AOL has announced plans to expand its personal communications network with the acquisition of teen social networking site Bebo for $850m in cash.

AOL hopes that Bebo's 40 million users, together with its AIM and ICQ instant messaging services, will give the company a good foothold in the fast growing world of social media.

"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 at AOL.

Bebo claims to be one of the leading social networks in the UK, and is ranked number one in Ireland and New Zealand, and number three in the US.

"Bebo's dynamic management team recognises that the internet is less about destination and more about connecting people, culture and lifestyles," said Ron Grant, president and chief operating officer at AOL.

Under the terms of the agreement, AOL will acquire Bebo for $850m in cash. Current Bebo president Joanna Shields will continue to run Bebo and will report to Grant.