Did AOL Just Write Down Its Bebo Acquisition?

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As part of Time Warner’s $24 billion writedown of goodwill that it detailed in this morning’s fourth quarter earnings announcement, AOL accounted for $2.2 billion. That charge swung the business from a $2.0 billion operating profit last year to a $1.1 billion operating loss in the quarter.

The charge was related to reducing the “carrying value of goodwill,” which is what companies do when when an acquisition or investment is no longer worth what they paid for them. For instance, Google just wrote down $1 billion of its investment in AOL itself. But AOL can’t take a charge on a decline in its own value (at least, I don’t think it can). It’s $2.2 billion charge is an acknowledgment that it overpaid for certain acquisitions or investments. But which ones?

It doesn’t say in the earnings release, but its biggest acquisition last year was the $850 million it paid for social network Bebo. It is now clear that AOL overpaid. But how much does AOL think it is worth now? 200 million? I have calls and emails into AOL, but don’t really expect them to answer that.

Of course, there are plenty of other acquisitions AOL can write down as well. (We track $8.8 billion worth of AOL acquisitions going back years on CrunchBase). It’s other large acquisitions in recent years were all online advertising companies (buy.at, Quigo, Tacoda, Third Screen Media). Those could be worth less now as well. And last quarter AOL shut down some businesses, including Xdrive (that is $30 million right there).

AOL’s advertising revenues declined 18 percent in the quarter to $507 million (which was flat with the third quarter). And it’s total revenues, including from dial-up subscriptions, was $968 million, down 23 percent. For the year, AOL had total revenues of $4.2 billion, down about $1 billion. But it’s advertising revenues of $2.1 billion was up 6 percent for the year.

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