Last week, AOL announced that it would acquire Bebo, the third most popular social-networking site in the United States. The deal is worth $850 million, a bargain when considering that many companies, such as News Corp., Facebook, and Google are looking to the medium as the next big thing for advertising dollars. (Source: nytimes.com)

While the nobility of Silicon Valley have high hopes, no one has really found the 'magic formula' to turn social networking into a cash cow. If any company has the ability to monetize connecting with friends it may be AOL and Bebo. AIM is the dominant Instant Messaging application in the United States, and Bebo has a lot of deals with media companies to present their content on the site. That's an advantage that other Web 2.0 companies would kill for. (Source: timesonline.co.uk)

Of course the difficulty will be in convincing users to move to yet another social working site. MySpace cornered the market on teenagers, Facebook picked up, well, everyone else. Meanwhile, LikedIn is making a move for the professional set growing weary of the endless applications on Facebook. Thus, the new team certainly has its work cut out for it.

In addition, analysts are not impressed with AOL's newest acquisition. In an interview with The Times of London, Mike Masnick, founder of Techdirt said, "It's too little too late. AOL is a property in decline that has failed to leverage its best assets...[AOL's purchase was more] opportunistic than strategic."

Well, if the new plan doesn't succeed, maybe AOL can merge with Yahoo in time for a Microsoft takeover.