Why AOL buying Bebo for $850M is a good buy



I read comment that AOL is overpaying in its acquisition of Bebo.  I beg to disagree.  It is not appropriate to compare this to the “steal of the century” that was MySpace.  Bebo is well worth what it got bought for both because of its current scale and more importantly because of the incredible quality of its user engagement

Let’s do a woefully inadequate back of the envelope on Bebo:

  • 40 Million Uniques
  • 40 page views per user per day
  • —> 48 billion page views a month ?
  • 50% monetizable inventory
  • 25% inventory sellout
  • 1 ad per page
  • €1 average CPM
  • —> current monthly revenue €6 million per month ?
  • potential revenue if fully maximised of €50M per month ?

Optimize even some of these metrics over time and you could easily see €300M of revenues in this business at the current scale.

This does not sound like a dumb buy to me.

Remember, social networks represent 13% of young adults attention but only garner 2% of ad revenues.  Whether this is recession proof I do not know, but there is a lot of catching up to do. 

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