Joining the buddy list

AOL has purchased social networking site Bebo for $850 million in cash.

The news follows rumors that Bebo was bought by a masked buyer for $1 billion. AOL was not included in the speculative list of buyers, which included Google, Microsoft, CBS, Viacom and Comcast.

AOL called the Bebo purchase a step toward international growth. The social network spread its roots in the UK, Ireland and New Zealand. It hosts free video content, supports OpenSocial and Facebook apps and recently launched a nationwide talent competition in partnership with Music Nation. Bebo also ran the debut of KateModern, which represented Lonelygirl15's expansion into Europe.

In 2008 Bebo shall launch five local versions of its site in France, Germany, Italy, Spain and the Netherlands. This falls neatly in line with AOL's ambition to expand to 30 countries outside the US before 2009, reports Webware.

According to Ron Grant of AOL and Joanna Shields of Bebo, integration between Bebo and AOL's AIM — which just opened to developers — will be crucial to success of the merger. The combo will yield AOL a "social graph" of 80 million people, larger than Facebook's userbase of 67 million, but still smaller than MySpace's audience.

AOL has also struggled to reposition itself as an ad platform. Bebo relies mainly on ad revenue, which may prove a boon as social media ad buys continue to rise.

Nonetheless, rebuilding brand equity will be intensive for the former online subscription giant. Last month Time Warner announced it would split AOL's internet and ad divisions. Half its sales force is rumored to be expended, and ad exec Curt Viebranz has just departed the company (via C|Net).

In any event, the Bebo purchase is expected to finalize next month.