Online Social Network Rules

One of my readers from Youth Radio highlighted this Current.com video about young people's attitudes towards web-based social networks and privacy.

It gives a quick snapshot of current opinion but offers further proof that web users are wisening up to the risks of over-exposure via the web and adopting their own set of rules for using their favourite social networks sites.

War of the Social Networks

I'm posting this humorous video short from current.com that illustrates in a fun way how saturation has arrived to the world of traditional online social networks.

Hope you enjoy it!

AOL acquires Bebo & How to value an Online Social Network

I am deep in the throes of analysing the online social network 'market' for a presentation I am preparing and stumbled across the recent news of Bebo's acquisition AOL for no less than $850m and thought wow!That is a lot of cash!

Bebo was set up in 2006 and now has (only) 100 employees. It achieved significant success early on, when it offered a free trial for 7 weeks in 2006 and obtained 40,000 user sign-ups.It later changed its business model, dropping member fees for a more 'traditional' advertising supported medium.

Having to hand the numbers for the last big acquisition in the sector, that of MySpace by NewsCorp in 2005 for $580m I could do a quick calculation. Given that back then, MySpace had 25 million members, NewsCorp paid $23 for each user.


Fast forward to 2008, and the value of online social networks is clearly on the rise. Bebo has an estimated 22 million visitors (I will assume this means members), so AOL paid a neat $38 for each one, a whopping 65% more than the amount paid for the MySpace members.

As far as I can work out from public information, rival Facebook has about 60 million subscribers (4m of these users of the mobile Facebook site) and in 2007 generated $100m in advertising revenue i.e just under $2 per member per year. At these levels, AOL will require around 20 years to breakeven on its acquisition in terms of ad revenue alone (ok, a simplistic calculation, but a revealing one nonetheless).

One could argue that AOL probably has plans to integrate Bebo with its other business(es) and cross-sell media etc. but based on the social network alone, either AOL knows something we don't in terms of how much advertising can be pumped through the pipes of a social network or they have some cunning plan to create new value from it by some (yet unknown) proposition.

Needless to say, eyes will be peeled for any developments just as much as they will be on the last remaining independent players in the online social network space, like Friendster and Tagged (with claims to 60m and 30m subscribers each).... a whiff of consolidation in the sector is definitely in the air..question is, how much will the next brave acquisition cost and will the premium keep on rising despite a probable plateauing of subscriber numbers across the board...?