London, England (CNN) -- Do you remember Bebo? AOL bought the hot social networking Web site for $850 million in 2008. This week, the company threw in the towel -- Bebo will either be sold or shut down in 2010, according to an internal memo.
How did Bebo devolve from an $850 million sale to a dud in two years? And how do we tell whether the Web startup du jour is a long-term bet or a passing fad?
The fall of Bebo and MySpace
Bebo was once a real contender -- it rose to become the United Kingdom's biggest social network in 2007, according to comScore. Following News Corp.'s $580 million acquisition of MySpace in 2005, leading Web companies were desperate to have a stake in the social networking game, and multiple suitors were said to be appraising the site. In May 2007, it was rumored that Yahoo may acquire Bebo for $1 billion -- but it was AOL that scooped up the service the following year.
MySpace too turned out to be a bad bet: It has long since conceded the social networking crown to Facebook, and continues to be an albatross for News Corp.
The reigning social networking champions come in the form of Twitter and Facebook -- but who's to say they won't go the same way as Bebo and MySpace? Won't users just hop to the next hot social network when it comes along?
It's unlikely that Facebook and Twitter will fall off a precipice this year -- although they soon will if they cease to innovate.
The signals of success are numerous -- from investors to market positioning to their founding teams. Key among those seems to be the need for continued innovation and consistent service: MySpace in fact stole its lead from Friendster, which struggled to maintain uptime as its popularity spiked. (Friendster has since become popular in Asia, particularly the Philippines.)
Bebo, meanwhile, was a MySpace clone which was able to gain an early foothold in U.K. schools -- it too lacked a long-term vision beyond getting big fast.
Fittingly, MySpace's failings were similar to Friendster's. A lack of technical innovation led to crowded, slow-loading profile pages, spam messages and a slew of hacking attempts. MySpace also failed to keep up with the rapidly evolving demands of Web users: While Facebook introduced its continually-updated "news feed" in 2006 (the year of Twitter's launch), MySpace took more than a year to respond with a similar feature.
MySpace stagnated; Facebook blossomed.
A similar fate awaited Bebo: Post-acquisition, innovation ground to a halt and U.K. users embarked on an exodus to Facebook's more fertile shores.
The platform play
Facebook and Twitter aren't banking solely on their own technical prowess to keep things fresh. For both companies, survival is about the innovative services that developers build on their platforms.
From Twitter photo hosts (TwitPic, YFrog, Tweetphoto) to the countless Web sites leveraging Facebook Connect for their log-in systems, these companies are enabling Web developers to discover new "use-cases." This month, both will host developer conferences which aim to foster innovative new ideas and developments around their respective services. Neither Bebo nor MySpace were able to cultivate such healthy ecosystems around their products.
How do you build an $850 million fad?
Simple: Start strong, then fail to evolve. Just like Bebo.
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