Is the moral of the AOL / Bebo deal that large corps with too much money tend to overvalue internet companies?
To turn $850 million into $10 million is quite an achievement.
To turn $850 million into $10 million is quite an achievement.
Google+ will be much better for Google than buying Twitter or Facebook ever would have been. It integrates with their existing stack and represents their culture.
There's also the perception that social networking is the game to be in, and it's been the carrot everyone's been chasing for quite a while, and that AOL saw success with Bebo as absolutely vital to its corporate survival, worth the risks. Subsequent developments bear this out somewhat as Bebo's failed and been spun off, and AOL continues its decline.
There's also the truth that social is a network-effects game. The bigger your network, the greater the value. Up to a point. From a user perspective, the Odlyzko/Tilly refinement of Metcalfe's Law is a better estimator: http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf
Essentially: for any member, there are a small number of high-value members of any network. Additional members have a decreasing marginal value, and eventually (particularly with heavy marketing adoption of a network, but also with trolls and other malevolents) many members have a negative participation value. The death of many prior "social networks" (Usenet, email, Myspace, early AOL) derives in part from this negative aspect of growth, as well as the flight of high-value participants to nascent (and high S/N) networks. Such as, say, HN.
The social value of networks is hugely volatile and tippy. Networks can go from titan to has-been in a matter of a few years, though some survive longer: AOL, Geocities, Yahoo, MySpace, Facebook, Google+, ....
The network effects also come into play on the business side, and the business side of social networking is advertising and marketing. Here Google already have a huge advantage (and are already the subject of some anti-trust investigations). This both increases the likelihood of success for Google and raises the bar for new entrants.
The other interesting story from history is that while early-stage technology is often marked by the emergence of walled gardens (think of the time when MCImail, Prodigy, and AOL mail systems couldn't communicate with one another), eventually such networks tend to merge. At the same time, commodity backbone providers (telcos, generally) tend strongly to consolidate. The two opposing factors are commoditization and opening of protocols (e.g.: SMTP) and the monopolization of common carrier infrastructures (rail, telegraph, telephone, radio/TV, mobile, Internet).
If history is any guide, we'll eventually see some set of social networking protocols emerge (messaging, identity, authentication, directory services, data interchange), while there's a consolidation of certain back-end services (comms, advertising networks, possibly compute resources and storage). Initiatives such as Diaspora may play a role, or not. Give that another 4-5 years to play out.