Bebo.com is the 3rd largest social networking site to Mypace and Facebook:

NEW YORK (Fortune) -- AOL will pay $850 million to acquire global social networking site Bebo.com in an all-cash deal announced Thursday.

With 40 million members, Bebo falls a distant third to Facebook and MySpace (NWS, Fortune 500) in the United States, but it vies for the top spot in terms of audience in the United Kingdom and has a fast-growing global audience.

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

AOL hopes to leverage its advertising sales business across Bebo's network. Time Warner (TWX, Fortune 500) owns AOL and Fortune.

Bebo will be the cornerstone to AOL's social media strategy. When integrated with instant messaging services ICQ and AIM, it is expected to reach 80 million members.

Started in 2005 by San Francisco programmers Michael and Xochi Birch, the company has approximately 100 employees.

Bebo's site looks a lot like MySpace with a cleaner interface. It has been a pioneer in combining professionally produced entertainment and user-generated content with programs like KateModern.

The show's title character, Kate Modern (whose name is a play on the famous British museum, the Tate Modern), is a waifish art student trying to make it in London. She and her friends record and post short video diaries and chat with viewers. Her popularity is one reason why Bebo's 40 million members spend an average 33 minutes on the site.

Bebo also has partnership with media companies like CBS (CBS, Fortune 500) and MTV (VIA).

The deal comes just one week after AOL launched Open AIM 2.0, which allows developers greater freedom to develop for the AIM network and integrate AIM into its sites and applications.

Bebo has a number of pre-existing deals with AOL competitors. In September the site announced a partnership with Yahoo (YHOO, Fortune 500) to sell the site's display ads in Britain and Ireland and to integrate Yahoo! Answers with Bebo's site. That followed a Microsoft (MSFT, Fortune 500) partnership that let members IM with anyone - Bebo friend or not - on Windows Live Messenger. Shields declined to comment on what will happen to those deals.