AOL Acquires Bebo for $850M, Opens Door to Younger Demographic

AOL (TWX) announced yesterday that they have acquired social networking service Bebo for $850 million in cash. Bebo has 100 employees operating in offices in the UK, San Francisco and Austin, TX. Bebo is the third-largest social networking service in the U.S. behind MySpace (NWS) and Facebook. For February 2008, Compete shows 3.5 million U.S. visitors to Bebo, 28 million to Facebook and 65 million to MySpace. Techcrunch had the first rumors out about a month ago of someone acquiring Bebo and Eric at VentureBeat had news on Bebo bringing in a bank back in December.

Here are some of the important notes from the conference call:

• Bebo will focus on European expansion into 5 new countries and they are working on localization
• Deal will close in normal time as it has to go thru antitrust in the U.S. (and Europe?)
• 80 million unduplicated visitors when you count ICQ, AIM and Bebo
• Lots of talk on the call about "engagement advertising"
• Discussion about how social networking users don't care about advertising - they will use the engagement advertising to get past this

What does this mean for AOL? It brings their ad inventory for Platform-A skyrocketing upwards with a youth and young adult demographic. This is a good complement to their current AOL properties which tend to tick a bit further up the age chain. AOL also announced last month the launch of 20+ Web sites in 2008.

Yahoo (YHOO) currently serves ads on Bebo so we will need to see what happens with this relationship. I will attempt to ask this question on the call in 10 minutes. The acquisition also gives AOL an entry point into Facebook and OpenSocial as Bebo supports both platforms.

Bebo claims over 40 million members and is one of the leading social networks in the UK, and is ranked number one in Ireland and New Zealand, and number three in the U.S. Its users are heavily engaged and view an average of 78 pages per usage day. In comparison, Facebook CEO Mark Zuckerberg noted Facebook's member count at 65 million last week.