AOL Buys Bebo Amid Integration Upheaval and Layoff Rumors

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

Bebo ads will be sold through Platform A, which is now in the midst of executive turnover and integration hiccups as the company prepares to integrate its many sales units into a single force. Specific plans for the site include behavioral and contextual targeting based on insights from users’ interactions on Bebo. The new subsidiary will also serve as a companion to AOL’s ICQ and AIM instant messaging properties.

AOL plans to monetize the Bebo platform “around the engagement marketing that Bebo pioneered,” said AOL Chairman and CEO Randy Falco during a press conference this morning. Falco stressed the significance of combining Bebo’s audience with Platform A’s display ad targeting capabilities.

The user insight-driven ad targeting scheme is a direct shot at News Corp’s Fox Interactive Media, which introduced a similar hyper-targeting display ad system for Bebo-competitor MySpace last year.

According to President Joanna Shields, Bebo had considered purchasing technologies to boost its behavioral and contextual ad targeting capabilities before AOL and others expressed interest in the firm. “We were planning to raise money…to try to acquire some small advertising assets, but this is a much better opportunity for us,” she said of the deal. Google and Yahoo were also rumored to have been eyeing Bebo.

Shields also mentioned the benefit of being connected to AOL’s network, noting, “We’re looking forward to bringing all those assets to bear.” Shields will continue to head up Bebo and will report to Ron Grant, AOL President and COO.

Yahoo already has a display ad relationship with Bebo. In September of last year, the companies agreed Yahoo would sell most of Bebo’s display ads served to users in the U.K. and Ireland. Through the deal, Yahoo aimed to enable behaviorally targeted Bebo ads through its Right Media exchange and BlueLithium ad network unit. In reference to Bebo’s current partners in general, Shields said, “We expect that will continue.” She didn’t reference the Yahoo deal in her comment however.

Enabling more refined targeting capabilities, particularly behavioral and contextual targeting, may create the means for AOL to compete directly with Myspace. In July, the social networking giant unveiled a system for targeting display ads to interest-based user segments. That system was expanded in November to slice audience interest categories into more than 100 smaller “hyper” segments.

Bebo is a distant third among social networking sites when it comes to U.S. audience rankings, drawing about 4.8 million unique visitors in February 2008 compared to MySpace’s 68 million and Facebook’s 32 million, according to comScore.

Still, the buy gives AOL new entryways into the U.K. and Europe. Bebo ranked 13th among top UK sites in January, attracting around 11.4 million unique visitors according to comScore. The social networking firm is currently testing new sites based in France, Germany, Italy, Spain and Holland; those are expected to launch in a matter of months, according to Shields. AOL has launched 17 international sites in the past year and expects to have sites in 30 countries outside the U.S. by the end of this year. Bebo “will be featured prominently in AOL’s international expansion efforts after the deal is closed,” noted AOL in a company statement.

The acquisition comes during a period of some uncertainty for AOL and Platform A. Time Warner CEO Jeff Bewkes made remarks this week to the effect that the media and cable giant would be open to selling AOL or spinning it off by means of a public offering, The New York Times reported. The company has signaled it will miss its Q1 earnings targets owing to continued downward pressure on CPMs and the ongoing fallout from the loss of its ad deal with Apollo Group, which owns major online marketer University of Phoenix.

Platform A has experienced considerable executive turmoil of late, with the recent departure of three senior leaders: Dave Morgan, Platform A Chief Curt Viebranz and AOL Sales Honcho Kathy Kayse.

Platform A is also preparing a new reorganization that will consolidate sales for its various holdings — including, Quigo, Tacoda, and now Bebo — within a single group. The division’s new chief, Lynda Clarizio, plans to share details “as early as next week,” according to an AOL spokesperson. One report this morning suggested the restructuring could involve the layoff of as many as half of AOL’s sales staffers. AOL declined to comment on the downsizing rumor, which was published by Silicon Alley Insider.

Zach Rodgers contributed to this article.

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