AOL Dumps $1.2 Billion Worth of Acquisitions 122
destinyland writes "The social networking site Bebo is being sold for just 'a small fraction of the $850 million AOL paid for the site two years ago,' according to the Wall Street Journal. Since its acquisition, 'the site has been shedding users as fast as Facebook and Twitter have been gaining them,' according to one industry observer, quoting an April memo reportedly sent by an AOL executive arguing that Bebo 'has been declining and, as a result, would require significant investment in order to compete in the competitive social networking space.' Bebo's traffic is already down 44% from last year, according to the Wall Street Journal, attracting just 5 million unique US visitors in May (versus 130.4 million for Facebook). And earlier this month, AOL shed the instant messaging service ICQ for $187.5 million — which it had acquired in 1998 for over $408 million."
AOL Is Bad At This (Score:4, Interesting)
AOL overpays for a company, lets it get stale and then sells it for less than its current market value just to shed it from the cupboards. Great business model if you can afford to hemorrhage money forever.
Geeks Profit (Score:2, Interesting)
It appears like companies that are run by business people and their accountants and MBA's never seem to do very well (i.e. AOL, General Motors, Apple under John Sculley). While technology companies run by geeks seem to do much better (Microsoft under Bill Gates, Facebook with Mark Zuckerberg, Apple under Steve Jobs).
You'd think that the business geniuses with their education in management, marketing, accounting and economics would get that math right.
Re:Geeks Profit (Score:3, Interesting)
jobs was the money man, woz was the geek.
Yes, that's true. Jobs WAS also a geek as well (although, to put it generally, sales and management were his primary duties). The point being that people who have knowledge and passion about what they are doing will tend to be more successful (or that's the hypothesis anyway) than people who go to school to learn how to make money or manage other people.
Re:Selling ICQ? Really? (Score:5, Interesting)
Agreed. ICQ is nice technology. I certainly prefer it to MSN.
However (this is a big "however"), the quality of social software is NOT its most important feature. The most important feature is popularity. And MSN and Skype are simply more popular. Unless that decrease in popularity is reversed, the ICQ ship is sinking. It may sink slowly, but it's inevitably sinking.
It may be a wise decision to sell it for about 200 million. Another company that is better at marketing may now attempt to either find a niche for ICQ, or to turn mainstream chat focus back to ICQ. It's got a catchy name already, it could work.
I never really understood why people preferred MSN over ICQ.
Re:AOL Is Bad At This (Score:1, Interesting)
AOL overpays for a company, lets it get stale and then sells it for less than its current market value just to shed it from the cupboards. Great business model if you can afford to hemorrhage money forever.
Hardly unique to AOL. It's been a grand tradition for decades. Big company buys another big company. Execs all get together and talk about "Leveraging their synergies" and "Economies of Scale" and even "Better Service for the Customer". People at the top cash in, collect big bucks. Massive layoffs in the ranks as they eliminate duplicate positions. Customers see fees and rates go up, not down (at least when it's banks) and lose what little personal inside contact they had as their old familiar representatives are replaced by telephone robots (Your call is very important to us. Please stay on the line. Average wait time is ... 3 ... hours ... 47 minutes). Large sums of money are spent on elaborate technical solutions that attempt to capture what the laid-off people already knew, followed by massive systems failures that shut the whole company down for days (OK, not this extreme in most cases, but I could name some well-known incidents).
Finally, they give up, as profits have tanked. CEO gets laid off, collects large golden parachute. Shareholders get burned. Purchased company is spun off and execs collect gobs of cash from stock options on the newly spun-off company. New company doesn't hire because they're cash-strapped - in fact, may lay off.
Rinse. Repeat. Often.
If they opened source/started Mozilla way before? (Score:3, Interesting)
Can you imagine if they actually listened to CmdrTaco at right time and open the damn source (no matter how bad quality it is) years before?
I speak about this article
http://web.archive.org/web/19980113192359/slashdot.org/slashdot.cgi?mode=article&artnum=425 [archive.org] That is way before the "Cathedral and the Bazaar wondering around at Netscape building" times.
That is from 1998. Of course, AOL is also the company who effectively destroyed last remains of Netscape brand via rushing Netscape 6.x out of the door while ANY Mozilla user/developer could tell them that it is way too early.
Re:AOL Is Bad At This (Score:4, Interesting)
Don't oversimplify the business market ...
There's nothing wrong with buying a company for $400m and selling it for $200m ten years later if you make $300m in profit from it during that time.
A car rental company sells cars for a lot less than they payed for it, and still got profitable use out of them.
AOL may not have done so in these cases, but you can't assume a business transaction has to be buy low, sell high to be profitable or successful. In fact, it can be a smart move if you do the analysis and determine the work you need to upkeep the property in question isn't worth it relative to the revenue its generating.
Re:Um... (Score:4, Interesting)
I've already said this in another reply, but that is a vast oversimplification of economics and business, and frankly is an incorrect statement.
Example: You're Avis. You buy a Ford Fusion for $15k. Two years later you sell it for $5k. Was that a bad business decision? No, you got $5k out of an asset that was going to eventually drop to zero... *after* you already made $15k in revenue from renting it. Could you spend more money keeping it up to date and running? Sure, but your costs of upkeep skyrocket as you try to keep the vehicle modernized and competitive with the other companies with newer fleets. You're better off getting your $5k and applying that towards a new vehicle that you can make another $15k off of in the next two years.
Its the same thing with any business investment. The total cost of the investment is the difference between what you paid for it and then sold it for. There's nothing wrong with the asset depreciating, particularly if you are making revenue off owning the asset and its not an investment purchase. In fact, that's the whole point of the purchase of an asset like that.
In the case of a web property, culture is a fickle thing. Popularity changes over time. You can spend billions chasing popularity, or you can focus on being profitable over the time you own that asset. From a business standpoint, the latter is the right decision. Fans of the property may disagree, but a dwindling fan base doesn't matter in the business world.
Here is how they erased it from entire .TR (Score:5, Interesting)
Now, here is a very unknown and interesting thing. Turkey is also 16th country with largest online population. I also heard it is 5th largest user of Facebook.
ICQ was the de-facto messaging standard here and AOL genius management/admins, instead of fixing their systems with basic bayesian filtering/speed triggers/spam reporting, blocked the ENTIRE country IP block from accessing the servers. For couple of months, people played around with proxies, open proxies resulting in a way bigger issue as some of those open proxies are actually nice honeypots for passwords operated by bad guys acting like stupid.
Soon, people stared to their desktop and they have seen they actually have another instant messenger pre-installed by MS (windows messenger) which they previously joked as it is like stone age compared to features ICQ offers. All launched it regardless of how backwards it is and let me tell you what happened now: 35 million Microsoft messenger/live _active_ users in Turkey. That number is so high that, MS had to double check their statistics system. Today, you can even get Live messenger IDs of small grocery shops in villages to order stuff "online".
I still run ICQ on my handheld etc. and guess what? Weeks after Russian acquisition, ICQ spam problem is down from daily/hourly to weekly. So, it could be fixed...
It is not like AIM had any existence in Turkey so, "conspiracy to kill ICQ" is not valid. Unfortunate thing is, MS "Live", that backwards thing became the king because of them.