AOL’s future with Time Warner may be uncertain, but the portal proved on Thursday that it’s staying in the ring against larger competitors by agreeing to acquire British social networking site Bebo for $850 million.
Though it’s a distant third behind Facebook and MySpace in the U.S., Bebo is the No. 1 social network in the U.K., Ireland and New Zealand and boasts 40 million users around the world, most of whom are between the ages of 15 and 24.
All-cash deal immediately establishes AOL as one of the biggest players in the red-hot social-networking space. That gives it a key advantage over competitors Yahoo, which has no presence in the market, and MSN, which owns a 1.6% stake in Facebook.
MySpace is the biggest asset in News Corp.’s Fox Interactive Media group.
Purchase is a major vote of confidence by Time Warner in AOL at the same time that the conglom is selling off its online division’s access business and talking about spinning off or forming a partnership for the online content operation.
Addition of Bebo should significantly expand the reach of AOL’s online advertising unit Platform-A, which is a major player in display advertising but doesn’t compete in the lucrative search space.
AOL will also be able to integrate its extensive content operations into Bebo, along with its popular instant messenger application.
It’s not clear that there will be an immediate financial benefit, however. According to the Wall Street Journal’s All Things Digital blog, Bebo had revenues of just $20 million last year.
“Bebo is the perfect complement to AOL’s personal communications network and puts us in a leading position in social media,” AOL topper Randy Falco said in a statement.
Other big media companies are believed to have considered acquiring Bebo as well.