The problems with social networking sites continue. It's a lesson for anyone who thinks they can make money out of them.
Two years ago, AOL stunned the world when it announced it was buying the social networking site Bebo for $850 million with the company's then CEO Randy Falco claiming it would put AOL "in a leading position in social media". Yeah right. There are some companies in this world that have the reverse Midas touch and AOL is one of them. So two years after spending $850 million, AOL is now selling it for $10 million to a private equity firm Criterion Capital Partners.
And then of course, there is MySpace. Earlier this month, I did a blog entry where Rupert Murdoch admitted MySpace had lost its way but was now moving ahead.
Now the Financial Times reports that Jason Hirschhorn, the co-president of MySpace who was brought in there to turn it around just five months ago is leaving. Read the story carefully, it's not like he has a better offer. He is just heading back to New York for "entrepreneurial pursuits". It just compounds the problems for MySpace which, the San Francisco Chronicle reports, is about to lose up to 20% of its employees. Hirschhorn could see MySpace was fighting a losing battle.
The Bebo and MySpace disasters have profound lessons for other social networking sites. The problem for social networking sites is working out how to monetize the traffic and that problem has left Facebook kicking a few own goals. Facebook could do worse than study the mistakes made by MySpace and Bebo. Otherwise, it could end up going the same way.