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Business Brief: Video Advertising Looks to Future

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A social network aimed at providing information for ex-pats living in London has been established. New Media Knowledge met the site’s co-founder to find out more.

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AOL Acquires Bebo

Following several months of negotiations, AOL are set to enter an agreement to acquire social networking site Bebo for $850 million.

With News Corp’s purchase of MySpace and Microsoft’s investment in Facebook, Bebo is set to become the latest social networking site courted by the large corporations. The social networking site has 11.4m unique users in the UK and a total membership of more than 40 million worldwide.

The move is seen as a move by AOL to grab a greater share of the online advertising market. A study by analyst group eMarketer predicts that by 2011, $4.1 billion will be spent worldwide on social network advertising - a dramatic increase from the $480 million spent in 2006. The report, Social Network Marketing: Ad Spending and Usage, December 2007, reveals that in 2008 alone, global ad spend in the social networking arena is expected to increase 75% year over year, amounting to $2.1 billion. Bebo currently ranks as the UK’s most engaging social network with users spending an average of 33 minutes on the site per usage day - a fact not lost on marketers.

AOL will look to Bebo to reinvigorate the company, whose early 1990s prominence has recently flagged somewhat. By integrating AOL’s instant messaging services into Bebo, he company hopes to attract more users and raise advertising revenue.

"Bebo is the perfect complement to AOL’s personal communications network and puts us in a leading position in social media," said Randy Falco, Chairman and CEO, AOL. "What drew us to Bebo was its substantial and fast-growing worldwide user-base. This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers."

"AOL understands the shifting dynamics of the Web and has clearly demonstrated its commitment to leveraging the ever-increasing power of social networks," said Bebo President, Joanna Shields. "With one and the same vision in this area, it was a natural progression for Bebo to join AOL."

The all-cash deal follows a recent spate of acquisitions from the web services company as it tries to compete with Google, Yahoo! and Microsoft. AOL has spent nearly $1 billion for companies which include purchases of Advertising.com, ADTECH, buy.at, Lightningcast, Quigo, TACODA and Third Screen Media.

However, there are still question marks as to whether AOL can stage a comeback. Monetising social networks has been a struggle so far for the likes of Google and Facebook. "Bebo has the potential of becoming a valuable asset to AOL, if AOL manages it well and executes well," said Gartner Group analyst Ray Valdes. "It’s unclear if they will be able to."