Time Warner/AOL buys Bebo for $850m cash

It has just been announced that the AOL division of Time Warner is to buy the social networking site Bebo for $850m cash. Bebo is the third most visited social networking site - after Facebook and Myspace. It is also the most visited site for teenagers in the UK. The last major purchase in this space was News Corp buying Myspace in 2005 for $580m. This was initially thought of as being an extremely ‘rich’ price but has since been referred to a real steal! Last year Microsoft bought a very minor 1.5% stake in FaceBook which technically valued them at $15bThere are a few interesting points here;

1 - Is a 100 strong company worth $850m?
2 - This valuation makes a $15b valuation of Facebook look faintly farcical
3 – Time Warner made a real pig's dinner of their AOL acquisition – at least in part due to a clash of cultures. Bebo looks to be on a different planet to Time Warner
4 – Where does this put the Microsoft/Yahoo deal? I only say that because Yahoo doesn’t give Microsoft a leg up in social networking.

Having said that, if AOL can make the integration work, it looks a very good deal. eMarketeer reckons social networking advertising will be worth $4.1b by 2011. It is certainly a major alternative to email for many – in particular the ‘younger generation’. AOL see online advertising as a key part of their strategy having moved from subscription to an advertising.

Anyway, well done to British-born Michael Birch and his partner Xochi who founded Bebo in 2005 who are £295m richer today. Also Joanna Shields (currently President of Bebo) - The KateModern of Bebo fame - who has been a UK resident for the last 7 years, who is staying on to run Bebo at AOL.