Updated: A Year Later, AOL Is Contemplating A Bebo Sale

I didn't quite believe it when one of my most trusted sources told me that AOL was seriously considering selling Bebo, the social network it acquired for $850 million only a year ago. But I have now confirmed the rumor with three other sources intimately acquainted with the company. AOL is indeed quietly pondering a sale after watching Bebo perform much worse than it had hoped. That, combined with an advertising market buffeted by the waves of the economic downturn, means Bebo's days at AOL could be numbered. Selling Bebo after only a year would be an astounding about-face. How did this happen?

[UPDATES: As a result of this story, more sources are coming forward. One I trust says Bebo is being pitched at $200 million. Update 2: Sources inside AOL are denying that it is exploring a sale. Bebo also denies a sale. Update 3: We have been in contact with corp communications at AOL, they say on the record: "There is no truth to this rumor." Four of our sources, including former and current Bebo insiders and a well-placed VC, say otherwise. Last December Gigam published "Is Time Warner Having Second Thoughts About Bebo?". I'm not saying Bebo is formally on the block, but I am saying that a sale is something under consideration].

My sources paint a picture of a startup which cleverly went about wooing advertising agencies, their clients, and - in the end - a media company that was prepared to jump on the social networking bandwagon during late 2007. There is absolutely no suggestion that anyone was dishonest or misrepresented the situation. But a year on it's clear that AOL itself projected more growth onto Bebo that the network could deliver.

Here's the scenario my sources paint as to why Bebo may now be for sale.

The story starts two years ago in January 15 2007. Bebo is riding a wave of growth and to control this and pitch the company in the right direction, founders Michael And Xochi Birch hire Joanna Shields, managing director of strategic partnerships for Google EMEA, as international President, based in London.

You have to cast your mind back to that era. Social networking was still a very new phenomenon, especially in the mainstream media. Facebook had only just opened up in the six months prior. Selling social networks as media platforms was a new field. What advertising agencies wanted was someone to explain to them, in simple terms, where the value lay. And that's exactly what Shields did.

As one of my sources says: "Shields was extremely really good at getting the slightly dim media buying agencies to automatically tell their clients that they just had to be on Bebo."

It would be fair to say that many advertising agencies then - and even to some extent even now - don't have a clue about the Web.

A senior media planner at a major agency spoke to me on the condition of anonymity. She confirmed that Bebo's 2007 offensive on the agencies was planned with military precision: "Among all the social networks that pitched to us at the time Bebo had the best packages and approach to sell to agencies. It was VERY easy to buy from them. Joanna's approach was excellent. Her experience was evident. When they presented the packages it was presented as a one-stop shop."

Media agencies found other social networks at the time far more complex to deal with. But "dealing with Bebo was very similar to traditional online buys. They got into agencies easily because of that. They just pitched exactly what you wanted to hear: audience, growth, traffic, costs, and branding/textlinks packages. Simple."

By the time other social networks came calling at the agencies' doors, Bebo had almost sown up the market.

But in particular, Bebo did very well targeting the completely Web-clueless TV planning agencies, largely responsible for buying TV shows, not running the ROI numbers on a PPC web campaign.