AOL to sell Bebo for just $10 million

AOL is selling social site Bebo

AOL is on the brink of selling struggling social networking site Bebo to a private investment firm, it has been claimed by the Wall Street Journal this morning.

The rumored buyer, LA-based digital media investors Criterion Capital Partners, is said to be buying Bebo for somewhere in the region of $10 million, or perhaps even less. This is a huge dive from the $850 million AOL bought the social networking site for in 2008.

Exact terms of the deal couldn't be learned, although one person said it was "an exceptionally uninspiring number" with almost total "value destruction." AOL have declined to comment on the reports.

According to some reports, if AOL had decided to abandon Bebo, rather than sell it, they could have realized a tax saving of around $380 million, whilst selling the company only allows AOL to write off the loss against capital gains, which makes AOL's rumored decision something of a mystery. 

Criterion Capital Partners, however, specializes in turning around companies with a revenues between $3 million and $30 million and insiders have said that the investment firm has been actively pursuing technology and media acquisitions.

Bebo's speedy demise

As we reported in April 2010, AOL revealed that its purchase of Bebo had been something of a misjudgement and talk of AOL selling Bebo quickly circulated. However, at this point, industry insiders were predicting that Bebo would be bought for around $200 million. Now that Bebo is possibly being sold for just five percent of the forecasted figures, it is clear that the burden of buying Bebo was even worse for AOL than anyone realized.

When AOL bought Bebo, it had 40 million users and a dominant presence in the UK and Ireland and was the largest social network behind Facebook to open its platform to outside developers. However, Bebo never caught on in the US and while AOL struggled to solve the ailing company's problems, Facebook retained a far quicker pace of user growth, adding about 50 million users more than Bebo every two months.

By this year, according to comScore, Bebo had five million unique US visitors in May, down 44 percent from the same period last year. Facebook, on the other hand, had 130.4 million unique US visitors.

AOL's future

VentureBeat has reported that sources close to the negotiations between AOL and Criterion Capital Partners, have said that AOL executives are "livid that the news has broken and believe Criterion leaked the information."

However, it is thought that a deal could be announced as early as next Thursday.

The sale of Bebo comes just six months after AOL separated from Time Warner and, when the company recently celebrated its 25th birthday, it announced a change in direction for AOL. The company said at the time that it was hoping to become the leading producer of high-quality content on the web and announced its new slogan "Beat the Internet".

Whether or not AOL is in a position to "Beat the Internet" remains to be seen. 

Related links:

AOL: Where it all went wrong 25 years of AOL | The brand that Time forgot | Apple's Steve Jobs defends conditions at Foxconn | Collaborative Application Growth

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