AOL to Buy Bebo Networking Web Site for $850 Million
on March 14th, 2008 at 8:56 amAOL, seeking to make up for falling subscription sales, agreed to buy Bebo for $850 million to gain the third-largest U.S. social-networking Web site and expand in online advertising.
Bebo, which is closely held, has offices in the U.K., San Francisco and Austin, Texas, AOL, a Time Warner Inc. unit, said in a statement today. Bebo, which trails News Corp.’s MySpace and Facebook Inc., said it has 40 million worldwide members.
Buying Bebo will bolster AOL in advertising for social- networking sites, a market that may almost triple to $2.5 billion in the U.S. by 2011, according to research company EMarketer Inc. AOL, whose sales slumped 32 percent last quarter as users dropped its Web access service, is offering for Bebo 47 percent more than Rupert Murdoch’s News Corp. paid for MySpace in 2005.
“AOL’s revenue growth continues to be challenging but their acquisitions continue unabated,” said Laura Martin, an analyst at New York-based Soleil Securities, who recommends buying Time Warner shares and doesn’t own any. “The value will be determined by how well they monetize it.”
Time Warner, down 25 percent in the past year, fell 25 cents to $14.51 at 4 p.m. in New York Stock Exchange composite trading.
The popularity of social-networking sites, which let users communicate with friends, share photos and play online games, has surged in the past three years, attracting investors.
News Corp. bought MySpace, the leader with 109.3 million visitors worldwide in January, for $580 million almost three years ago. In October, Microsoft Corp. agreed to buy a 1.6 percent stake in closely held Facebook, a deal that valued the business at $15 billion.
AOL Turnaround
Facebook had 100.7 million unique visitors in January and Bebo had 22.4 million, according to researcher ComScore Inc.
AOL, an online pioneer created in 1985, has pushed free e- mail and e-mail security services since 2006 to boost ad revenue, a plan supported by Time Warner Chief Executive Officer Jeffrey Bewkes. Time Warner, the world’s largest media company, is also splitting off AOL’s dial-up business from its ad business.
“It’s the next piece of our strategy of our turnaround,” AOL Chief Operating Officer Ron Grant said in an interview. “If you look at what AOL has always been at its core — a way to connect with people, to be in touch with their lifestyles — this can provide a social media experience.”
Bebo, founded in July 2005 by Michael Birch and his wife Xochi, plans to create local versions of its site in five countries this year, helping AOL expand internationally, Grant said.
Bebo Users
Bebo, which stands for “Blog Early Blog Often,” will operate as a standalone unit within AOL. Bebo is complementary to the online ad network, as it lets marketers buy display ads, Grant said. Bebo users spend about 40 minutes a day on the site, giving AOL advertisers opportunities to target them, he said.
Bank of America Corp. and Deutsche Bank AG advised AOL, and Allen & Co. counseled Bebo. London-based venture capital firm Balderton Capital said today it will sell its 15.7 percent stake in Bebo to AOL for about $140 million, more than nine times its original investment.
The purchase of Bebo adds to the $1 billion AOL has already spent on acquisitions to expand its online ad-buying network.
Time Warner is open to merging AOL with another company, Bewkes said this week. Yahoo! Inc., fighting Microsoft’s $44.6 billion takeover bid, has held talks with AOL, a person familiar with the discussions said last week.
“It shows they’re not just looking for a buyer for themselves,” Andrew Frank, an analyst at researcher Gartner Inc. in New York, said of AOL. “No one has cracked the code yet on monetizing social networks. If you want to be in the game, you have to make some investments and from that point, it makes sense.”
Source : Bloomberg
