AOL to sell or shut down Bebo by May 2010

AOL has confirmed its intention to find a buyer for its social networking site, Bebo by the end of May or close it down altogether.

The news comes just two years after internet company AOL (then part of Time Warner group) spend a total of $850m on it in a bid to jump on the social networking bandwagon.

Facing strong competition from the likes of Facebook and MySpace a company memo was sent to Bebo staff revealing the company was unable to provide the "significant investment" needed for the site to compete with rivals.

Jon Brod of AOL Ventures told Bebo employees in an email: "Bebo, unfortunately, is a business that has been declining and, as a result, would require significant investment in order to compete in the completive social networking space." He added: "AOL is committed to working quickly to determine if there are any interested parties for Bebo."

With hints social networking sites are losing momentum, even if AOL is successful in attracting a buyer for Bebo it's thought the price they will have to pay will be significantly lower than 2008's $850m price tag.

Despite being a little more popular in the UK market, Bebo has really struggled against rivals in the US. Recent figures suggest its users have declined from 5.8 million to 5.1 users in the past year. To put these figures into perspective social network market leader Facebook currently has over 200 million users.

Google Trends graph showing the past 12 month's visitors to Bebo, Facebook and MySpace