AOL Dumps $1.2 Billion Worth of Acquisitions

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."

Comments

Come and go.

[cosm]

Web trends come and go. Much of the time, it is just a roll of the dice on the company's part as to which "trendy" startup they decide to buy. Hell, perhaps "Facebook" was just easier to say/read/pronounce for todays high-school drones, so it became popular. Or perhaps it was i'ts (once) simplistic interface and (semi) useful purpose. Or perhaps the flying spaghetti-monster decided to cut the strings. Either way, nothing new under the sun, and the lesson to be learned from here is that if you gamble on fluctuating trends and fads, there is always an inherent risk to be understood.

And plus, if your company spams the world with digital coasters for a decade, well, your really screwed.

Re:Come and go.

[buchner.johannes]

My partial differential equations prof said: "There are two notations for the sum of second derivatives, and ; They are like Bebo and Facebook", referring to the fact that the first is not used much, but the latter is really popular. IMMD

Re:Come and go.

[DarkOx]

The lesson is Google and possibly Facebook(remains to be seen) are the exceptions. Most Web Sensations are just a flash in the pan. If it seems like its getting to the point where just about everyone you know has heard of it (assuming you know at least a few non slashdot readers), than it can only go down hill from there.

If you own a part of it, its likely time to sell, if you were thinking of buying in its likely to late to turn a profit. Again that is to say unless the company is actually doing something unique that normal people would actually find valuable. They might be some oppertunities yet to simply do something better the way Google did; but if you get into one of those it better be something the incumbents can't use their supperior resources to just leap frog. I doubt even if someone builds a better Facebook at this point they could reach critical mass before being passed by again.

The leaders, in losing money.

[tivoKlr]

AOL & Time Warner. AOL & Bebo. AOL and & ICQ. Gosh what's next...AOL and GM?

Wanna lose money? Follow AOL's lead...how is it that this company exists anymore?

Re:The leaders, in losing money.

[tehcyder]

As the saying goes, the only way to make a million dollars from AOL is to start off with ten million.

AOL needs to be stopped

[troubbble]

AOL just shouldn't be allowed to acquire anything from now on. They seem to ruin everything they touch.

Re:AOL needs to be stopped

[Idbar]

Either they are really bad at business and they haven't realized yet. Oooor they are really good at one thing:
money laundry.
How are they still in business?

Re:AOL needs to be stopped

[trytoguess]

AOL runs sites like Engadget, Joystiq, wow.com, autoblog, etc. They seemed to have been trying to rebrand themselves as a nerdy information hub for quite some time.

Re:AOL needs to be stopped

[wisty]

Yet nobody hates them more than nerds. :s

Re:AOL needs to be stopped

[Buzzsaw5]

They seem to ruin everything they touch.

Hopefully they'll acquire the Yankees next.

Re:AOL needs to be stopped

[Trepidity]

Well, they had a huge installed base, and while it's been declining since 2002, it's from a large peak and not all that high a slope. That's provided a ton of revenue over the years to let them survive these unsuccessful forays into other businesses.

They still have about 5 million paying subscribers. And they've actually increased the profitability per-subscriber compared to their heyday, because while in the late 90s / early 2000s they sold them dialup access (and had to maintain modems/etc.), these days they're mostly selling an add-on service on top of broadband internet access that customers get elsewhere. People for years would pay $10/mo basically to keep their email address that they'd had for years, or the software they were used to using (a lot of AOL users aren't that tech-savvy). Now you can actually get the software and email/etc. free, but you have to go click on something to request a transition to the free service (which is identical but w/o tech support), so several million people are totally voluntarily paying AOL $120/yr, for a service that also makes a good amount of money by showing them ads.

Re:AOL needs to be stopped

[DrXym]

AOL are like King Midas except everything they touch turns to shit. Netscape, CompuServe, Mapquest, Bebo et al. They buy these companies for their innovation and technology which they promptly smother until it is dead. AOL is conservative, risk averse, marketing driven company and inflicting that culture on acquisitions negates the reasons for buying them out in the first place.

Re:AOL needs to be stopped

[soliptic]

Bebo didn't need any help from AOL to ruin it. Have you ever actually seen a Bebo profile? It's like a bunch of feral children somehow discovered social networking despite being illiterate if not outright lobotomised.

Re:AOL needs to be stopped

[couchslug]

"They seem to ruin everything they touch."

They should stick to touching themselves.

Re:AOL needs to be stopped

[Firemouth]

AOL are like King Midas except everything they touch turns to shit.

It's called the Charmin touch.

Re:AOL needs to be stopped

[ncc74656]

Somehow the term "endless September" comes to mind...

On 6134 September 1993, what would give you that idea?

AOL Is Bad At This

[WrongSizeGlass]

AOL is very bad at acquisitions. They are all gung-ho about buying companies, but they just sit on them and hope they continue to be relevant (if they ever were relevant). They don't understand that you have to make things happen - these types of companies don't just improve themselves.

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.

Re:AOL Is Bad At This

[Brett Buck]

I think it's worse than that. Once a company gets associated with AOL, it's reputation goes into the swirling porcelain bowl. If they acquires the companies but didn't tell anybody, they would be far better off. Even my elderly mom and dad know that AOL is intrinsically lame.

      Brett

Re:AOL Is Bad At This

[khallow]

I never understood the bad reputation that AOL has. They are a great charity.

Re:AOL Is Bad At This

[J Isaksson]

Not only that. AOL seems very US centric, the acquisitions they make (most striking example being ICQ) just seem to "stop existing" internationally.
ICQ was quite popular among the people I know (in Sweden), but since AOL bought them I've only ever heard of them in the context of being considered for sale or now being sold. The service works internationally for sure, but the little marketing I've seen for Live Messenger totally crushes anything I've heard about ICQ for years. In the context of the Internet, no news isn't good news. No news is abandonware.

Re:AOL Is Bad At This

[DigiShaman]

AOL = Always Off Line

Re:AOL Is Bad At This

[Arancaytar]

Well, they're consistently buying high and selling low. Their market strategy program probably has an inverted if-condition somewhere.

Re:AOL Is Bad At This

[tgd]

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.

Nah

[sortius_nod]

They're just scared Amazon is going to sue them.

About half of that is in 30-Day Trial CD-ROMS.

[Anonymous Coward]

BP has shown interest in using them to plug the hole.

Re:About half of that is in 30-Day Trial CD-ROMS.

[Joce640k]

Can't they plug it with old AOL diskettes? There's billions of them in storage.

Geeks Profit

[Anonymous Coward]

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

[gandhi_2]

jobs was the money man, woz was the geek.

Re:Geeks Profit

[Anonymous Coward]

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:Geeks Profit

[grouchomarxist]

Woz wanted to make products he would use, Jobs makes products the general public can use.

Re:Geeks Profit

[wisty]

Jobs was a geek. He went to HP lectures while he was in junior high school. He then got a job at HP. He went to Homebrew Computer Club meetings with Woz, and worked as an Atari technician (where he ripped Woz off on the circuit board design).

Woz on the other hand was The Geek.

Re:Geeks Profit

[tehcyder]

You've just mentioned the three biggest assholes in the entire industry, and called them geeks because you want to be on the winning side.

It's fair to say that being a colossal asshole correlates with business success far more than being a geek does.

Who?

[Saeed al-Sahaf]

I've never heard of Bebo. 850 million? Maybe that's (just another reason) why AOL sucks.

Re:Who?

[Trepidity]

The first place I ran across a mention of Bebo was in this song, which probably isn't a good sign...

*bing*

[Anonymous Coward]

You've got fail!

Re:*bing*

[gbobeck]

Me too!!!!!!

Come and Stay...

[Anonymous Coward]

Someone make an excellent point about making sure that a web site stays relevant (using API's, observing the competition and keeping up with features). If you ignore what your competition is doing and think a site is good as is, you as owner of that domain are going to get trampled by any and all competition.

However, I do not agree that facebook and twitter are 'just a fad'. Facebook is top dawg because of every reason. Fast loading, simple interface (no messy myspace background and image personalization), a great domain name. Twitter, same thing as facebook. Great domain name, simple to use and uniform formating, limiting personalization. Most people are not good website designers!

Re:Come and Stay...

[Svartalf]

Facebook's a fad...

It might be fast loading, etc. but it's usability diminishes with your social network growing (the news becomes NOISY...), coupled with the bulk of the content being mostly of the "and nothing of any import was lost" type stuff.

The same goes for Twitter, really.

What USE is it all other than being a participatory boob tube? Not much, that I can see. And, yes, I've got Twitter and Facebook accounts.

Remember they bought Netscape

[Gregg M]

Remember they bought Netscape for 4 BILLION! Then they did nothing with it ... nothing! They could have rebuilt AOL to work in the Netscape browser. The way all of Google works today. Overnight Netscape would have gained 40% market share. Even just the Netscape homepage could have brought in some money.

Um...

[Greyfox]

They DO know that you're supposed to buy LOW and sell HIGH right? The consistency with which they're doing the opposite makes me wonder. I mean, even a blind squirrel gets a nut every once in a while, right? You would think that they would accidentally buy one good company. Maybe they have some sort of Midas poo touch, where everything they touch turns to poo. Actually this IS AOL we're talking about here, so maybe that's what the problem is...

Re:Um...

[tgd]

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.

Selling ICQ? Really?

[Etcetera]

This actually kind of surprises me... From what I understand, ICQ is still a big player internationally in the instant-messaging space. Unless Skype is suddenly ruling the roost or something... And despite my qualms with some of their updates over the years (Newsflash: When you have to put out a "Lite" version of your software because your users refuse to use the bloated piece of crapware that your official client is, you're doing something wrong...) ICQ has done nothing if not tried to remain relevant, added features, tried to integrate with other systems.

ICQ seems like one of the pieces of tech to keep... and not just for nostalgia reasons.

ICQ #5632973

Re:Selling ICQ? Really?

[captainpanic]

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:Selling ICQ? Really?

[SolitaryMan]

In CIS countries (Russia, Ukraine, etc.) ICQ is the most popular messenger. I don't like it, but that is what I have to stick to here for the same reason you are sticking to MSN.

So, ICQ ship is doing OK.

What about CA?

[cbraescu1]

What about Computer Associates, you insensitive clod? Their track record dwarfs AOL's

Re:

[Dunbal]

Seems like AOL's business plan lately is throw what ever they can against the wall and see what sticks.

      Well AOL had their business model yanked out from under them with the arrival of the internet. After that they became a "media company" by swallowing other "media companies", but the rudder fell off of that ship a long time ago.

      I guess we can just be lucky that they didn't decide to buy politicians and try to force through legislation that outlawed broadband and forced everyone to use their software on their network... MAFIAA-style. Perhaps in a parallel universe.

If they opened source/started Mozilla way before?

[Ilgaz]

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 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.

Here is how they erased it from entire .TR

[Ilgaz]

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.