Acquisition may not help AOL grow in Web 2.0 world

Bebo deal may boost online advertising efforts, but firm may be too late with social network

AOL's planned acquisition of social networking site Bebo comes during AOL's quest to morph itself from an ISP into a media and content company. Some industry insiders say the move may be too late to help AOL reach that goal.

Andrew Frank, an analyst at Gartner said that US$850 million offer to buy Bebo - the third largest social networking site in the US - in some ways takes AOL back to its roots as a pioneer in user experience. "The original AOL site was a precursor to a lot of the kinds of things we see in today's social networks," he said "They were really a pioneer."

In addition, AOL's statement that it plans to use Bebo to grow its online advertising network is a sound strategy and alleviates much of the speculation that AOL parent Time Warner is looking to sell off the unit, he added.

"One of the lessons that we've been learning from folks like Microsoft and Yahoo is that while advertising and content are both important, if you're going to try to sell an advertising platform you need to be able to seed it with a reliable source of content. That is one of the things that is driving the acquisition of content sites."

Frank did question the timing of the acquisition for AOL, saying that it may be "too little, too late" for the company. "They have some pretty hefty competition from Microsoft and Google - it is hard to play catchup with that," he said.

Charlene Li, an analyst at Forrester Research Inc., added that the move makes a lot of sense for AOL, which "has been very much under the radar in many ways in the social space" while they try to build up an advertising network.

"They feel like they need to have that audience to gain access to this brave new world of social networks," she said. "They do have a very strong product in AIM - that is about communicating between your friends, and that in many ways is a social network as well."

Mike Masnick, president and CEO of IT research firm TechDirt, noted that his firm has long wondered why big online players like AOL, Yahoo and Microsoft didn't create social networks from their instant messaging systems four or five years ago when Friendster and MySpace first began to gain popularity.

"Whereas most social networks had little to do once you connected, most people used instant messaging to communicate all the time," Masnick noted. "Those instant messaging systems already knew who all your 'friends' were, and it shouldn't be that hard to then take that information and convert it into a more standard social network, with instant messaging features built right in."

Now, AOL "has finally woken up" and realized this possibility, he added.

Linking AIM to Bebo in a way that gets people interested may be difficult now because many people are reluctant to join yet another social network unless it provides something compelling and different than the ones they already use, Masnick noted.

"Yes, AOL should be turning AIM into a social network, but they should have done it four years ago when it still made sense," he added. "As it stands, this seems likely to go nowhere fast -especially with the cloud over AOL's future strategy."

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Heather Havenstein

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