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April - 2008 - issue > Tech Tracker
AOL gulps Bebo for $850 Mn
Christo Jacob
Monday, March 31, 2008
Time Warner Empire owned AOL’s five months effort has finally come to fruition in the buyout of Bebo, a young social networking site, for $850 million.

The acquisition is aimed at transforming itself from an Internet access subscription business into an advertising focused one. As per the Forester analysis, the deal would help Bebo to compete with its rivals like Facebook and MySpace, being an integral part of AOL. In fact the deal would be a windfall for Bebo and would help double its reach that already enjoys about 40 million users of its AIM and ICQ instant messaging networks. A major slice of the deal would be beneficial for the London based venture capital firm Balderton Capital which acquired a 15.7 percent stake in Bebo in 2006 for $15 million.

Meanwhile to be armed for the rat race, Bebo is launching its own developer’s platform this year to rival Facebook, MySpace, and others in letting programmers build applications for Bebo.

Still, some of the analysts express an uncertainty whether AOL would utilize the deal to expand its network. Analysts find that the deal will not help AOL much in the U.S. as Bebo is a leading social network in the UK, ranked number one in Ireland and New Zealand, and only number three in the U.S. Jeffrey L. Bewkes, the Chief Executive of Time Warner while acknowledging the weakness in the business said that the company is open to combine AOL with another company - “whatever configuration makes it the strongest and the most valuable.”

The deal also raises questions about the $15 billion valuation assigned Facebook when Microsoft took a stake. AOL would spend about $21 per member for Bebo’s 40 million worldwide users, versus Facebook’s $204 per member, based on Microsoft’s $240 million investment when the site had 73.5 million users.
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