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Update: Kara Swisher has more on the numbers.

AOL has announced this morning that they have acquired social networking service Bebo for $850 million in cash. Bebo has 100 employees operating in offices in the UK, San Francisco and Austin, TX. Bebo is the third-largest social networking service in the U.S. behind MySpace and Facebook. For February 2008, Compete shows 3.5 million U.S. visitors to Bebo, 28 million to Facebook and 65 million to MySpace.

Here is the Bebo acquisition call transcript from this morning.

This is a good deal for AOL. The argument about price and well, becoming part of AOL, will continue for a while as more details emerge and people being to parse the deal.