• Silicon Alley Insider, Friday, March 14, 2008 11 AM

Silicon Alley Insider Henry Blodget reflects on AOL's $850 million acquisition of Bebo, saying, "We don't get it." The companies' clearly believe their strengths will complement one another: Bebo is strong internationally, but it's a distant fourth in the U.S. social networking market. AOL is much stronger in the U.S. than it is in Europe.

Blodget says the bigger problem here is that "the companies' strengths aren't that strong." In the Web portal business, its main business, AOL is a distant third to Yahoo and MSN. Bebo, meanwhile, isn't even the No. 1 social network in the U.K., its main market. "The most likely outcome of putting the two companies together, therefore, is that the companies' weaknesses complement each other," says Blodget, "and they go down together."

Or maybe alone, as all that cash means that Bebo executives are sure to go. "AOL essentially just forked over all that money for an audience of primarily teenagers in England," he adds. Meanwhile, all that wonderful social data contained in AOL's AIM and ICQ properties is just sitting there, rotting.

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