AOL to pay $850M for social site Bebo

AOL to pay $850M for social site Bebo

AOL says it is serious about social networking.

NEW YORK (AP) — AOL said Thursday it will pay $850 million to acquire the online hangout Bebo, giving the struggling Internet company a foothold in an expanding business.

Bebo is strong in many markets around the world, particularly Britain, and has a global membership of more than 40 million, according to AOL. In the United States, however, it is far behind MySpace and Facebook in the number of monthly users, according to comScore.

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.

AOL has been looking for ways to boost its advertising revenue to offset steep declines in dial-up Internet subscriptions. After several quarters of strong growth, AOL’s advertising expansion has been slowing, putting pressure on the company’s parent, Time Warner Inc., to sell the Internet unit.

In a conference call with reporters, AOL Chief Executive Randy Falco said Time Warner’s willingness to spend $850 million was indicative of its commitment to AOL’s future.

The deal is an acknowledgment that AOL still needs to seek additional outlets for expanding its audience and its advertising opportunities. But it also underscores the growing value of social networks such as Bebo to media companies as potential gold mines for online advertising dollars.

Falco called the acquisition “game changing for AOL,” one that will power key elements of the company’s strategic push into advertising.