AOL’s Bebo on Its Last Legs?

AOL is evaluating strategic alternatives for Bebo, including a sale or shutdown of the social networking site this year. A decision is expected by the end of next month.

In early 2008, AOL, then part of Time Warner, acquired U.K.-headquartered Bebo for $850 million at a time when media giants were looking at digital media targets, particularly in the networking space. But the price target was considered very high, and TW and AOL executives later started hinting at a potential sale.

In a message to AOL employees Tuesday, Jon Brod, evp of AOL Ventures, said the company’s new strategy set last year by chairman and CEO Tim Armstrong focuses on “quality content, premium advertising and consumer applications, positioning us for the next phase of growth of the Internet.”

The competitive social networking space requires scale and is therefore not a future focus, AOL said. “Bebo, unfortunately, is a business that has been declining and, as a result, would require significant investment in order to compete in the competitive social networking space,” the note to employees said. “AOL is not in a position at this time to further fund and support Bebo in pursuing a turnaround in social networking.”

Bebo has tried its hand at original Web content to boost user engagement.