Bebo — The $850 Million Teen Network AOL Spent Into Bankruptcy

Bebo was the teenage social network that briefly ruled the United Kingdom and Ireland, and in 2013 the company that owned it filed for bankruptcy and was bought back by its own founders for $1 million. Launched in January 2005 by the husband-and-wife team Michael and Xochi Birch in San Francisco, Bebo combined profiles, comments, and a customizable, scrapbook-like aesthetic that landed perfectly with teenagers. Where MySpace was loud and Facebook was, in 2005, still a college-only walled garden, Bebo was the friendly, expressive network where British and Irish teens spent their afternoons. At its 2008 peak it claimed on the order of 40 million registered users and, for a stretch, overtook MySpace to become the most-used social network in the UK.

Then AOL bought it, and the story turns from a teen-network success into the textbook case of acquisition value destruction. On March 13, 2008, AOL acquired Bebo for $850 million in cash — a price that handed the Birches, who held the majority stake, a fortune, and that the BBC would later rank among the worst deals of the dotcom era. AOL bought at the worst possible moment, just as Facebook was opening to everyone and beginning to pull the entire social world into its orbit. AOL had no coherent plan for what it had bought, invested little, and watched Bebo’s users drain toward Facebook.

By 2010 AOL had given up. In June it sold Bebo to the investment firm Criterion Capital Partners for an undisclosed sum reported to be under $10 million — a loss in the neighborhood of $840 million on a two-year-old purchase. Criterion fared no better; under its ownership Bebo kept shedding users, and in 2013 the company filed for Chapter 11 bankruptcy. The closing twist arrived on July 1, 2013, when Michael and Xochi Birch bought their old network back out of bankruptcy for $1 million — the same network they had sold to AOL, five years earlier, for $850 million.

What users lost was a network they had genuinely loved, dismantled not by a better product alone but by years of corporate neglect that hollowed it out while Facebook waited. Bebo would be relaunched repeatedly in later years, but the social network that meant something to a generation of UK and Irish teenagers had been bought, broken, and bankrupted long before. It is the clearest object lesson in tech of how to turn $850 million into $1 million.