"What drew us to Bebo was its substantial and fast-growing worldwide user base, its vision of a truly social web, and the monetisation opportunities that leverage Platform A across our combined global audience," said AOL chief executive Randy Falco. Platform A is AOL's advertising platform.
AOL began in the internet access business, but has expanded to offer instant messaging software AIM and ICQ.
"Bebo is the perfect complement to AOL's personal communications network and puts us in a leading position in social media," said Falco.
Social networking sites have been a phenomenon, with tens of millions of internet users keeping in touch and posting information about their lives on sites such as Bebo, Facebook and MySpace.
Traditional business has been keen to buy into the phenomenon and instead of launching their own platforms, business giants have tended to buy into existing sites.
Bebo rival Facebook received $240 million in funding from Microsoft last October in a deal that valued the company at $15 billion. MySpace was bought by Rupert Murdoch's News Coproration in 2005 for $580 million.
Falco said that the acquisition would give it not only a platform on which to sell advertising, but a view into the minds of the network's users, who tend to be young.
"This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers."
Bebo was founded in 2005 by Michael Birch, who was born in the UK. It claims that 40 million people use the service each month to publish details about themselves and keep in touch.