Reports are that AOL, having bought social-networking company Bebo for $850 million two years ago, has agreed to sell it for $10 million. Oops.

While we didn’t write anything at the time of the purchase–we were in the throes of finishing the writing of “Billion-Dollar Lessons”–we’ll go ahead and comment now because one of the main mistakes that AOL made seems like it’s being repeated by many others.

AOL felt that Bebo could not only hold on to its users despite the growing dominance of Facebook but could add users. In fact, technology markets like social media tend to be winner-takes-all. VHS vanquished Beta. DOS killed OS/2. Windows Explorer wiped out Netscape–something that should have been in the AOL DNA, given that AOL bought Netscape for more than $4 billion in the late 1990s, then watched the value disappear.

When it comes to networks, especially like social ones, the tendency toward monopoly is even greater than for technology such as operating systems. The math proves this, as David Reed noted in an article we published in our magazine, Context, in 1999.

Yet many companies are trying to build specialized social networks around magazines, companies, products, and so on. In fact, the tools for networking are already out there, courtesy of Facebook, LinkedIn and Twitter, and it’s wiser to build on those tools rather than build your own.