Founder: Bebo’s Michael Birch

Bebo: Michael Birch

How does $850m for three years’ work sound? The Birches, who recently sold social  networking site Bebo for that tidy sum, would probably suggest it’s worth a few late nights in the office.

Like so many internet
success stories, that of husband and wife Michael and Xochi Birch,
initially appears to be an overnight sensation. The real story includes
five preceding internet start-ups, and learning the valuable lesson of
knowing when to let go.

Michael’s love affair with online ventures began shortly after he quit his position at an insurance
firm. “I was always entrepreneurial,” he says. “But I was trying to be
entrepreneurial within a very boring insurance company and it was
probably the most frustrating thing in the world. Then the internet
happened and I quickly realised this was the perfect medium.”

Relocating

When
Michael married Xochi, a Californian, he promised they’d spend five
years in England, five in the States, then decide where they wanted to
settle. Having spent eight years in the UK, it was time for Michael to
live up to his end of the bargain and the couple relocated to San
Francisco.

Michael insists his penchant for online start-ups
would have developed even he hadn’t moved to the state that brought us
Google, but admits it’s ‘not a bad place to be running an internet
business’. “I’m just lucky Xochi isn’t from Utah.”

Settled
amid a strong community of online developers, the Birches set to work
on their own ventures. However, online success was not instant and a
few of years of trial and error ensued.

The first two
projects, a self-updating address book and a programmers’ tool, fell by
the wayside. Then came BirthdayAlarm.com, an e-card and diary alert
tool that sends out reminders so you never miss a friend’s birthday.
The site was a major hit and is still going strong to this day, albeit
without the Birches’ direct involvement.

Having acquired a
taste for dot com success, Michael and Xochi turned their attention to
social networking and developed Ringo.com which they sold a few months
later. “We just didn’t have the resources to throw at it. We’d had
three offers in a week and it was hot property at the time.”

In
early 2005, armed with the cash from the Ringo sale, and confident they
had the skills to set up an even better social network, the Birches
delivered Bebo to the online community.

“Ultimately, we built
something we thought we’d find useful and wanted to use, and hoped
enough people shared the same opinion,” Birch insists.

Enough
people did. Successfully tapping into the youth demographic, Bebo
enjoyed phenomenal growth during the three years Michael and Xochi were
at the helm. Topping 40 million users, the site dominated the ‘tween’
market and ranked number one for social networks in several countries
including, at one stage, the UK.

“Starting Bebo was a similar
process to starting the other ventures,” Michael says. “The difference
was this took off from a very early stage. I think that was because
we’d got a lot better at learning how to do things. There wasn’t so
much trial and error. After a while you start to get an instinct for
what works and what doesn’t.”

The site’s sole revenue model
was advertising. However, Michael soon recognised the potential ads
have for frustrating users. He refused to allow pop-ups or pop-unders
and restricted ads to one unit per page.

“It’s important to
provide a service that works for the advertiser but equally, it’s in
the advertiser’s interest for users to embrace ads, not be frustrated
by them.” Time will tell if Bebo’s new owners maintain this stance.

Bebo’s year

A
couple of months before Michael and Xochi signed the multi-million
dollar deal with Time Warner’s AOL, we asked him if he thought 2008
would be Bebo’s year. Facebook was riding a wave of unprecedented user
growth, MySpace was ticking along nicely under Murdoch’s steady hand,
and there was nobody biting at Michael’s heels for shot at third place
in the market.

“We’ve been laying the ground work for this
year and if you look at the marketplace as a whole there’s not really
anyone else in the English language market positioned as far down the
road as Bebo. A year is a long time, and by the end of this one the
landscape may have changed.”

A mere three months after Birch
expressed that opinion, the cyber cynics were queuing up to make their
inevitable objections to the Bebo price tag. Even Time Warner’s chief
exec, Jeff Bewkes, recently acknowledged his company may have
‘overpaid’ the Birches.

But while the critics and online
executives dissect the numbers, the Birches have returned to the
drawing board with food for thought, and a tidy sum in the bank.

“In a couple of years I’ll be back with another start-up,” promises Michael. Watch this space…

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