Michael Birch and his wife Xochi launched Bebo in 2005 after meeting at university in London and the site became the destination of choice for teenagers to chat and share pictures, attracting 40m users by 2008.
But as Facebook and Twitter began their rapid rise, Bebo fell out of fashion and by the time it was sold to AOL, analysts were warning that it was vastly overpriced.
AOL sold it on to investment fund Criterion Capital Partners in 2010 for a sum reported to be as low as $10m.
After buying back the now-bankrupt company, Michael Birch tweeted: “We just bought Bebo back for $1m. Can we actually re-invent it? Who knows, but it will be fun trying.”
The Birch’s own high-tech development team, Monkey Inferno, will try to “breathe new life” into Bebo from offices in San Francisco, where the couple live with their three children, a statement said.