Bebo "is the centerpiece for what AOL is doing."

"You will see us embracing the community," Grant added. He also called Bebo the "final leg of the stool" in terms of AOL's existing content sites and its advertising division.

Later, Grant spoke in a bit more detail to the Context Next staff. "We're not trying to build a portal," he insisted. "We're literally putting relevance front-and-center--relevant ads, relevant content, and letting the users decide where to take these platforms. That's what you'll see a lot with Bebo. We're not going to care where the content comes from. We're just going to put the right stuff in front of the right people."

After the conference, which also included panels featuring Jeff Weiner, Executive Vice President of Yahoo's Network Division, and Gordon McLeod, president of the Wall Street Journal Digital Network, Grant's remarks were the subject of some animated discussion at the concluding cocktail party. If the news of AOL buying Bebo seemed peculiar at the moment, least one partygoer noted that the industry was just as shocked when NewsCorp purchased MySpace in 2005 for $580 million. "Go back and read the headlines," he said. "The press were saying just the same things." [Pictured: Context Next co-editor and Executive Vice President Staci Kramer interviewing AOL COO Ron Grant]

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