Q&A: Michael Birch, CEO and founder, Bebo

Michael Birch, CEO and co-founder of social networking site Bebo, has been the driving force and chief architect behind six websites over the last decade.

Birch first dipped his toe into the web 2.0 waters with one of the first social networking sites Ringo.com back in 2003, which "somewhat regrettably" Birch sold on shortly after setting up the site.

He's now determined he won't sell again when suitors come knocking at Bebo's door - even if that means turning down Google's cash-laden advances.

silicon.com caught up with Birch to find out how the site makes its money and if he might be tempted by Google's millions.

silicon.com: Why do you think social networking sites are so popular?
Birch: It's just kind of fun isn't it? I first saw them back in 2003 when I did a website called Ringo.com, which is kind of a friendster copycat. I saw friendster and looked at it for half an hour and I was totally enthralled by it and found it very addictive and hard to leave.

It's just fun browsing around and it's a much better way of staying in contact with friends. The normal way online of staying in contact with friends is either email or IM - that's the only way you could it prior to social networking. But social networking adds so many more dimensions to that.

How can businesses take advantage of social networking sites?
There are business networks linked into Bebo. One way that businesses do interact with Bebo is through engagement marketing so they'll have a presence on Bebo and they'll use that to share information with their consumer base.

They [businesses] can do that for free but if they want greater penetration they tend to work with us and we'll develop a marketing campaign with them.

There's kind of two types [of business uses on Bebo] - the business-to-business person communication and then there's the business-to-consumer.

The business-to-consumer social networking is absolutely perfect because that's where the consumers are spending their time now instead of watching television or so on.

So are you increasing the number of online ads in Bebo?
Well, there's the two types [of online advertising] - we do the very traditional online advertising and then we do what's called engagement marketing - which is a much deeper integration. It works along the analogy of product placement and product sponsorship so it's a more integrated experience.

We're trying to strike a healthy balance between commercialism and the user community and we do tend to put the community first.

It's important that we do make money, that we want to grow organically and grow profitably and we do invest all of the money we make back into the business but clearly we need to make money from it because they're relatively expensive sites to run.

Other social networking sites, such as YouTube, have been criticised in some quarters for a perceived lack of business model...
But now Google can just bankroll them.

So if Google came knocking on Bebo's door with a big fat cheque, as they did with YouTube, is that something that would interest you?
Not really, not at this time, no.

The ultimate goal is to remain independent and I think if a lot of the social networks allow it - obviously MySpace is the big one that sold out to News Corp - I think it creates a different dynamic not to be independent.

Bebo's a very media-centric site. We're doing a lot of work with large media companies and it's very difficult when you're owned by a large media company such as News Corp to then do these partnerships with the others.

We do see value in staying independent and we'd rather work towards eventually an IPO (initial public offering) rather than looking at a private sale.

Where's the money in social networking?
Bebo is obviously user-generated content so it's relatively low-cost to run. You don't need to make a huge amount of money to be profitable.

I think in the same way that - I always draw the analogy with Google - everyone was saying it was a great search engine but so what? Its been done, there's no business model in search.

Then it suddenly transformed to being the most profitable business model on the internet.

With social networking we're currently doing a lot of traditional advertising and we're going beyond that and doing engagement marketing, which is a little more exciting, but it's not the true innovator that I think will ultimately happen within social networking.

I think we're going to see a big change in social networking as a business model.

I'm sure a lot of companies have ideas but between them there's going to be a big business model that's not just simple, straightforward advertising.