AOL slams the door on social networking

Yesterday AOL announced that it planned to sell or shut down the social networking website Bebo. The news comes a few months after the digital media giant announced that it would cut one-third of its work force in an attempt to save $300m a year.

Despite this, the move to sell Bebo, one of the top 10 social networking websites, seems surprising at a time when social media is on the rise.  However, Bebo’s global unique visitors in February totalled 12.8 million, which was down 45% on February 2009. In comparison, Facebook had 462 million visitors, MySpace nearly 110 million, and Twitter 69.5 million according to figures from ComScore. Clearly the ability to attract advertisers and ultimately revenue is becoming more difficult – one of the core reasons for the purchase at the time in many industry commentators opinions.

At the same time AOL continues to invest heavily in digital content. In March this year it bought the local US news site Patch for $50m as part of its ongoing plans to invest in local news digital content. It also acquired StudioNow Inc. , an online platform for quality video creation and distribution, which is going to be integrated into its content management system Seed.com.  The interesting concept behind Seed.com is that users can upload original photos, music and or written content and get paid a certain percentage of the profits. However, AOL retains the rights to the product which allows the company to exploit successful content across its digital media platforms or to sell distribution rights to broadcast/music/publishing companies.

This can potentially generate high revenues, especially if the company can successfully utilise its business connections with Time Warner. Following on from this, it is not surprising that AOL has decided to refocus its core business strategy on content management and creation and avoid heavy investments in the highly competitive social networking market.  The company is trying to reposition itself as a major digital content provider and it shifts its direction towards niche markets, localised information and user generated content.