> "I know of absolutely no service which failed because it couldn't scale."
Zooomr did. They came out of nowhere in 2006 and were a real threat to Flickr. They had AJAX-powered editss, geotagging, various other unique features and they were starting to pull in some highly followed followed photographers.
But, the site kept crashing as traffic grew and some scaling problems even lead to data loss. I wanted to see them win but they just couldn't keep up with traffic and eventually Yahoo cloned their features and they became irrelevant.