AOL agreed to pay for its recent acquisition $850 million in cash. In the last five years the social networking sites, online places where a user can create a profile and build a personal network that connects him or her to other users, have rocketed from a niche activity into a phenomenon that engages tens of millions of internet users.

Bebo has 40 million worldwide users and is considered one of the leading social networks in the UK. In addition, Bebo is ranked number one in Ireland and New Zealand, and number three in the U.S. Its users are heavily engaged and view an average of 78 pages per usage day. Founded in 2005, by husband and wife team Michael and Xochi Birch, Bebo has approximately 100 employees operating in offices in the UK, San Francisco and Austin, TX.

For AOL, the acquisition means one more step in its was to the transformation in a Web media and marketing company.  

"Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media," said AOL's chief executive Randy Falco in a statement.

Though, according to the research company Hitwise, Bebo has only a 1.18% share of the market. Still, by combining Bebo with AIM and ICQ personal communications network, AOL could be soon enough an important rival to Facebook and MySpace.

AOL’s acquisition is also a signal that the company doesn’t want to be involved in the bidding war between Microsoft and Yahoo.

The former American giant among Internet service providers, which had more than 30 million subscribers, aims to create a one-stop shop for advertisers seeking to market their products and services on its own site as well as on other properties across the Web.

Last year, AOL announced that is combining all its various ad networks, which were acquired during the last years, into one single ad platform called The Platform A. It includes Web ad banner buyer Advertising.com, Web marketing firm Tacoda Inc., cell-phone advertising firm Third Screen Media, broadband video ad company Lightningcast Inc. and interactive-advertising firm Ad:Tech.

As part of its international growth plans, AOL has launched 17 international web sites over the last year and has plans to expand to 30 countries outside the U.S. by the end of 2008. In addition, AOL teamed up with HP last September to include localized versions of the AOL.com portal and other AOL services as the default setting on HP computers shipped in the United States and around the world.