Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

AOL sells Bebo for scrap - and a $275 million tax break

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- AOL sold social network Bebo to a private investment group for an undisclosed sum on Thursday, after buying it for $850 million just two years ago.

The online media company unloaded almost all of Bebo's assets to a Criterion Capital Partners affiliate. AOL deemed its remaining Bebo stock "worthless," but it will get a nice break from writing off its failed investment: AOL said it expects to record a tax benefit of $275 million to $325 million in the second quarter.

Though the companies did not comment on the value of the sale, The Wall Street Journal reported that it was "a small fraction" of what AOL paid to buy Bebo.

That drew a snarky reply from a man with intimate knowledge of overvalued acquisitions. AOL founder Steve Case tweeted his thoughts on the deal: "AOL buying Bebo for $850 million and then selling 2 years later for $10 million doesn't seem like a winning strategy."

This isn't the way AOL figured the deal would end. AOL had high hopes for Bebo as it tried to go toe-to-toe with social networking giants like Facebook and MySpace.

"We will be a social media powerhouse," said then-AOL CEO Randy Falco on a conference call with analysts in March 2008. "This deal is a game-changer."

The social network took off in the United Kingdom, but failed to gain any significant traction in the United States. Bebo had just 5 million U.S. visitors last month, compared to more than 130 million visits to Facebook, according to online traffic tracker comScore.

That failure to gain any momentum prompted AOL to cut its losses with Bebo. In April, the company announced it would either sell Bebo or simply close it down. AOL said that maintaining the site "would require significant investment in order to compete" with the likes of Facebook, Twitter and MySpace.

AOL, which was spun off by CNNMoney.com and Fortune parent company Time Warner in December, is in the midst of a turnaround effort from CEO and former Google executive Tim Armstrong. The company is trying to build up its content network and grow its ad revenue to compete with bigger online media companies like Yahoo (YHOO, Fortune 500).

Shares of AOL (AOL) fell slightly in morning trading on Thursday. To top of page

Index Last Change % Change
Dow 17,813.39 1.20 0.01%
Nasdaq 5,116.14 13.34 0.26%
S&P 500 2,088.87 -0.27 -0.01%
Treasuries 2.23 -0.01 -0.49%
Data as of 5:00pm ET
Company Price Change % Change
Pfizer Inc 32.87 0.90 2.82%
HP Inc 12.64 -2.00 -13.66%
General Electric Co 30.36 -0.30 -0.98%
Bank of America Corp... 17.44 -0.03 -0.17%
Freeport-McMoRan Inc... 8.10 -0.20 -2.41%
Data as of Nov 25


Looks like the Magic Kingdom is lacking some sparkle. Disney's cable channels have lost millions of subscribers in recent years. More

Brazilian police arrested a prominent senator and billionaire CEO for interfering in the investigation of Petrobras, which has pushed Brazil into recession. More

Watsi crowdfunds donations to cover healthcare costs of those in need. And it's seeing a surprising trend: micro-donations via the popular Chinese social networking app, WeChat. More

Some of the coolest toys this year are from small businesses. Here are 10 hot toys that just might be a smash hit this holiday season. More

Facebook just increased the amount of paid time off new dads working at its international offices can take. More