AOL  is emerging as a serious competitor in the business of online advertising by purchasing Bebo for $850 million cash.   Bebo, a San Francisco-based Web site, is the third-largest social networking service in the US behind MySpa

ce and Facebook.    Along with the UK, is ranked the number one social networking site in Ireland and New Zealand. With approximately 40 million unique users worldwide, Bebo only has 4.8 million unique US visitors. Acquiring Bebo is a big win for AOL in the popular social network domain. Now, AOL has an edge in the business of targeted advertising, especially internationally. Bebo's plans to expand into European markets may give AOL the reach it lacks outside North America. The deal is also part of AOL's larger goal of transforming from an Internet-access gateway to an online advertising giant competing with Yahoo! and Google. Once considered for acquisition by Microsoft and Yahoo!, the acquirement by AOL does not come as a surprise.  Randy Falco, Chairman and CEO at AOL, a unit of Time Warner Inc., explains the move: “What drew us to Bebo was its substantial and fast-growing worldwide user-base, its vision of a truly social Web, and the monetization opportunities that leverage Platform-A across our combined global audience. This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers.” Bebo President, Joanna Shields, says the AOL acquisition is a “natural progression for Bebo” and adds that they “look forward to working together to continue to expand the online social experience globally.” The addition of Bebo could ultimately breathe new life into AOL's sluggish advertising growth. AOL ad sales have continued to fall from a low13% in the third quarter of last year to 10% in the fourth quarter. By Kathleen Clark   FEEDBACK For comments on this article, email us at