Michael Birch

Growing Business speaks to the founder of the UK's foremost social networking site

You might not know it to look at them, but one in six people on these shores is a ‘Beboer’. Bebo is now Britain’s foremost social networking site. And the man behind it all is 37-year-old Brit Michael Birch.

He could be sitting on a billion dollar business if he chose to put it on the market. Following a storming summer, the website popular with teenagers has finally swept past Rupert Murdoch-owned MySpace to lead the UK ratings. Bebo boasts 10.7 million UKusers, according to internet tracker Comscore, compared to 10.1 million on MySpace and 7.6 million on Facebook. It has 36 million users worldwide.

Birch, the son of an inventor, launched the site in January 2005 primarily as a photo-sharing site. It’s become a forum for his ideas, the constant metamorphosis showing no sign of slowing. Success wasn’t immediate though. In 1999 he left his job in insurance to set up in business. His first ventures, a self-updating address book and a programmers’ tool, didn’t take off. But in 2001, with brother Paul and wife Xochi, he set up e-card business, Birthday Alarm, which now has 47 million users although Birch is no longer directly involved. In 2003, he and Xochi set up social networking site, which they sold six months after launch to “get out of the financial hole I had been digging for the past few years”. By January 2005 the couple knew a thing or two about the online world and established what was to be their dream business.

Bebo, like its rivals, allows users to set up personalised web pages containing their own pictures and lists of favourite films, books and TV shows. It also offers the chance to hook up with friends who are also registered users. The site’s popularity spread like wildfire through schools and colleges by word of mouth. It has captured the English-speaking teenage market easily, making it an ad man’s dream. “We didn’t set out to capture the teenage market,” admits Birch. “I pretty much designed the website that I wanted to use. So I designed it for people in their thirties, but it took off with younger people. I am very glad that it took off with teenagers rather than not taking off at all.”

Teenager troubles

But social networking is bigger among teens than any other demographic and Bebo’s features made the site friendly to a vulnerable age group. However, this was to place Bebo under heavy scrutiny early in the company’s development. The availability of information on individuals and the ease with which users can interact has led to abuse. The press has been keen to highlight stories of bullying and harassment and even suicide linked with the site. Also, paedophiles posing as children are known to frequent social networks as a means of finding prey. Some have claimed the site should be held responsible for such outrages, but this is a charge that Birch denies and one he was ready for.

“We are a young social network in terms of entering the market. In the US, they all went through the negative media attention that comes with this market so we had the benefit of hindsight. We designed the site with a lot of that in mind,” he says. Default privacy settings on web pages are tight, with only friends able to view one another’s pages. A ‘report abuse’ button was there from the outset. “The problems we have seen occur in life, they aren’t unique to social networking. Bullying in the playground has always been there. When cell phones came out there was a lot of press about the effects they could have and the same happened with email.”

Following criticism of the site, Birch defended his company at a live debate on breakfast TV and went head to head with Dr Rachel O’Connell, a renowned psychologist who advises the Home Office on child behaviour. “We were meant to be coming from different sides of the fence where she was the good guy and I was the bad guy but we realised that we were trying to achieve the same thing.” Birch offered O’Connor a job on Bebo’s board advising the company on ways to ensure that the site is safe and beneficial for its users. She accepted. “I think we are the first social network to employ a chief safety officer,” he says. “We wanted to employ someone who could make a difference. So we gave her a senior position in the company.” Bebo has recently launched a set of safety tools designed to help kids who are suffering from abuse or bullying on the site, with the backing of a Home Office internet taskforce.

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Pulling not pushing

Teenagers don’t much like advertising. They are aghast at how older generations can patiently sit through TV commercials and appear almost immune to traditional promotions. But they are also effectively walking, talking billboards for many promotions. They proudly wear clothes with labels and slogans, and a Bebo web page is reminiscent of teenage bedrooms. Its users’ pages are awash with pictures, posters and the names of things which define their personalities.

Bebo has tapped into this by allowing users to choose their own skins to use as background for web pages and emails. They can choose skins showing celebrities, musicians, sports personalities or even drinks brands. Or they can ‘roll their own’ using Photoshop – giving it an edge over rival MySpace, which uses complex coding. These skins are a potent advertising tool.

“Most of the advertising on the site is where people can opt in. It is pull advertising rather than push,” explains Birch. “If the user is opting into advertising then it stops being intrusive. “Direct advertising is to be found on Bebo, marketing the latest movies, computer products and television channels – even Murdoch’s Sky TV – but it isn’t in your face. The corporate world is lining up to join the site. Users can now access iTunes music directly from Bebo in a deal that boosts revenue and associates the site with legal downloads. Utilising iTunes links with the music industry is a smart move. Music is massively important to social networks but the web is also renowned for piracy. Bebo has already launched the careers of artists such as Lilly Allen and with greater respectability can play an even more central role in the industry. Orange now offers a ‘Bebo bundle’ which provide exclusive mobile networking treats to users. It’s a part of a major cross-marketing deal where Bebo’s user appeal is exchanged for corporate clout.

Bebo wants to constantly add reasons for its users to return to its site. In turn, the blue chips consider Bebo as a great way to reach a huge audience, so the relationship between the partnerships and growth is exponential. But when it came to securing partners, Birch says Bebo still had to undergo the same credibility tests that other businesses are subjected to.

The company took on $15m of venture capital backing from Benchmark Capital in May last year, in part to assure partners that it was a stable business. “It adds a lot of credibility to the business to have investors on board,” says Birch. “It was important to partners who need to know that we are a going concern. If you don’t have private equity investment people start wondering why.” The deal came after Bebo was tracked down by Benchmark’s Barry Maloney, who had become exasperated at the amount of time his own children were spending on the site. “He said: ‘My teenage children are spending half their lives on this website – what is it?’,” recalls Birch. Maloney now sits on the company’s board.

Change is the only constant

Keeping relevant is one of Bebo’s biggest challenges – its audience is easily bored. The site is constantly updated and new applications are added on a regular basis. It began largely as a photo-sharing site, but now incorporates a wide range of applications, some involving partners, but most developed in-house. Birch is still handson with programming and devotes about half his time to it. However, the company now has about a dozen people on the technical side. New ideas are always being developed, providing a forum for Birch’s daydreaming tendencies.

“Bebo is a very different website from what it was six months ago and will become unrecognisable again,” he says. Much of the change is driven by the users. Bebo has around 50 people – half the company – engaged in customer service. The customer service centre, based in Texas, aims to respond to all enquiries within 24 hours and, using a mixture of automated systems, FAQs and experienced staff, Birch says more than 90% are handled in this time. He says customer service is of vital importance to the company and has resisted any temptation to outsource it. He knows the site’s huge audience could quickly become hostile and Bebo’s fortunes could fall as quickly as they rose. “So much feedback comes from customer service. The community can very quickly become alienated and can effectively use the tools on the site against you.”

Global networking

Bebo straddles the Atlantic, with offices in London, San Francisco, and Austin, Texas, and also has a newly established base in Sydney, Australia. The reason for its California base is personal as well as business – it is Xochi’s home state. However, Bebo benefits from California’s high-tech base and all software development and hosting is there. The UK is home to the sales and PR front and is seen as a springboard to Europe. With 10.7 million users, the UK is commercially very significant and Bebo is “bigger than Google” in Ireland. Time differences have their advantages. Greenwich Mean Time is a bonus that City traders are familiar with. Meanwhile, Texan working hours appear to fit with prime user times. However, running a global business poses challenges.

“As one office opens the other is about to close, you get a few hours of overlap as people tend to work quite long hours here,” Birch says. “We try to get as many people as possible fl ying back and forth. Xochi and I come over every two months.” There are also team exchanges, and the company makes communication a high priority. Birch says there is not much hierarchy in the company and that openness between management and staff is encouraged. He doesn’t have his own office, but sits with the development team, and other managers do the same. Video conferencing is planned.

Birch also benefits from having a number of trusted lieutenants. Alongside Xochi, who is also involved in programming, his sister Hilary works on the child safety side. Loyalty from staff is another key to Bebo’s success. No-one has left the company since it began. Birch has attracted personnel from veterans of the internet such as Google, Yahoo and MSN. At 100 staff the company is still fairly small. But Bebo is growing, and with the new base in Sydney, Australia, its global reach is expanding.

Cool about the future

Birch seems relaxed about growth and happy to employ, recruit and defer responsibility as he deems necessary. Growth was one of the reasons he and Xochi brought venture capital in. It is not something he has done before so he was keen to bring in people who would know where the pitfalls lay. He seems equally comfortable to be battling MySpace, owned by one of old media’s toughest adversaries. “I love it,” he beams.

“The bigger the company the better. I don’t feel intimidated by Murdoch in any way. With social networking everyone thought all the big companies were going to dominate and I partly bought in to that. But it hasn’t happened.” Birch shows no inclination to sell, but is tight-lipped about the offers he has received and how much the company is worth. However, the sector is renowned for buy-ups in the hundreds of millions and a price tag in excess of a billion dollars for a social network is not out of the question.

A flotation on a public market would crystallise value and Birch has considered it, but seems ambivalent: “It is good to go for something and aim at building the company to a level. But whether we will do that I don’t know. I have certainly heard a lot of negative stories around it.” However, Birch the dreamer doesn’t strike you as the sort of man who would particularly enjoy the stresses and strains of a listing. He is happiest when writing code, coming up with new ideas and watching them ferment. And, if money is not his prime objective, can he really fail?


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