AOL reveals social media site Bebo will be sold or closed

14:50 8th April 2010

AOL has revealed it plans to sever its ties with the social media site Bebo, despite spending $850 million (£558 million) to acquire it less than two years ago.

In an email to Bebo staff, the internet giant said it plans to either sell or close the social media network after deciding it is unlikely to offer the kind of financial returns it had expected.

At the time of the acquisition in May 2008, AOL said it had a clear idea of how to monetise Bebo and integrate it with AOL's other social media applications.

However, several AOL executives expressed fears the company would be unable to make a healthy return on the investment as they believed it had paid too much for Bebo.

It now appears they have been proved right, as AOL's head of start-up acquisition and investment John Brod has admitted Bebo is no longer able to compete with rival social media services.

"Bebo, unfortunately, is a business that has been declining and, as a result, would require significant investment in order to compete in the competitive social networking space," his email read.

"AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking."

The decision to offload or close Bebo has been described by industry commentators as an admission that the social media site cannot hope to compete with Facebook, which now has more than 350 million users worldwide.