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March 14, 2008

AOL Sights BEBO Buyout

This seems to be the next big acquisition deal after the botched attempt by Microsoft to buy over Yahoo. Mediapost reports that AOL has recently announced plans to buy the nation's fourth-largest social network for $850 million.

"Bebo will be the cornerstone of our strategy to transform online experiences for advertisers, media companies, and consumers," said AOL head Randy Falco during a Thursday morning press call.

By Falco's estimate, Bebo's worldwide community combined with AOL's AIM ICQ instant messenger users equal about 80 million unduplicated unique visitors.

The surprise deal marks a major push by AOL to grow its social media business, which consists of AIM, a cross between messaging and social networking, and personal communications network ICQ.

Statistics show that, Bebo is the fourth-largest Web community--behind MySpace, Facebook, and MyYearbook--and accounts for just 1.15% of all visits to social networks, according to Hitwise.

Industry insiders took the news in stride on Thursday. "AOL's obviously bulking up in the ad space," reasoned Bernard Gershon, senior vice president and general manager of corporate strategy, business development and technology at Disney Co.

Yet, whether AOL can effectively monetize Bebo--and without alienating its community--remain open to questions.

MySpace had 21 million unique users in the US alone when Rupert Murdoch paid $580m for the social networking website in July 2005. Bebo has 22.4 million global users, according to comScore.

If this deal actually comes through the major winner from the deal is going to be London-based venture capital firm Balderton Capital, which acquired a 15.7% stake in Bebo in 2006 for $15m. Balderton will $140m from selling its stake to AOL.

"The key to truly unlocking the value of social networks lies in having a robust monetization platform that encompasses all the key display advertising capabilities," said Falco. "And that's exactly what we've built with Platform-A."

AOL's Platform-A ad serving network is still a work in progress, however, having just this week lost its president, Curt Viebranz, for failing to align its assets quickly enough.

Some also argue that Platform-A is weak in the increasingly decisive area of online video advertising, where its Lightningcast unit has made limited headway.

Bebo, which is supposed to be backronym for “Blog early, blog often”,was founded in January 2005 by husband and wife team Michael and Xochi Birch.

One of Bebo's unique USP has been its Bebo Open Media Platform which is a platform for companies to distribute content to the Bebo community. It is a business model where content providers can bring their own media player to Bebo, and are able to monetize the advertising within that. Each content provider has a specialised page designed for video which showcases any Flash video content at the top of the profile.

Bebo also hosts KateModern, an online video hit. The site is developing other short-form online video content, along with unique ways of integrating marketers into the video storyline. It also has found novel ways to allow viewers to participate in the action both online (by interacting with the video’s characters on their profile pages) and offline (producers invited fans to watch the filming live last month).

Bebo also boasts of a good user engagement metrics.Bebo users spend more time on the site than those at Facebook or MySpace – an average of 217 minutes apiece in January, according to comScore Media Metrix. That's 18 minutes more on average than was spent on Facebook, and over an hour more than on MySpace.