The Decline of AOL's Bebo Social Network

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Facebook, by comparison, had 462 million. Bebo was targeted primarily at schoolchildren but they have been migrating to Facebook, which is seen as cooler.

Bebo also failed to support some of the most popular social networking games, such as those developed by Zynga, which have a huge following on Facebook – the rival that is hammering the nails into Bebo's coffin. "Facebook took risks and was very focused," Mr Valdes said. "None of its competitors has had its drive."

Bebo's founders left shortly after the sale, as did senior managers including the chief executive Joanna Shields, who later joined Facebook. AOL failed to replace her for a year and the business felt as if it had lost direction, according to experts.

Andrew Thomas, the publisher of Communicate magazine, said: "The innovation has disappeared since AOL took over. When the innovation stops, top people tend to leave."

Analysts believe Bebo could find a buyer, but at only a fraction of its original cost. A similar fate befell Friends Reunited, for which ITV paid £175m in December 2005 but sold last year for just £25m.

Mr Thomas added: "Three years ago, we were dazzled by numbers of users. We now have a better understanding of the value of social networks. Those that have added innovation and accessed a range of different audiences have done well."

Social gaming: Zynga's a winner

Zynga, the social gaming company behind Facebook games such as Mafia Wars and Farmville would be worth $5bn if it was traded publicly today, research suggests. The group's shares currently trade at $9 on the illiquid private market, but would be worth 75 per cent more if Zynga went public, according to a study by former Goldman Sachs (GS) and Sanford C. Bernstein analysts for SecondShares.com.

They said that online social gaming was "huge, growing rapidly and highly profitable". Zynga currently has a pool of 237 million monthly players, and 50 per cent of monthly active users of the top 10 game developers on Facebook. From revenue estimates of $300m last year, the analysts expect Zynga to hit $1bn by 2012.

Provided by The Independent—from London, for Independent minds

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