AOL + Bebo = Still No Market Differentiation
The big news today is that US portal giant AOL acquired leading social networking site Bebo for $850 million. There has been a lot of coverage about the business aspects of this deal, but from a product view I don't think this will make much headway for either company. Bebo is a distant third to MySpace and Facebook in the social network market (especially in the key US market), while AOL is a perennial also-ran nowadays when compared to Google, Microsoft and Yahoo. While this deal will see innovations such as AIM integrating with Bebo (Whoa! Real-time Social Networking!), let's look at the bigger picture. Ultimately we're talking about two middle of the road Web brands.
The Facts
The Wall St Journal's Kara Swisher has a good analysis of the acquisition. Her video interview at Bebo's London office also had some interesting facts. In the video Bebo president Joanna Shields said that the UK is Bebo's strongest market - they have 9 million users there. Globally Bebo has 36 million users worldwide, which according to Shields puts them 3rd worldwide (behind MySpace and Facebook). However, the other side of that coin is that Bebo is relatively weak in the US market, where MySpace and Facebook dominate.
The demographic for Bebo is very young and engaged. The 13-24 year old demographic is Bebo's base and Shields said to Swisher that the average user spends 40 minutes per session on Bebo. So their users are "living their lives out online" - which is theoretically a nice way to attract brands and advertisers. On that front, Shields admitted that the US is still the biggest online advertising market, but "UK is a strong second".
As a product, Bebo is kind of a mix between MySpace's anarchic but hugely popular service, and Facebook's more structured and trendier service. Kara Swisher had a nice turn of phrase for this, saying that Bebo is "neater than MySpace and more fun than Facebook". For a good look at the tech backend of Bebo, check out Rev2.org's post from July last year. In the end though, the features are not what differentiates Bebo from MySpace and Facebook.
Indeed, Bebo has struggled to define itself - the fact that the company chose to (at least publicly) support both Google OpenSocial and Facebook is telling. Bebo is not strong enough to beat MySpace or Facebook as a standalone social network; and the AOL acquisition isn't going to change that.
Bebo Platform - How's That Going?
Bebo has always been a step or two behind the other major social networks as a platform. In November last year it announced a half-hearted effort called Open Media, which at the time we called "a white listing of professionally produced, big media content." Then Bebo was one of a number of social networks to join Google's OpenSocial network. Soon after Bebo announced it was adopting the Facebook platform - a confusing signal, as up till then everyone had assumed that OpenSocial and Facebook platform were direct competitors.
The Bebo platform appears to be running smoothly. The Bebo development team posted an update to their blog today assuring us that "the only changes we see on platform are for the better." In the final analysis, it's hard to know what to make of the Bebo platform because it hasn't been a leader in this space as Facebook, Google and now Myspace have been. The Bebo platform has been along for the ride - and it seems like it had little, if anything, to do with Bebo's sale to AOL.
Conclusion
I see a lot of similarities between Bebo and AOL. Like Bebo, AOL is behind other more high profile competititors in its market. Just as Bebo has struggled to make headway against MySpace and Facebook, AOL has struggled to differentiate itself against its 'big Internet co' competitors like Google, Microsoft and Yahoo.
Bringing AOL and Bebo together may be a good technological fit - e.g. adding AIM to Bebo will be interesting. But it's hard to see AOL getting much out of the deal in the US market, considering that Bebo is not strong there. And I'm not sure what business AOL has in the UK market, as AOL really has little brand recognition outside of the US.
What do you think? Perhaps I'm being unfair to both AOL and Bebo by taking this blase attitude. But really, after the rush of excitement today, I think we'll all be back reading and writing about Google/MS/Yahoo and Facebook/MySpace tomorrow...
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I think AOL's aquitision of bebo portends the end of bebo…
http://webpoet.wordpress.com/2008/03/13/bebo-aol/
TWL
about the numbers:
Does Bebo’s 36 million users refer to registered users, or monthly uniques? Either way, how can they claim 3rd place to Facebook and Myspace when there’s at least one contender with a much higher global userbase? I’m thinking of course of hi5, with 38 million unique monthly visitors, and 80+ million registered users.
http://www.techcrunch.com/2008/03/13/hi5-gets-ready-to-take-opensocial-global/
Admittedly I may be somewhat biased here, since I work for hi5. But still, what gives?
(Speaking of which, if you’re a software engineer, architect, or technical product manager, and interested in the social networking space, we’re hiring – feel free to contact me at kkanarek at hi5 dot com)
I agree with the general perception (although given the fickle track record we've seen with a lot of social networks in the past, not having a good toehold in the US could be a good thing in the future if MySpace/Facebook fall out of favor.) But I also think it's sometimes a little short-sighted to look at some of these acquisitions by the major web giants in recent years in their most immediate terms.
I'm increasingly viewing established online giants like Yahoo, Microsoft, AOL, Google, Ebay and Amazon as holding companies. Even if the company they're buying is a lower-profile brand or doesn't seem to be an ideal fit within the parent company's overall brand that doesn't mean it might not work out. As these bigger companies mature and try to diversify, so many of these acquired brands are now left to float along semi-autonomously, much like the operating procedure of traditional holding companies (i.e., Yahoo w/Flickr, Del.icio.us and MyBlogLog, Google w/YouTube, Ebay w/Skype and StumbleUpon, AOL w/TMZ and Weblogs properties, etc.)
To be sure, a company can overpay. Skype's a good example. But for companies with deep resources looking to get a foothold in emerging/related fields (which sometimes don't always have a very promising revenue model; like most social networks currently) it's the cost of doing business.
And the company you're buying doesn't always have to be #1 in its market for it to work out for your needs. Sears and Kmart have been perceptually weaker brands in recent years. But due to diversification, the Sears Holding Company stock (which owns both brands as well as several smaller brands) has done very well for its investors over the last 5 years.
http://finance.yahoo.com/q/bc?t=5y&s=SHLD&l=on&z=m&q=l&c=TGT