AOL has agreed to acquire social networking site Bebo for around $850 million in cash.

AOL announced Thursday that it plans to buy the company to round out its portfolio and step into social networking Bebo could complement AOL’s AIM and ICQ personal communications networking and increase AOL’s user base to 80 million.

“This is a tremendous acquisition and one I think is game-changing for AOL,” said Randy Falco, AOL chairman and CEO, during a conference call.

Falco said that AOL is eager to acquire Bebo’s growing user base of 40 million people around the globe. The company’s focus on media also appealed to AOL, which spent about six months negotiating the acquisition.

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

Bebo relies on users to create, discover, and share content. It employs about 100 people in San Francisco, Austin, Texas, and the United Kingdom. Its focus is on entertainment and self-expression. The company boasts heavy user engagement with an average of 78 page views and 33 minutes spent on the site by each user each day. The company also works with major media outlets on content distribution.

Bebo’s current President, Joanna Shields, will continue running Bebo, while reporting to Ron Grant, president and COO of AOL.

“Bebo’s dynamic management team recognizes that the Internet is less about destination and more about connecting people, culture, and lifestyles,” Grant said. “This acquisition supports our key objectives — accelerating the growth, engagement, and monetization of one of the world’s most engaged online communities.”

AOL said it has launched 17 international Web sites over the last year and it plans to expand into 30 countries by the end of 2008. Bebo also announced plans to launch in five new countries this year.

Last week, AOL launched Open AIM 2.0, which gives developers increased access to the AIM network and allows integration of AIM into other sites and applications. Also last week, Apple announced an AIM application for the iPhone.

“AOL understands the shifting dynamics of the Web and has clearly demonstrated its commitment to leveraging the ever-increasing power of social networks,” Shields said. “With one and the same vision in this area, it was a natural progression for Bebo to join AOL, and we look forward to working together to continue to expand the online social experience globally.”

Time Warner (NYSE: TWX) is reportedly considering whether to spin off AOL, which is trying to compete against Microsoft (NSDQ: MSFT) and Google (NSDQ: GOOG).

The fund will be known as iFund, and will be led by Matt Murphy of Kleiner Perkins Caufield & Byers, a venture capital firm in Silicon Valley.

The move echoes the $10 million fund created by CEO of Facebook Mark Zuckerberg, which was distributed to startups creating applications for Facebook.com.

According to the Kleiner Perkins website, “KPCB’s iFund is a $100 million investment initiative that will fund market-changing ideas and products that extend the revolutionary new iPhone and iPod touch platform. The iFund is agnostic to size and stage of investment and will invest in companies building applications, services and components.”

Also announced over the weekend was news that Sun Microsystems are currently making use of the iPhone SDK to create a Java variant for the handset, which they say should be finished by Q2 2008.

A famous New Yorker cartoon from 1993 showed two dogs at a computer, with one saying to the other, “On the Internet, nobody knows you’re a dog.”

That may no longer be true.

A new analysis of online consumer data shows that large Web companies are learning more than ever before the gritty details of what people search for and do on the Internet, gathering clues about the tastes and preferences of a typical user several hundred times a month.

These companies use that information to predict what content and advertisers people most likely want to see. They can charge steep prices for carefully tailored ads because of their high response rates.

The analysis, conducted for The New York Times by the research firm comScore, provides what advertising executives say is the first broad estimate of the amount of consumer data transmitted to Internet companies every day.

The analysis indicates that Web companies are, in effect, taking the trail of crumbs people leave behind as they move around the Internet and analyzing them to anticipate people’s next steps. So anybody who searches for information on such disparate topics as iron supplements, airline tickets, hotels and soft drinks may see ads for those products and services later on.

Consumers have not complained to any great extent about data collection online. But privacy experts say that is because the collection is invisible to them.

“When you start to get into the details, it’s scarier than you might suspect,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center, a privacy-rights group. “We’re recording preferences, hopes, worries and fears.”

But executives from the largest Web companies say that privacy fears are misplaced, and that they have policies in place to protect consumers’ names and other personal information from advertisers. Moreover, they say, the data is a boon to consumers, because it makes the ads they see more relevant.

Detail producing payoffs

The rich troves of data at the fingertips of the biggest Internet companies also are creating a new kind of digital divide within the industry. Traditional media companies, which collect far less data about visitors to their sites, are increasingly at a disadvantage when they compete for ad dollars.

The major television networks and magazine and newspaper companies “aren’t even in the same league,” said Linda Abraham, an executive vice president at comScore.

During the Internet’s short life, most people have used a yardstick from traditional media to measure success: audience size. Like magazines and newspapers, Web sites most often are ranked based on how many people visit them and how long they are there.

But on the Internet, advertisers increasingly are choosing where to place their ads based on how much sites know about Web surfers. ComScore’s analysis is a novel attempt to estimate how many times major Web companies can collect data about their users in a given month.

Web firms once could monitor the actions of consumers only on their own sites. But over the last couple of years, the Internet giants have spread their reach by acting as intermediaries that place ads on thousands of Web sites, and now can follow people’s activities on far more sites.

Large Web companies like Microsoft and Yahoo have also acquired a number of companies in the last year that have rich consumer data.

“So many of the deals are really about data,” said David Verklin, chief executive of Carat Americas, an ad agency in the Aegis Group that decides where to place ads for clients.

“Everyone feels that if we can get more data, we could put ads in front of people who are interested in them,” he said. “That’s the whole idea here: Put dog-food ads in front of people who have dogs.”

Some advertising executives say media companies eventually will have little choice but to outsource most if not all of their ad sales to companies like Microsoft and Yahoo to benefit from their data.

Billions of “events”

ComScore analyzed 15 major media companies’ potential to collect online data in December. The analysis captured how many searches, display ads, videos and page views occurred on those sites and in their ad networks.

These actions represented “data transmission events” — times when consumer data was zapped back to the Web companies’ servers. Five large Web operations — Yahoo, Google, Microsoft, AOL and MySpace — record at least 336 billion transmission events in a month, not counting their ad networks.

The methodology was worked out with comScore and based on the advice of senior online advertising executives at two of the largest Internet companies.

Yahoo came out with the most data-collection points in a month on its own sites — about 110 billion collections, or 811 for the average user. In addition, Yahoo has 1,709 other opportunities to collect data about the average person on partner sites like eBay, where Yahoo sells the ads.

MySpace, owned by News Corp., and AOL, a unit of Time Warner, were not far behind.

Google also has scores of data-collection events, but the company says it is unique in that it mostly uses only current information rather than past actions to select ads.

The depth of Yahoo’s database helps explain why AOL is talking with Yahoo about a merger and Microsoft is willing to pay more than $41 billion to acquire the company.

The comScore figures do not include the data that consumers offer voluntarily when registering for sites or e-mail services. When consumers do so, they often give sites permission to link some of their interests or searches to their user name.

The figures also do not account for information people enter on social-network pages.

Informing consumers

Executives from Web companies said they have been working to inform consumers on their data practices.

These companies also noted that they have consumer-protection policies. AOL, for example, lets users opt out of some ad targeting, Google lets users edit the search histories linked to their user names, Yahoo is working on a policy to obscure people’s computer-identification addresses that are linked to search results, and Microsoft says it does not link any of its visitors’ behavior to their user names, even if those people are registered.

But for all these precautions, the Web giants may be treading into areas that would make their users uncomfortable — if those users knew the extent of the data collection.

A study of California adults last year found that 85 percent thought sites should not be allowed to track their behavior around the Web to show them ads, according to the Samuelson Law, Technology & Public Policy Clinic at the University of California, Berkeley, which conducted the study.

“If you said to people, ‘Hey, do you realize that information was not just ephemeral, it ended up potentially tied to your name?’ ” said Deidre Mulligan, director of the Samuelson clinic. “A lot of people would say, ‘Wow, I guess I hadn’t really realized that.’ “

Web search company Google Inc is testing in the United States an online storage bank where individuals can store and access their medical records, the company said on Thursday.Just last week, Google said it was teaming up with the Cleveland Clinic, a leading academic medical center, to test an exchange of medical data that Google says will put the patient in charge of his own records. The electronic system will allow patients to control their records and interact with multiple physicians, health care service providers and pharmacies.

Google said other possible partners include health insurer Aetna Inc, medical testing company Quest Diagnostics, Walgreens and Walmart pharmacies, and hospitals.

Google Chief Executive Eric Schmidt, addressing a Healthcare Information and Management Systems Society Conference in Orlando, Florida, described a secure information service in which consumers store their health records in a Web-based system on Google computers.

Access to medical records would require a login and password, he said. Privacy is one of the first principles of the system, Schmidt added.

“The information in your health record is yours and it doesn’t get shared with anyone else without your permission,” he said.

Asked if the system would make money for Google, Schmidt replied, “Not in the short-term.”

YouTube was hard to reach this week following action by Pakistan to block access inside its borders for its hosting of a “blasphemous” video clip.

Analysis suggests the block was taken up by net hardware that routes data effectively cutting off the site.

But a spokeswoman for Pakistan’s telecoms authority said the problem was caused by a “malfunction” elsewhere.

Dead end

“We are not hackers. Why would we do that?” Shahzada Alam Malik, head of the Pakistan Telecommunication Authority (PTA), told the AP news service.

The Peshawar office of the PTA issued a blocking order for YouTube last week in a bid to block access to a video clip the Pakistani government regarded as “very blasphemous”.

Analysis by net monitoring firm Renesys shows that the problems getting through to YouTube began as a result of the action taken by Pakistan Telecom to implement the block.

Essentially, Pakistan Telecom took over some of the net addresses assigned to YouTube.

Crucially the path it offered to this group of addresses was faster than the usual one used by the hardware, or routers, that speed traffic around the internet.

Pakistan Telecom let this address change propagate to the routers of one of its partners - PCCW.

Routers are constantly in search of faster ways to get the data passing through them to its destination so news about this faster path started propagating across many of the net’s routers.

However, because Pakistan Telecom was stopping the traffic reaching YouTube all the data reached a dead end.

“While it is hard to describe exactly how widely this hijacked prefix was seen, we estimate that it was seen by a bit more than two-thirds of the internet,” wrote Martin Brown of Renesys in a company blog post analysing the sequence of events.

The problems getting through to YouTube were most severe for two hours on Sunday but the problem was cleared up soon after.

Access to YouTube was restored in Pakistan on Tuesday when the video clip was removed.