This story was written by Robert Andrews.
In a major and rather unexpected deal, AOL (NYSE: TWX) is buying social net Bebo for $850 million in cash. Rumors had swirled around Bebo of either an acquisition or new financing for weeks, but few anticipated AOL as the suitor. AOL will get Bebo's 40 million members and 80 million unique users, its core 13-to-24 demographic and a growing line in both original TV production and hosting broadcasters' content. This comes as AOL completes its transition from an access business to an ad-funded content and community player.
Bebo president Joanna Shields, who has grown to effectively run Bebo from London since she was hired from Google (NSDQ: GOOG) in January '07, "will continue to run Bebo and will report to Ron Grant", the announcement says. But there's no mention of site founders Michael or Xochi Birch, who are based in what is technically Bebo's headquarters in San Francisco. Shields is not in the UK today and will be on a joint AOL-Bebo call at 9am EST.
AOL CEO Randy Falco: "Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media. 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 (AOL's ad system) 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." Shields says the acquisition is "a natural progression" for Bebo because the pair share "one and the same vision in this area" of leveraging social networks.
- Suitors: This price is considerable when you consider News Corp (NYSE: NWS) paid $580 million for MySpace in 2005, when it had 27 million unique monthly users. In the last couple of months, rumors had linked Google and News Corp to a potential acquisition, but this buy is far less than the unlikely $1 billion recently mooted. Rupert Murdoch was reportedly spotted at Bebo in SF in January with a view to either buy or invest, but its press people explained the apparent untruth away to me as office high jinx, adding it's "always open to talks" on funding. Viacom (NYSE: VIA) was also linked with a $750 million purchase.
- Advertising: Bebo claims high user engagement, with an average 78 pages per user per day, and 33 minutes. But Yahoo (NSDQ: YHOO) inked a deal with Bebo in September to manage the social net's UK and Ireland display and video ads as well as integrate its Yahoo Answers platform - it will be interesting to see whether AOL's Platform-A will now oust Yahoo as the ad supplier, and this brings ongoing Yahoo-AOL discussions in to sharp relief.
Curiously, AOL used the announcement to tout its Open AIM instant messenger initiative - curious because Bebo already added AIM support to its Windows Live Messenger functionality in October.
Bebo is especially popular in the UK, Ireland and New Zealand and has over 100 staff across its London, San Francisco and Austin offices. No word yet on whether Bebo will stay put or move to AOL's HQ.
By Robert Andrews