Thursday, March 13

AOL to buy Bebo social network

Time Warner Inc's AOL Internet division is to buy social network Bebo
for $850 million in cash, bolstering its consumer Internet offerings
even as the media conglomerate mulls splitting off the business.

Bebo, which claims a global membership of about 40 million users, is
one of the top social networks in Britain and market leader in Ireland
and New Zealand, it said. It is No. 3 in the United States behind News
Corp's MySpace and Facebook.

"AOL, at its core, is a way for people to connect," AOL President Ron
Grant told Reuters in a phone interview on Thursday. "We need to get
back to our roots."

The two companies had spent the last six months hashing out the deal,
the executives said. Grant said Bebo's heavy focus on media and
international interest had made it particularly attractive.

It already has a service in Poland and is set to launch in France,
Germany, Italy, Spain and the Netherlands in the next five or six
months.

The purchase comes amid a wholesale transformation of AOL from a
dial-up Internet provider to an online advertising powerhouse.

It has spent nearly $1 billion to create one of the biggest
third-party display ad units, Platform-A. AOL aims to gird against the
prospect of bigger rivals as Microsoft Corp pursues a deal to buy
Yahoo Inc and following Google Inc's purchase of DoubleClick.

"This is a tremendous acquisition and one I think is game-changing for
AOL," AOL Chairman and CEO Randy Falco said on a conference call.

NETWORKING

"Bebo will be the cornerstone of our strategy to transform online
experiences for advertisers, media companies and consumers," Falco
said.

AOL said Bebo would help round out its personal communications
offerings, now comprised of AOL Instant Messenger and ICQ, two wildly
popular services that let users send quick text, video and audio
correspondence.

Despite its global popularity AOL has not had much success turning
that into a business.

AOL said its advertising system is well positioned to turn social
networks into a thriving business despite difficulties its rivals
face. Google, which is the search advertising provider for MySpace,
expressed difficulties in "monetizing" MySpace's traffic.

"The acquisition demonstrates again how important the social
networking sites are to major media and Internet brands, who are
looking for new means to advertising growth," said Paolo Pescatore, an
analyst with UK-based CCS Insight.

"They represent a powerful opportunity, with their access to
demographic data and ability to target specific audiences."

Bebo President Joanna Shields will continue to run Bebo and will
report to Grant after the transaction closes. Falco said he expected
the deal to close in "the normal time" -- within around 30 days.

Falco declined to comment on what multiple of sales or earnings AOL
may have paid but defended the price, comparing it with the $15
billion valuation of Facebook implied by the $240 million Microsoft
paid for its 1.6 percent stake.

Facebook has around 67 million unique users.

"We think it's an excellent asset at a great price and we, I think,
have a proven track record of spotting value," he said."

Banc of America Securities LLC and Deutsche Bank Securities Inc.
advised AOL. Allen & Co advised Bebo.

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