Technology

AOL and the Curse of Beb-oh


If AOL hadn't wasted $840 million acquiring Bebo, CEO Tim Armstrong would have a lot more cash to buy up content-related outfits

When Time Warner spent a whopping $850 million to buy Bebo, an also-ran social network, back in March 2009, I wrote: "Given Time Warner's history of messing up everything it buys, I wonder how long before Bebo becomes Beb-oh." Now comes word that AOL is getting rid of Bebo—and may have sold it to a private investor for somewhere between $2.5 million and $10 million. That would put it in the same category as the New York Yankees' $39.5 million deal with pitcher Carl Pavano—hope and hype that ended in heartburn. If the reports are indeed true, Randy's Folly cost the company $840 million of much-needed cash. Randy being Randy Falco, the clueless executive who took AOL to the brink of extinction before someone woke up and brought in Tim Armstrong to make a miracle. From Engadget to Seed

Armstrong is trying to move AOL away from its access-centric revenue stream by building a content-centric company. Thanks to the acquisition of Weblogs (way back when), AOL now sits on a gold mine of Web brands, Engadget being the best known. The company has also embarked on an expansive and ambitious strategy with such new programs as Seed. At the D8 conference, when Armstrong was asked, "What is the future of the company?" he replied, "If I had to describe it in one word, I think it's content, and I think it's content because there's an opportunity to marry what the content has already done with what the content can do." Given that I've viewed AOL's content strategy over the past year and a half as a smart one, I can't say I disagree with Armstrong's approach. We are in the middle of a big media shift, which means some of the traditional brands are going to fall by the wayside. New ones will emerge. AOL can be home to many of them—whether they're homegrown or come via a shopping spree. As I have often said, we've entered an era of too much data (including news). From this data we need to derive information, and to this information we need to offer context. That context is social and local. These are not easy tasks, mind you; they require the resources of a technology company—and thankfully, AOL has plenty of those. From Foursquare to Gowalla

This is precisely the time AOL should be making aggressive acquisitions—not Associated Content, but companies such as Foursquare and Gowalla—and use them to build a new class of "media entities" that revolve around location and social.I see such services as the next iteration of gourmet magazines and retail guides.They can also help AOL realize its local ambitions. Just as back in the day [when] AOL viewed weblogs as a new media entity, Armstrong must peer into the future and rethink what media is, including getting rid of such notions as content created by content farms like Associated Content. It should also explore a new opportunity pursued by certain startups: the marriage of content and commerce sans traditional advertising. Good examples include New York's Thrillist, which bought JackThreads, and San Francisco's women-oriented content company, Sugar Inc., which in turn bought FreshGuide. In a world awash with cheap page views, it's the premium experiences that result in premium advertising dollars and commerce-related revenues. But thanks, in part, to Bebo, AOL doesn't have a lot of cash on hand—roughly $262 million—which limits what Armstrong can do. Now imagine if Armstrong had that $840 million that was wasted buying Bebo; he could easily go about building a brand-new AOL. Instead, he needs to take measured steps and worry about paying the price of someone else's stupidity. Also from the GigaOM network: Will Silicon Valley Remain the Center of the Tech Universe? What Would a More Open Twitter Look Like? World Cup Woes: Why Doesn't ESPN3 Work With Your ISP? The iPad Works, Thanks to These Apps Five Ways to Maximize Your Evernote Usage

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