Bebo, one of the most popular social networking sites is to close or be sold by AOL, two years after it was bought for a reported £557 million.

In news that is likely to upset thousands of British teens who frequent the social networking site, owner AOL has announced that heavy competition from rivals has forced the decision.

Bebo reached giddy heights in 2008, but 2009 saw the decline of the British born company, as users fell by 60 per cent in the period from February 2009 to February 2010, leaving the site with just 4 million users. Thus if the content generation site were to be sold, it could be worth a small proportion of what AOL initially paid.

AOL released a statement to staff saying: ”Bebo, unfortunately, is a business that has been declining and as a result, would require significant investment in order to compete in the competitive social networking space.” In addition, the site’s London office is set to close by the end of the month, according to The Telegraph.

The Guardian reports that this decline is rumoured to be due to strategic changes and a lack of funding. Such a demise in funds ensured that Bebo was unable to compete with its rivals, leaving it trailing in the wake of Facebook. A source speaking to the paper commented that ”Bebo needed investment and engineers” as staff levels and cost cutting ensued, sealing the fate of the site. The source added ”[decline] is not unique to Bebo – look at Friends Reunited, Skype, MySpace…”

It is expected that AOL will complete its evaluation of Bebo by next month and its future or lack of, will be sealed. It remains to be seen whether its fall will further bolster the success of the growing entity that is Facebook.