13th March 2008 2:01 pm Bebo

AOL announced today that it has entered into an agreement to acquire the social network Bebo.com.

The acquisition will give AOL access to the fast growing world social network which has approximately 80 million unique users.

With a total membership of more than 40 million worldwide, Bebo is a global social media network which combines community, self-expression and entertainment to enable its users to consume, create, discover and share content.

Bebo is one of the leading social networks in the UK, and is ranked number one in Ireland and New Zealand, and number three in the U.S. Its users are heavily engaged and view an average of 78 pages per usage day. Bebo has approximately 100 employees operating in offices in the UK, San Francisco and Austin, TX.

The deal comes just one week after AOL’s launch of Open AIM 2.0, an initiative that allows the developer community greater freedom to access the AIM network and integrate AIM into its sites and applications, and the announcement by Apple of a downloadable AIM application for the iPhone.

Under the terms of the agreement, AOL will acquire Bebo for $850 million in cash.

“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 CEO, AOL.

“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.”

“AOL understands the shifting dynamics of the Web and has clearly demonstrated its commitment to leveraging the ever-increasing power of social networks,” said Bebo President, Joanna Shields. “With one and the same vision in this area, it was a natural progression for Bebo to join AOL, and we look forward to working together to continue to expand the online social experience globally.”

“Bebo’s dynamic management team recognizes that the Internet is less about destination and more about connecting people, culture and lifestyles,” said Ron Grant, President and COO, AOL. “This acquisition supports our key objectives ” accelerating the growth, engagement and monetization of one of the world’s most engaged online communities.”

Upon closing the transaction, current President Joanna Shields will continue to run Bebo and will report to Ron Grant.

Analyst eMarketer predicts that by 2011, $4.1 billion will be spent worldwide for social network advertising - a dramatic increase from the $480 million spent in 2006. In 2008 alone, global ad spend in the social networking arena is expected to increase 75% year over year, amounting to $2.1 billion (eMarketer, Social Network Marketing: Ad Spending and Usage, December 2007).

In recent months, AOL has moved aggressively to bolster its position in areas critical to its emergence as a leading advertising-supported Web media and marketing company. Building on its number one position in third party display with Advertising.com, AOL has spent nearly $1 billion on online advertising acquisitions, including market leaders like ADTECH, buy.at, Lightningcast, Quigo, TACODA and Third Screen Media to create Platform-A. Platform-A is the top display ad serving network focused on helping marketers build brands that perform online.

In Web content, AOL’s revitalized network of sites has experienced five months of consecutive page view growth and key categories like Music, Television, Moviefone, TMZ, Money & Finance, News, Living and Body are all in the top four in their respective categories.

As part of its international growth plans, AOL has launched 17 international web sites over the last year and has plans to expand to 30 countries outside the U.S. by the end of 2008.

In addition, AOL teamed up with HP last September to include localized versions of the AOL.com portal and other AOL services as the default setting on HP computers shipped in the United States and around the world. Bebo, which has announced plans to launch in five countries this year, will be featured prominently in AOL’s international expansion efforts after the deal is closed.

Since its inception, Bebo has established a radical new vision for online media and engagement marketing, combining community, self-expression and entertainment, enabling its members to consume, create, discover, curate and share digital content in entirely new ways. Bebo global users have high engagement levels spending an average of 33 minutes a day on the site.

Its groundbreaking Open Media platform ushered in a new way for Bebo users to experience content online, while giving global media companies like MTV, CBS, BBC and more than 400 others, a new way to promote, distribute and monetize their programming.

“Engagement Marketing,” is Bebo’s initiative for brands to build long-term relationships with their target audience. Today, brands from Apple to Nike use Bebo as a platform to establish ongoing conversations with consumers.

Bebo pioneered the blending of Web-native original content with interactivity in the social networking environment by co-producing “KateModern,” the most successful TV show on the Web, now in its second season, followed by the soon to be premiered “Sophia’s Diary,” and the upcoming “Gap Year.”

In December 2007, Bebo opened its platform to external application developers becoming the first social network to embrace both Facebook and OpenSocial APIs. To date, more than 1500 applications have joined the network.

AOL was advised by Banc of America Securities LLC and Deutsche Bank Securities Inc. Bebo was advised by Allen & Co.

AOL and Bebo senior management will host a conference call beginning at 9:00 am ET to discuss the day’s news.