The internet group AOL has announced that it has agreed to buy the social networking website Bebo for $850 million (£417 million).

AOL, backed by Time Warner, said that it would use the acquisition to improve its position within the internet advertising market, claiming Bebo’s 40 million young users made it a very attractive site for advertisers.

“Bebo is the perfect complement to AOL’s personal communications network and puts us in a leading position in social media,” said Randy Falco, chairman and chief executive of the company.

“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 across our combined global audiences.

“This positions us to offer advertisers even greater reach and marketers significant insights into the desires and needs of consumers.”

AOL’s takeover is the latest in a series of deals by global firms trying to tap into the boom of popularity in social networking sites.

In 2005 Rupert Murdoch’s News Corp bought MySpace for $580 million (£285 million), and last year Microsoft bought a 1.6 per cent stake in Facebook for $240 million (£118 million).

Bebo was founded in 2005 by the husband and wife team of Michael and Xochi Birch.