AOL banks on Bebo deal to make it social powerhouse

by Staff, Brand Republic 14-Mar-08, 09:00

NEW YORK - AOL is banking on its $850m acquisition of social networking site Bebo to help it become a 'social media powerhouse', and plans to integrate the site with its AIM online messaging system.

AOL chief executive Randy Falco said that the acquisition would see Bebo become the 'cornerstone' of its advertising strategy.

It will be applying its Platform-A display ad serving network to the site, which has been created after heavy investment in companies providing online ad technology, such as Adtech, Quigo, Tacoda and affiliate network buy.at.

Falco said: "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."

However, he said the company had looked carefully at the issue of the resistance of members to commercial exploitation of social networking sites and would "not do anything to jeopardise" user engagement on the site.

The deal is widely seen as a bit of a bargain for AOL, given that Microsoft's acquisition of a 1.6% stake in Facebook valued that company at $15bn (£7.5bn).

While Bebo lags behind Facebook and MySpace in numbers of worldwide users, AOL was yesterday pointing to research showing that its members had a high level of engagement with the site, averaging 40 minutes a day compared with 20 minutes for Facebook.

Nonetheless, the cash sale will make Bebo's founders, Michael and Xochi Birch, extremely wealthy - they hold around 70% of Bebo's shares, which means they will be paid around $600m. The rest of the shares are owned by venture capital group Balderton Capital, and staff and members of the Birch family.