AOL Buys Social Networker Bebo

Time Warner's (TWX Quote) AOL division snapped up social-networking outfit Bebo for $850 million, the media giant said Thursday.

The deal significantly expands AOL's presence in the popular social-networking space as it struggles to transform itself amid competition from the likes of Google(GOOG Quote) and the prospect of a merged Microsoft (MSFT Quote) and Yahoo!(YHOO Quote) Web behemoth.

Bebo, which has about 40 million members, is particularly popular abroad, with a big presence in the U.K. and ranking as the No. 1 social network in Ireland and New Zealand. In the U.S., it's No. 3, well behind News Corp.'s (NWS.A Quote) MySpace and privately held Facebook.

The deal is just the latest for AOL amid its shift to ad-supported revenue from a subscription-based model. The company has spent nearly $1 billion in online advertising acquisitions in recent months, creating a new ad-serving network called Platform A.

"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 of AOL, in a statement. "What drew us to Bebo was its substantial and fast-growing worldwide user-base, its vision of a truly social web, and the monetization opportunities that leverage Platform-A across our combined global audience. This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers."

San Francisco-based Bebo, founded in 2005, is backed by venture capital firm Benchmark Capital.