- The Washington Times - Thursday, March 13, 2008

AOL is buying its way into the social networking business with an $850 million acquisition of Bebo, an online hub of 40 million users. The purchase furthers AOL’s goal of transforming itself into an online advertising leader, giving the Sterling, Va., company access to Bebo’s audience of highly engaged users. But aside from feeding information to marketers, the combination of AOL’s instant messaging software with Bebo will create a “social media powerhouse,” Chief Executive Officer Randy Falco said during a conference call this morning. Bebo, based in San Francisco, ranks a distant third in the U.S. behind MySpace and Facebook, but it is one of the most popular social networking sites in Britain and No. 1 in Ireland and New Zealand. Mr. Falco said Bebo is particularly valuable because its user audience is heavily engaged, spending an average of 40 minutes per day on the site. AOL, a unit of Time Warner Inc., was forced to reinvent itself as cable and phone companies have entered the Internet access market. The company has already dumped its dial-up access business overseas and is now in the process of spinning off its access business in the U.S. The company’s revenues have plummeted as a result. Total annual sales dropped 33 percent to $5.2 billion in 2007, but sales from advertising grew 18 percent to $2.2 billion. AOL hopes to close the deal in the next month. The purchase comes on top of the $1 billion AOL has already spent on acquisitions to beef up its ad-buying network.

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