Bebo, Britain's second-biggest social networking website, has engaged the investment bank Allen & Co amid speculation that the Anglo-American company could be sold for more than $1billion (£510million).

However, sources close to the company downplayed talk of an immediate sale.

The investment bank has been engaged to ensure that Bebo is properly advised should a substantial offer, or a meaningful partnership opportunity, emerge for a business that is largely owned by its founders Michael and Xochi Birch.

Viacom, the owner of MTV, Google and CBS, the American television network that also owns Last.FM, have been touted as potential buyers. Microsoft has also been named, although the software giant is engaged in a battle to buy Yahoo! after making a $42billion hostile bid.

Bebo has required little external capital in its rise to become the country's most popular social networking site after Facebook. It was founded in 2005 and said that it was profitable

a year later. Its principal external investor is Balderton Capital, which paid $15million for a stake thought to about 18 per cent shortly after the business started. It is not thought to have raised cash since then.

Bebo is the sixth internet company to have been set up by Mr Birch, a Briton, and his wife, who comes from California. Their stake could be worth as much as $800million after a relatively modest start-up investment of no more than a few million dollars. The couple, who met in London, are based in San Francisco.

Bebo, which is popular with teenagers in Britain, has 11.2million monthly unique visitors compared with Facebook's 12.5million, according to figures for last December from the data collector Comscore. MySpace, the world leader, which is owned by News Corporation, parent company of The Times, had 9.3million.

Bebo is not significantly different from any other social networking site, but its younger audience has seen it embroiled in controversies such as the role allegedly played by the internet in glamorising suicide.

In the United States, Bebo lags far behind and its decision to retain the New York-based Allen & Co, which is well known for specialising in North American media deals, signals a desire to attract a local partner. MySpace had 68.9million visitors in the United States in December, when Bebo achieved only 4.3million unique users.

Valuing the fast-growing social networking sites is not simple. Facebook, which is privately owned, persuaded Microsoft and Li Ka-shing, the Asian billionaire, to invest $200million on a valuation of $15billion in the autumn, a move that is understood to have persuaded Bebo that it needed to have a bank on board.

Rich Greenfield, of Pali Research, said that MySpace was worth “easily $5billion to $10billion”. The limited availability of financial information has made it hard to calculate a more precise estimate.

In an interview two years ago, Mr Birch said that he was not “looking to sell”, although Mrs Birch said that “it wouldn't be bad” if the couple got rich from a windfall.

Mr Birch said: “I'm not planning an exit, but I doubt we will hand it down to the kids, even though my daughter has said she wants to work at Bebo.”

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