AOL wraps up $850 M buy of Bebo social network

AOL today closed its $850 million buyout of European-based social networking site Bebo, leaving Yahoo as the only player among the "big four" search engines not to control the ad space of a social network.

"When you combine Bebo's worldwide users with those who use AIM and ICQ, we reach around 80 million," said AOL CEO Randy Falco, during a conference call held when AOL initially announced the deal in March.

Now, AOL plans to launch a new business unit known as People Networks that will bring together with AIM and ICQ instant messaging services together with Bebo, a site that's been focusing on advertising-sponsored, Internet-enabled "video dramas" that are very much along the same lines as TV reality shows.

Though the former America Online dropped its patriotic name in April 2006, much of the world still perceives the "A" in its name as the same letter that follows "U" and "S." In Comscore's listings of the top Web 50 Web sites worldwide for March, social networking site Facebook ranked 15th, and MySpace took 27th place. Bebo, on the other hand, didn't even make it on to the roster.

Yet Bebo has been gaining major ground in Europe, especially in Ireland and the UK.

"Bebo is big in the UK. One of the largest social networks in the region. More specifically, it's Ireland's #1," contended Paul Glazowski, in the Mashable Social Networking Blog.

AOL, though, has apparently been planning a more global presence for Bebo since at least March.

"We will circulate users from Bebo to our network and we will have the opportunity to leverage our scale to grow Bebo's audience worldwide," Falco said during the earlier conference call.

Meanwhile, since Google controls the ads on both MySpace and Orkut, and Microsoft owns a slice of Facebook along with Windows Live Spaces, Yahoo becomes the sole "big four" search player to be bereft of its own operational social networking platform.

In April 2007, it put its toes in the social waters with its first tests of what was called "Mash." A whole year later, Yahoo started over with a pledge to build the foundation of its new network around an "Open Social" concept. It's a genuine effort, but the payoff remains down the road.

As a result of the Bebo buyout, Yahoo stands to lose out on the advertising side. Now that the deal is final, AOL's Platform-A will handle advertising for Bebo in all parts of the world except for the UK, Ireland, and Australia.

In those two geographic areas, Bebo already has a deal in place with Yahoo. But that advertising agreement runs out in September 2009, and is not expected to be renewed.

Bebo President Joanne Shields -- who will now become president of AOL's People Networks -- has already made it clear that beyond the $850 million purchase price, ad opportunities with AOL constituted key lures for Bebo in accepting the acquisition bid.

Shields mentioned AOL's Platform-A and contextual advertising during the earlier phone call.

"We were planning to raise money prior to the interest we received from multiple parties about the business itself. We were going to acquire some small advertising assets. But this was a much better opportunity for us," she told reporters.

Shields also discussed Bebo's "engagement marketing" strategy, which revolves around advertisers doing product placement in "reality" video dramas.

Over the past week, Bebo has also unveiled the advertising sponsors for an upcoming reality program called "Gap Year," which will follow the experiences of six Bebo users from the US, UK, Ireland, Australia, Canada, and New Zealand, during their individual travels around the world.

The sponsors of "Gap Year" include Sony PlayStation Portable, Doritos, Canon, Trident, Acuvue, STA Travel, the Royal Air Force, Tourism Austalia, and Tourism Auckland (New Zealand). The tourism offices for Australia and Auckland will sponsor travel trails for travelers. STA Travel will sponsor a road trip for a participant, and the RAF will pose various physical challenges at some of its air bases.