AOL's $850 mln for Bebo: a sign of froth or stable valuations?

AOL's $850 million acquisition of Bebo is more proof that the one-time king of dial-up access isn't afraid to open up its wallet to try and recapture its Internet glory.

The move follows AOL's acquisitions of online ad networks Tacoda and Quigo, and its buy of Truveo, the video search firm. Including Bebo, that's an aggregate investment close to $1.5 billion.

That tells us how serious AOL is about getting its share of growing online ad revenue.

Those deals were about acquiring ad relationships and technology.

Bebo, a media and entertainment-focused social network, on the other hand, is all about content and traffic.

And what can we deduce about the market for social networking properties from the deal.

On an absolute basis, the Bebo deal is priced 50% higher than the $580 million News Corp. paid for MySpace nearly three years ago.

But on a per-user basis, at $21.25 per user, assuming 40 million users, it's less than the $27.62 News Corp. paid for MySpace's 21 million users.

That suggests valuations are coming down or, allowing for rounding errors in the user numbers, stable. They're certainly not accelerating a bubble-like speed. 

That's pertinent information for sites like Flixster and Seesmic. 

While some might compare what AOL paid to the insane $15 billion valuation of Facebook, I think more than anything it shows that that Microsoft investment did not create a credible marker

Let's be frank: Microsoft didn't pay $15 billion for Facebook, they invested $240 million. They were willing to pay that valuation because the strategic value to locking in Facebook worldwide -- and locking out Google -- was worth it.

What's more, let's remember who pulled the trigger on that deal. Steve Ballmer, whose overly-aggressive pursuit of Yahoo shows price is really no object to his plan, seemingly more desperate every month, to remake Microsoft into an Internet-focused giant.