AOL to spend $850 million on social networking site Bebo

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"Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media," AOL chairman and CEO Randy Falco said in a prepared 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 across our combined global audience."

Falco said the deal puts AOL in a position to offer advertisers and marketers greater reach and insight into the desires and needs of consumers. He said Bebo, a top-ranking site in the U.K. but a small player in the United States, is a "perfect compliment" to AOL's network. The service currently ranks third in the United States, behind rivals MySpace, owned by News Corp., and Facebook.

During a conference call Thursday, Falco said Bebo will be the cornerstone of AOL's strategy to "transform the online experience" for advertisers and consumers. Falco said the acquisition would make the company "a social media powerhouse."

Ron Grant, AOL's president and COO, said Bebo understands the importance of community and connectivity across a range of lifestyles and cultures. "This acquisition supports our key objectives - accelerating the growth, engagement and monetization of one of the world's most engaged online communities," he said in a statement. "AOL, at its core, is a way for people to connect," he told Reuters. "We need to get back to our roots."

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Bebo's current president, Joanna Shields will continue to run Bebo and will report to Grant once the deal is complete. Shields called the acquisition a "natural progression" for Bebo and said AOL shares the same vision, and said during the call Bebo plans to focus on further expansion into the European market this year.

Bebo was founded by the husband and wife team of Michael and Xochi Birch, and currently employs 100 people in offices in the U.K., San Francisco and Austin, Texas.