AOL
(formerly America On Line) recently acquired Bebo, one of
the world's top social networking sites (which allow users
to connect with friends, share photos, discover new interests,
etc.), in an-all cash deal worth $850 mn. The US Internet
giant which has literally struggled post its historic acquisition
of Time Warner in 2000, hopes to reverse its sagging fortune
with this acquisition as it will pitchfork AOL—which
already has AIM (Instant Messaging Service) and ICQ (short
for "I seek you", an instant messaging service)
in its kitty—into the top league in the fast growing
social media network with approximately 80 million unique
users worldwide. Founded in 2005, in San Francisco, California,
by British entrepreneur Michael Birch, Bebo has 40 million
users worldwide. Randy Falco, CEO, AOL, said that it is "the
perfect complement to AOL's personal communications network
and puts us in a leading position in social media." The
AOL-Bebo deal comes close on the heels of Microsoft's acquisition
of Facebook last year and New Corp's purchase of MySpace in
2005, confirming the growing popularity and growth potential
of social networking sites; Media Baron Rupert Murdoch-owned
News Corp, which paid $580 mn to buy MySpace, estimates that
its investment (in the site) is worth more than $15 bn now.
The
recent acquisitions in the social networking space have been
associated with rosy projections about their future that perhaps
explains their lofty valuations. For instance, research firm
eMarketer expects worldwide social network ad spend to rise
sharply to $4.1 bn by 2011 from $480 mn in 2006. In 2008 alone,
the research firm forecasts the worldwide online social network
ad spending to grow by 81% to $2.2 bn from $1.2 bn, a year
ago. "If social network marketing delivers on the promise
of peer recommendations, however, this flow of advertising
dollars will become a flood," comments the report. |
