Bebo founder Michael Birch back at the social network

beboMichael Birch, the founder of online social network Bebo, who sold the company to AOL over two years ago for a spectacular sum, is linked up again to Bebo as an investor and advisor.

“I’ve been watching this space with interest and thought it was a good opportunity to get back and get it back on track,” Birch said.

Birch and his wife Xochi launched Bebo in 2005 and watched it become one of the most popular social networking sites among young adults in the U.K. It caught the attention of AOL, then still hitched to Time Warner, which bought Bebo for $850 million in March 2008 in order to gain access to the site’s 40 million users and to expand AOL advertising sales in markets outside the United States.

The deal turned out to be another ill-timed acquisition for AOL as months later the financial crisis hit.  The AOL spin-off from Time Warner only fanned speculation that Bebo was not long for the world under a new AOL management team headed by Chief Executive Tim Armstrong.  Indeed, AOL sold Bebo to Criterion Capital Partners for around $10 million in June.

Ever since, Bebo has lost even more ground to other social networking sites, including Facebook, which continues to dominate the space.

Make way for AOL

Today marks the beginning of the end of what is probably one of the most disastrous media mergers in recent corporate history — AOL and Time Warner. In 2000, AOL shelled out nearly $150 billion for Time Warner, but things didn’t quite work out as planned.

The folks at Time Warner have given ample hints that a separation from AOL was inevitable, especially as part of a strategy shift that will (hopefully) result on the media conglomerate returning to its core business. Hiring former Google executive Tim Armstrong to head AOL had created even more speculation that the split was coming soon.

Now that the spin-off has happened, what lies in store for AOL as an independent company? In January, AOL said it will focus on three areas: content, advertising and social networking. But things haven’t exactly been rosy at AOL, revenue-wise. So for the time being, it gets to hold on to the access line business, which loses value day by day as more people move to broadband, but still generates enough cash to make it an asset worth coveting.

UPDATE: AOL’s buying spree

kickapps-logo.JPGThe ink has barely dried on AOL’s $850 million proposed purchase of Bebo, but reports of another deal are already percolating. AllThingsD’s Kara Swisher reports AOL is seriously considering buying New York-based widget-maker KickApps for $90 million.

KickApps makes widgets to order for a broad range of companies, such as a car search widget for Autobytel and a social community for Time Warner’s CW TV network’s “Gossip Girl,” Swisher says.

Investors Softbank Capital, Prism VentureWorks and Spark Capital and others have dropped $17 million into KickApps.