AOL Acquires Social Networking Site Bebo for $850 Million

AOL will be acquiring the social media network Bebo for 850 million dollars. The deal comes in the aftermath of Yahoo’s reported courting for the site.

An excerpt from Mashable

Randy Falco, Chairman and CEO at AOL explains the move:

“What drew us to Bebo was its substantial and fast-growing worldwide user-base, its vision of a truly social web, and the monetization opportunities that leverage Platform-A across our combined global audience. This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers.”

This is one of the major deals to go through in the social networking space and follows on the prediction made by several industry analysts that social networking sites by themselves may not be able to generate enough revenue to sustain operations. Bebo was by no measure a struggling site, enjoying a membership of over 40 million with immense popularity among the Europeans (it is number one social network site in Ireland).

There is a lot of speculation on how the deal would perhaps make the chances of a Yahoo AOL partnership unlikely. The acquisition will boost the total network of AOL’s social media services to 80 million.

An excerpt from Associated Press

Ron Grant, AOL’s president and chief operating officer, said the deal should help AOL expand internationally and Bebo grow in the United States. He said the all-cash deal, expected to close in a month, also should give AOL an engaged audience from which it can generate additional advertising revenue.

“This is going to be the cornerstone of our strategy to really go after the social media space,” Grant said in an interview, adding that AOL would be looking to integrate Bebo with its instant-messaging communities, AIM and ICQ.

The move will enable AOL to expand revenues from its advertising services and Bebo, the third most popular social networking site in the US, will be a perfect complement to AOL’s behavior based advertising platform. While MySpace and FaceBook have had their share of trouble in effectively advertising to their vast audience, AOL would look to apply a very effective strategy to benefit here.

With Bebo, AOL is looking forward to international growth. Bebo supports the FaceBook platform and is also part of the Google inspired OpenSocial platform. The whole 80 million social graph that comes to AOL with this acquisition falls short of only MySpace’s scale.

Social networking sites have been a major attraction for internet media companies. But it is to be seen how they design the perfect advertising strategy that is acceptable to their users and gets results at the same time.

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