Rumors are running rife that Yahoo! is set to buy social networking site, Bebo, for as much as $1 billion. The story, started by The U.K’s Telegraph has been circulating widely - speculation is now the name of the game.

TechCrunch states,

“The Telegraph isn’t exactly known for breaking tech M&A stories, and the rumor has an exceptionally weak source - “according to silicon valley gossip” the article says. That sounds like something the Telegraph’s correspondent overheard after ten or twelve cocktails last night at a party. And while I don’t doubt that Yahoo is sniffing around Bebo, $1 billion seems a tad high for the service.”

Is Bebo worth it? According to leaked documents, Yahoo! would have been willing to pay up to $1.62 billion for Facebook before talks fell through last year. In the last year interest in Bebo has also risen, with British Telecom rumored to offer $550 million in July 2006 for the company, and Viacom entering the scene a month later.

Bebo is much smaller than both MySpace and Facebook; however, they hold the major share of the UK social networking market and could be the entry into market that Yahoo! is looking for. According to ComScore, Bebo has 13.7 million unique users per month, each viewing an average of 20 pages per day! A bid of $1 billion would see Yahoo! paying around $73 per unique visitor, “which is certainly an acceptable cost per acquisition”!

Regardless of whether the offer is rumor or not - news that Yahoo! may be set to acquire social networking site Bebo has seen Yahoo! add 78 cents or 2.7% to its share price on the NASDAQ. If just a rumor has the market jumping (even a little bit) just imagine what could happen if Yahoo! actually do make the purchase!