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AOL buys a friend for $850m

Bebo cashes out now

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AOL will acquire yoof social networking site Bebo for $850m cash, the web 0.1 mastodon announced today.

Bebo has been on the block for months with the web 2.0 circle jerk merrily tossing the names of News Corp, Yahoo!, CBS, Microsoft - basically anyone in online media - around. It's not clear what the deal will mean for Yahoo!'s exclusive deal to sell display ads on the site.

A $1bn price tag for Bebo has often been bandied about, so today's deal falls someway short and once again makes the $15bn valuation Microsoft slapped on Facebook look a tad optimistic. MySpace, which completes social networking's top three, sold for $580m to News Corp in 2005.

Nevertheless, its a great time for Bebo's backers to cash out. The "seemingly unstoppable" growth of social networking sites has, er, stopped, at least in the UK and US.

Here's AOL president Ron Grant with the buygasm: "Bebo's dynamic management team recognizes that the internet is less about destination and more about connecting people, culture and lifestyles."

"This acquisition supports our key objectives – accelerating the growth, engagement and monetization of one of the world’s most engaged online communities."

Lovely, but coughing $850m seems like an expensive attempt to stay relevant.

AOL has struggled to respond to the rise of Google even more than Microsoft, and investors have been calling for it to be dismembered. Rounds of lay-offs have become the norm and the firm's international broadband businesses have already been flogged. UK subscribers were offloaded to Carphone Warehouse in 2006.

Ex-Google fembot Joanna Shields will continue to run Bebo, which is developed in San Francisco and flogged to advertisers in London. The press release is here. ®

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