AOL Buys #3 Social Networking Site

Happy St. Patrick's Day, especially to my mother--a red-haired Irish lass when she bowled over my first-generation Italian father.

On Thursday, AOL announced it would acquire Bebo, the third most popular social networking site in the U.S. for $850 million.

According to The New York Times (NYT), AOL, a subsidiary of Time Warner, plans to integrate Bebo with its Instant Messenger service AIM.

The chief executive of AOL, Randy Falco, called the deal a game-changer for the company, which has struggled to move from an Internet access business to an advertising-supported model. AOL has spent more than $1 billion to acquire the pieces for an advertising division called Platform A that would probably be used on Bebo. (NYT)

Social networking sites have received enormous attention in the last couple of years. They provide a variety of ways in which their users can interact, including chat, email, video, blogging and file sharing. The #1 network, MySpace, was purchased by Rupert Murdoch's News Corp. in 2005. Two years later, Microsoft paid $240 million for less than two percent of the #2 site, Facebook.

Bebo was started in January, 2005 by a husband and wife, Michael and Xochi Birch. They are cashing out of the company according to The New York Times.

Bebo combines the features of Facebook with the focus on media and self-expression of MySpace. The three-year-old site is most prominent in Britain, where the measurement firm comScore recorded 11.4 million unique visitors in January. The site had 4.1 million visitors in the United States, comScore said. (NYT)

Bebo will allow AOL to jumpstart their social networking project. They already have the instant messaging component, and Bebo provides the community functions. AOL's AIM is the most popular instant messaging system in the U.S., ahead of Yahoo, Google and Microsoft. AIM is used by almost 30 million unique visitors a month.

Read The New York Times article here.