Bebo

The most annoying thing in the world: an unhappy billionaire

Shaan relays Michael Birch (Bebo founder) on post-exit wealth: selling was anticlimactic, building was more fun, and the cruel twist is no one will let you be sad once you're rich. There's a never-ending chain of 'you have it all' that denies wealthy people permission to feel down.

“Nobody wants to hear it, right? Like, what's the most annoying thing in the world? An unhappy billionaire. And I think he said something like that. And I was like, wow, that's so true, actually.”

Birthday Alarm: $4–5M/yr at 80% profit with almost nobody working on it

At its peak Birthday Alarm did $4–5M a year in revenue at roughly 80% profit, run by Michael Birch's wife, sister-in-law and cousin. It funded his next startup, Bebo, which he later sold for ~$850M while owning 70%+.

“And it was making at its peak $4 or $5 million a year of revenue with most of that being profit, like maybe 80% profit at that time.”

Bebo's Red Button: The 100-Step Game That Cracked Funnel Psychology

Shaan tells how Bebo's Michael Birch put a mysterious red button in front of 1 in 1,000 visitors, leading to a silly 100-step cat game. The lesson: ~30% bounce on step one, ~20% more on step two, but anyone who reaches step three almost always finishes.

“He put a red button on the site for 1 out of every 1,000, uh, visitors. So imagine going to Facebook and just seeing a shiny red button in the corner for the first And you click it and then the whole screen just went clear and it was like, here's a cat, click the cat. And you click the cat. It's like, this is a bowl of pasta. Don't click the bowl of pasta. You clicked it. And then it's like, the cat's dead. We told you not to click the bowl of pasta.”

Steven Bartlett's Bebo trick: make people Google the app, not click a link

Bartlett bought up large parody Twitter accounts and refused to run trackable link ads. Instead he seeded a brand (Bebo) as a casual mention across many accounts so people would see it repeatedly, wonder what it was, and go search it themselves.

“He's like, No, that's not how people talk on the internet. I was like, okay, so tell me, what do you mean? He's like, you got to think, what you want to do is we have so many accounts that we want somebody, when they scroll on Twitter, they see Bebo mentioned like 7 times and that nobody's explaining it. Nobody's selling it to them. They just realize, why is everyone saying this thing Bebo? What is that? And then they go Google it or they go search for it”

Steal thisSeed a brand as an unexplained casual mention across many accounts so people search it themselves instead of clicking an ad.

Bebo's $850M sale: the last girl left at the dance

Michael Birch sold Bebo for $850 million at the absolute peak of social networking. Facebook was too expensive to acquire and MySpace had already sold for $500M, so Bebo was the only target left; a year later it might have sold for half or less. The lesson: that you succeed isn't luck, but how much you succeed often is.

“Sold that company for $850 million. The timing was perfect. Social networking was at its absolute peak. Facebook was too expensive for anyone to buy. MySpace had already sold for $500 million, so they were the only girl left to ask out to the dance. They got a very high bid from a big bidder. That same company a year later might have sold for half the amount or less.”

Bebo sold to AOL for $850M, and the founders owned 70%

Shaan tells how Bebo, dominant in markets like Ireland (more trafficked than Google there), sold to AOL in 2008 for $850 million, more than MySpace got, with founders Michael and Sochi owning 70% of the company at exit.

“decides to sell, sells the company for $850 million to AOL. Huge exit at the time, sold for more than MySpace did. And, um, and so amazing exit for Michael and Sochi, and they went on to do a whole bunch of great things, both philanthropically as well as in business. And they own 70% of the company at the exit.”

Sold Bebo for $850M, then bought it back for $1M at auction

Shaan recounts the wild arc: after AOL wrote Bebo off as a near-zero tax loss and it passed through bankruptcy, his team bought the brand, domain and email list back for $1M at auction, then later sold the company again to Twitch (Amazon).

“We go buy it back. We go buy it back for $1 million. And so we go to this crazy-ass auction I can talk about, but buy the, buy the company back for $1 million. So sold for $850, bought it back for $1 million. And then a couple years later, we now sold it again, uh, you know, to, uh, to Twitch.”

Bought vs sold: when nobody's banging your door, you sell the company

Shaan distinguishes being 'bought' (hot company, buyers banging down the door, like Instagram) from being 'sold' (you approach acquirers, suss out their top strategic priorities, and position your company as the answer). Bebo was sold, not bought.

“I always differentiate. A company could either get bought or it's sold. We were sold, not bought. Bought is your Instagram, you're hot, you're the next big wave, everybody recognizes it, and people are banging down your door trying to buy you. We were sold in the sense of like, I approached a bunch of companies and I understood— I, through kind of conversations, was able to suss out what are the things that are important to them, what are their big top 3 strategic priorities as a company, and then is my little company an answer to any of those problems?”

Steal thisIf you must sell, reverse-engineer the acquirer's top 3 strategic priorities and reposition your company as the answer to one of them.

Shaan won Bebo out of bankruptcy at $1,015,000

Shaan and Michael Birch bought Bebo back out of bankruptcy in a back-room auction. Sensing the rival's ceiling was a round $1M, their lawyer jumped to $1,015,000 — and the other side immediately folded, revealing $1M had been their exact max.

“And at a million, our top was supposed to be a million. It was at 900-something and she just, our lawyer just jumped and went 1 million and 15,000 and just threw 15,000 on top. And they were just like, take it. And we were like, great. And they were, I was like, what was your max? He's like, a million was our max.”

Bebo sold for $850M to AOL, bought back for $1M, resold to Amazon

Shaan recaps Michael Birch's arc: Bebo sold to AOL for $850 million, then Birch and team bought it back for $1 million years later, then sold it again to Amazon.

“That company, Bebo, if you've ever heard that before, sold for $850 million to AOL. And when I met Michael, we got back together and we bought it back for $1 million. Years later. And then we actually sold that again just now to Amazon.”

Bebo hit 1 million users in 9 days with a 3.5 viral coefficient

Built in a couple of days by reusing prior code, Bebo hit a million users 9 days after launch. Its K-factor was 3.5, meaning every new user brought in 3.5 more on average.

“we went live and we had a million users after 9 days of going live. Okay. It was the most viral website we'd ever done by far. The viral coefficient, the K-factor, whatever you want to call it, was 3.5.”

Bebo signed up 100,000 people in Singapore in a single day

On its 9th day Bebo added 350,000 members in one day, and bizarrely 100,000 of them came from Singapore, a meaningful slice of the whole country. But it was the least sticky product Birch ever built: he jokes only two people came back, one being himself.

“And so I think on the 9th day, we added 350,000 new members on one day. And bizarrely, 100,000 of those 350,000 were from Singapore. So I had to look it up on a map. I looked up the population. I was like, Jesus, we just like in one day got a meaningful percentage of the entire population of one country to join.”

Why Bebo lost to Facebook: real identities and the messy middle

Birch pinpoints two reasons Facebook won: Facebook insisted on real identities while Bebo let users pick symbol-filled names that made friends unsearchable, and Bebo tried to occupy a middle ground between MySpace self-expression and Facebook quality. They were also always in catch-up with far less funding and ~10x fewer engineers.

“They insisted on real identities and we didn't. We were more sort of, we were trying to be the kind of self-expression of MySpace, but with kind of product quality of Facebook and engineering of Facebook. That's where we were trying to kind of position it. And we thought that the middle ground would be the winning ground.”

Bebo sold for $850M on ~$20M revenue, valued on potential not multiples

Birch says Bebo did about $20 million in revenue the year before it sold for $850 million, so the price wasn't a revenue multiple. It was about potential, and the fact that Bebo was essentially the only third-place social network left to buy.

“I think we were doing last year, we did $20 million in revenue, I believe. So it was a multiple of revenue. It wasn't gonna work. Mm-hmm. Right. It was all about the potential of what it could be. I mean, you're right in your analysis that we, we were kind of the only one you could buy in many ways. Like we were basically, we were the third place, like we were in the medals, but only just.”