AOL to buy Bebo social network site

AOL, the internet arm of Time Warner, said today it will pay $850m (£417m) in cash to acquire social media network Bebo, which has total global membership of more than 40 million.

Bebo is one of the largest social networks in Britain, and is ranked number one in Ireland and New Zealand and number three in the US, according to AOL. Bebo has about 100 employees operating in offices in the UK, San Francisco and Austin, Texas.

As social networks such as Bebo have grown in popularity, so has their value to media companies as potential goldmines for online advertising dollars. News Corporation, which also owns the Fox television and film studios in addition to its newspaper and internet holdings, bought MySpace for $580m in 2005, but has estimated the network is now worth more than $15 billion.

Facebook, which owns the internet's second-largest social network behind MySpace, now arguably has a $15bn market value, based on Microsoft's purchase late last year of a 1.6 per cent stake for $240m.

"Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media," said Randy Falco, chairman and chief executive of AOL.

AOL said current Bebo president Joanna Shields will continue to run the company, reporting to AOL President and Chief Operating Officer Ron Grant.

The acquisition is part of AOL's shift from a subscription-driven business to becoming a public website that generates income from building traffic and selling advertising, similar to rivals Yahoo and Microsoft's MSN. AOL, which has launched 17 international websites over the last year and has plans to expand to 30 countries outside the US by the end of 2008, said Bebo plans to launch in five countries this year, and will be "featured prominently" in AOL's international expansion efforts after the deal is closed.