For Broadcast March 19, 2008

AOL is spending $850m buying Bebo because it believes the social networking site has discovered the magic formula of becoming a money-spinning powerhouse.

And the entire media world should sit up and take notice because this is one of the big trends in Web 3.0: how web-delivered content (that's programmes to all you TV folks) attracts both an audience and money in cyberspace.

AOL believes it has the advertising tools to "supercharge" the monetisation of Bebo's 40 million registered users, while Bebo has created a community that boasts one of the longest dwell times of any social networking site (users stay on the site an average of 40 minutes per session).

To AOL, this was compelling enough to justify paying Bebo $37.95 per user (based on ComScore figure of 22.4 million active Bebo users in January). That compares favourably with a price per user of between $54 to $91 for MySpace (the News Corp-owned site is valued from $6bn to $10bn) and a $149 per user value for Facebook, based on Microsoft's recent $240m investment in the company.

If Facebook is like a Blackberry communications device, Bebo's "social media" approach of combining traditional social networking tools with compelling content is more akin to the iPod iTouch.

Bebo pioneered online drama in the UK with Kate Modern last year and launches the Sony-made Sofia's Diary this week. Endemol is next up with an online reality show on Bebo called The Gap Year.

"It's all about engagement with the users," says Bebo president Joanna Shields. "It kind of makes sense that we end up with a media company [AOL/Time Warner] because the things we are talking about are not being discussed in the corridors of Microsoft."

The Bebo deal was announced on the same day Channel 4 revealed its new strategy and the social networking site has already committed to work with C4 on engaging younger people in the channel's news output.

The project is part of C4's public service digital media initiative, 4IP, which looks like the new clothes for the old idea of the public service publisher (PSP).

It remains to be seen if PSP mark II has found a good home in C4, but partnerships with the likes of Bebo will make all the difference in helping the broadcaster nurture consumers and advertisers in the online environment.