The days appear to be numbered for Bebo at AOL (NYSE: AOL).
In an internal memo first circulated by PaidContent.org, the struggling online giant reveals its hopes of unloading its fading social-networking site.
AOL may have paid $850 million for Bebo -- before AOL was spun off by Time Warner (NYSE: TWX) -- but it will likely have to settle for far less today. Assuming it can even smoke out a buyer.
It's easy to see why AOL wants out of Bebo. Outside of Facebook, social networking has been a tough gig. Even the mighty Google (Nasdaq: GOOG) hasn't been able to make its Orkut site relevant outside of select international markets, and AOL is now run by a seasoned Google executive.
Given the network effect of social sites, it's not a surprise to see just one site grow at the expense of others. Folks will gravitate to where the friends, family members, and colleagues are hanging out -- and abandon the rest.
It's a pity for the non-Facebook sites, because social networking appears to be fertile soil for paid search at the lucrative local level.
Is anyone other than Facebook really growing? Twitter's a speedster, but it's more of a microblogging site with limited interaction. Genealogy specialist Ancestry.com (Nasdaq: ACOM) was able to pull off an IPO last year, but the premium subscription site lures users who want to get more in touch with their family tree roots than chat with living family members.
Bebo's shrinking usage will make it difficult to land a buyer, just as AOL's fading access business makes it tricky to unload on United Online (Nasdaq: UNTD) or Earthlink (Nasdaq: ELNK). Why buy a site that will likely be smaller -- and cheaper -- a few months later?
This doesn't mean that Bebo is worthless. However, the stigma of buying a site in decline may thin out the bidding pool of publicly traded buyers. Private equity firms and venture capitalists may pick at its bones if the price is right, believing that they have the magical elixir to turn the social networking site around.
If they are history scholars, they may realize that the odds are against them. Has there ever been a social networking site that bounced back into prominence after peaking? Bobbing for Bebo won't be as fun as it sounds.
