Why the AOL-Bebo Deal Matters - eMarketer
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Why the AOL-Bebo Deal Matters

Debra Aho Williamson, Senior Analyst

March 14, 2008

Yesterday, AOL paid $850 million in cash to acquire Bebo, a social networking site that is a distant third to MySpace and Facebook in the US.

Eyebrows have been raised in response to news of the deal because Bebo's traffic levels are only a fraction of those seen at MySpace and Facebook. Bebo had 22.4 million unique visitors worldwide in January, according to comScore Media Metrix. Facebook and MySpace both had more than 100 million worldwide visitors that month.

In February, MySpace's share of US Internet visits was 67 times larger than Bebo’s, according to Hitwise. In fact, 22% of visits to Bebo last week came from people who had first visited MySpace, Hitwise reported.

Nor does Bebo seem set to add significant revenue for AOL, at least not immediately. According to financial data obtained by AllThingsD, Bebo earned just $20 million in 2007 worldwide. eMarketer estimates that advertisers spent $510 million on MySpace and $145 million on Facebook in the US alone last year.

However, Bebo has been quietly innovative in areas of online marketing that are just now starting to get attention. It is a pioneer of widget marketing, having partnered with prominent widget developers in December 2006, five months before Facebook opened up its platform.

Bebo also hosts KateModern, an online video hit. The site is developing other short-form online video content, along with unique ways of integrating marketers into the video storyline. It also has found novel ways to allow viewers to participate in the action both online (by interacting with the video’s characters on their profile pages) and offline (producers invited fans to watch the filming live last month).

Another thing going for Bebo: its users spend more time on the site than those at Facebook or MySpace – an average of 217 minutes apiece in January, according to comScore Media Metrix. That's 18 minutes more on average than was spent on Facebook, and over an hour more than on MySpace.

Information from AOL is sketchy on the details of how Bebo will be integrated into its other properties, other than statements that it will be paired up with the messaging services AOL IM and ICQ.

There can be no denying the unique ability of social networks to bring people together in ways that were previously impossible. For marketers, it is also clear that social networks provide powerful branding solutions, taking online advertising beyond banners and clickthroughs into endeavors such as community building and customer interaction.

Bebo and its social networking brethren have so far only scratched the surface of what is possible in this space. AOL obviously plans to capitalize on Bebo’s innovations and online advertisers should hope that they succeed.

Get the facts behind the social networking buzz. Read eMarketer's Social Network Marketing: Ad Spending and Usage report.


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