AOL buys social network Bebo for $850 million
International growth is on the mind of AOL--an unexpected buyer. Youth-oriented social site Bebo is wildly popular in the U.K., Ireland, and New Zealand.
This post was expanded at 6:43 AM PT with details from the AOL-Bebo conference call.
In an unexpected move, AOL has acquired social-networking site Bebo. The price tag: $850 million in cash.
Rumors had floated over the past few months that Bebo, which has over 40 million members,. Reports suggested a $1 billion price tag, but there were few hints as to potential buyers. Though Bebo to facilitate friend-invite interoperability between the two services, even the most creative blogger speculation didn't seem to point to AOL eventually buying the social network.
Ironically, AOL itself has been. Jeffrey Bewkes, CEO of Time Warner, which operates AOL, to spin off or sell divisions of the company.
AOL has made it clear that buying Bebo is a move geared toward international growth, as the youth-oriented social network is wildly popular in the U.K., Ireland, and New Zealand. AOL reported that it has launched "17 international web sites over the last year and has plans to expand to 30 countries outside the U.S. by the end of 2008," as well as international versions of its home page and some services. Bebo, meanwhile, plans to launch five localized versions of its service this year (France, Germany, Italy, Spain, and the Netherlands), and AOL will make it a major part of the company's international expansion strategy.
"Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media," said AOL chairman and CEO Randy Falco in a statement. "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...This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers."
In a conference call on Thursday, Falco and Ron Grant, AOL's president and COO, as well as Bebo president Joanna Shields, said that integration between Bebo and AOL's AIM and ICQ messaging properties will be crucial. Combined, they said, AOL will own a "social graph" of 80 million people, bigger than the 67 million that the independently-run Facebook currently counts but still significantly smaller than News Corp.'s MySpace.com.
"The distribution aspect of linking up with AIM and ICQ is an extraordinary opportunity for us," Shields said in the conference call.
Still, at the core, the Bebo acquisition is all about the advertising. It comes at a time when AOL is still struggling to make the transition to a leader in online advertising after amassing nearly $1 billion worth in acquisitions--Tacoda, Buy.at, Quigo, and AdTech, to name a few--into its Platform-A ad network, as well as eMarketer predicts 75 percent year over year), AOL undoubtedly wants a piece of the pie.. Bebo, like most other social-networking sites, relies on ad revenue, and as projections claim that social-media ad buys will keep rising (
But it's still an uphill climb for AOL. Just this week, the company confirmed that Platform-A president Curt Viebranz wasamid a management shakeup.
Joanna Shields, president of the San Francisco-based Bebo, will continue to run the social network and will report to Ron Grant. The deal was brokered on AOL's side by Bank of America Securities and Deutsche Bank Securities. Bebo had hired investment bank Allen & Co. when it opted to put itself up for sale.
Grant estimated in Thursday's conference call that the deal will ideally be complete within a month.
Read more of News.com's coverage: "What Bebo means to AOL"