AOL is set to splash out $850m (£417m) to acquire Bebo, the second-biggest social network in the UK that attracts 80 million unique users worldwide.
The deal could end Yahoo's relationship with Bebo. The portal and search engine sells all of Bebo's standard display ad inventory in the UK in a deal that only started last September.
Yahoo was subsequently eyed by many as a favourite to acquire Bebo, but has been preoccupied by a takeover approach from Microsoft. And AOL has taken advantage of the situation to purchase Bebo.
AOL announced the acquisition this morning, citing Bebo's fast-growing user base and the potential of AOL's ad targeting division Platform A to monetise the audience.
Bebo has stuck to a one-ad-per-page policy so as not to annoy users but has started to integrate ad opportunities into online dramas, such as Kate Modern. AOL will now attempt to drive more revenue from Bebo's audience.
Last month, AOL chief executive Randy Falco said that Yahoo's preoccupation with Microsoft's advances could benefit Yahoo and Microsoft's rivals.
At the time, Falco said: "I hope they (Microsoft and Yahoo) beat each other's brains out over search and leave the display advertising market to us. I think it's a mistake, but I believe Napoleon said, 'never interrupt your enemy when they're in the middle of making a mistake'."
Joanna Shields, Bebo's international president, will continue to run Bebo and will report to Ron Grant, AOL's president and chief operating officer.
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