What Was AOL Thinking?

One week ago AOL announced that they were acquiring Bebo for a whopping $850 million. The blogosphere was surprised by the acquisition and now one week later talk of AOL making a horrible decision is returning. Is this surprising? Not really. While Bebo was the second social platform to market, growth has become relatively stagnant.

According to Henry Blodget, executives at AOL have had some internal conflict over the acquisition. The primary issues highlighted were the inability for AOL to monetize social-network inventory, Bebo’s flattening growth and the belief that the Bebo founders will hit the road. If I was the Bebo founders I definitely would hit the road! We’ve heard stories of how expensive it was for Fox Interactive to keep on the MySpace founders on board.

I have to agree with Henry Blodget when he quotes Glengarry Glen Ross, “first prize is a Cadillac Eldorado, second prize is a set of steak knives, third prize is you’re fired.” Many believe that the social networking space is a two horse race and that’s how it will remain. While maintaining a site with millions of active users can be a steady business, you won’t see the type of growth that the leaders are experiencing.

This was a last ditch attempt at joining the social networking game and as I said last week, join the social graph race. What is confusing to me though is why doesn’t AOL simply focus on leveraging their instant messaging service? Building out instant message services that are comparable of competing services such as Trillian or even Facebook’s new IM service would help them to rebuild the failing AOL community.

Then again, I’ve been wondering about why AOL hasn’t reinvented their instant messaging service for years. Do you think AOL’s acquisition made any sense? Do you think leveraging their instant messaging service could prove valuable?