Page last updated at 06:38 GMT, Wednesday, 7 April 2010 07:38 UK

AOL plans to sell or shut down Bebo

Internet entrepreneur Dan Wagner says Bebo can't compete with Facebook

Internet company AOL has announced plans to sell or shut down the social networking site Bebo.

The company said it was unable to provide the "significant investment" Bebo needed to compete with its social networking rivals.

The news comes just two years after AOL bought the site for $850m (£417m at the time).

A strategic evaluation of the company is expected to be completed by the end of May.

Buyers will be sought for the company, but analysts expect the selling price to be significantly lower than the price paid by AOL.

Bebo has been struggling against more popular rivals such as Facebook, 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," Jon Brod of AOL Ventures told employees in an e-mail.

"AOL is committed to working quickly to determine if there are any interested parties for Bebo."

Declining users

Bebo employs about 40 people, mostly in the US.

Although founded in San Francisco, Bebo has failed to make up any ground on rivals within the US, despite being more popular in other markets, including the UK.

I think it will be sad for those that use it and prefer it

According to figures from research company ComScore, Bebo has 5.1 million users in the US.

That is down from 5.8 million this time last year, and compares with the massive 210 million users of market leader Facebook.

The planned disposal of Bebo is a sign of AOL's attempts to streamline its business since its demerger from Time Warner last year.

AOL itself struggling to compete against the increasing number of internet companies, after establishing itself as a pioneer of early dial-up internet in the 1990s.

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