Time Warner, AOL’s parent company announced that it has entered into an agreement to acquire Bebo, a leading global social media network. Under the terms of the agreement, AOL will acquire Bebo for $850 million in cash. Together with its AIM and ICQ personal communications network, the acquisition will give AOL a premier position in the fast growing world of social media with a network of approximately 80 million unique users.

Bebo is a fairly popular social networking site which comes in third behind MySpace.com and Facebook.com here in the U.S. but ranks on top in the U.K., Ireland and New Zealand.

“This is the latest move in the land grab within the social networking space,” says Alex Burmaster, Internet analyst at Nielsen Online in London. “Bebo’s the biggest one left, so it’s the logical step for it to be snapped up by a large Internet company.” MySpace, the biggest social network with more than 110 million users worldwide, was acquired by News Corp. (NWS) for $580 million several years ago. Facebook, the second largest social network with more than 60 million users worldwide, has remained fiercely independent.

“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, 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.”

Analyst eMarketer predicts that by 2011, $4.1 billion will be spent worldwide for social network advertising – a dramatic increase from the $480 million spent in 2006. In 2008 alone, global ad spend in the social networking arena is expected to increase 75% year over year, amounting to $2.1 billion (eMarketer, Social Network Marketing: Ad Spending and Usage, December 2007).

Building on its number one position in third party display with Advertising.com, AOL has spent nearly $1 billion on online advertising acquisitions, including market leaders like ADTECH, buy.at, Lightningcast, Quigo, TACODA and Third Screen Media to create Platform-A. Platform-A is the top display ad serving network focused on helping marketers build brands that perform online.

AOL was advised by Banc of America Securities LLC and Deutsche Bank Securities Inc. Bebo was advised by Allen & Co.