Yahoo could lose Bebo ads deal

Yahoo is in danger of being edged out of a landmark advertising deal with Bebo as the social networking site plans to begin using technology developed by AOL, its new owner.

AOL will on Monday mark the completion of the $850m acquisition with news that it plans to integrate Bebo with existing community platforms such as AIM instant messaging into a single division.

Joanna Shields, Bebo’s chief executive and head of the new People Networks division, said the Yahoo agreement covered only the UK, Ireland and Australia, leaving Bebo free to use Platform-A, AOL’s internet advertising network, in the US and elsewhere.

The news is a fresh blow to Yahoo, which faces a proxy fight with Carl Icahn, the billionaire activist shareholder, after rebuffing a $46.5bn takeover bid by Microsoft. Yahoo’s deal last September to sell most of the display advertising on Bebo was one of its largest deals in Europe.

The deal, Yahoo’s first such agreement with a social networking site, was seen as evidence that the company could compete with Google, which has deals with MySpace and Friendster, and Microsoft, which sells advertisements for Facebook.

Bebo’s deal with Yahoo is not due to expire until September 2009. However, a successful partnership with Platform-A in the US, the market where Bebo hopes to see the strongest growth over the next few years, would make a renewal of the Yahoo relationship unlikely.

Ms Shields said she was excited about Platform-A’s potential to allow closer behavioural targeting of advertising on Bebo, adding that this would make ads more relevant to Bebo users, and command higher prices from advertisers. Comscore ranked Platform-A as the largest advertising network in the US in March, above Yahoo.

AOL will also announce plans for cross promotions between its community and communications products, such as inviting its 30m AIM instant messaging users to join the Bebo site and allowing them to merge AIM and Bebo profiles.

Bebo’s 40m users will gain access to AOL’s messaging, chat and e-mail functions as well as media content from other branches of Time Warner, AOL’s parent company.

Original programming developed by Bebo, such as the online mini soaps KateModern and Gap Year will also be featured on the AOL portal as part of the group’s efforts to give Bebo greater exposure in the US.

Bebo ranks third among social networks in the US behind Facebook and MySpace, with just 5.5m unique users a month compared with its UK user base of 11.7m.