It failed because it was completely invisible. Facebook spams your inbox. They make sure you know that you have an account and that people are trying to reach you (or tell the world about their cat, etc). With wave, it's silent. There was activity on a wave I was following in January. I found out about it in March. Someone replied to something I said on July 21st. I'm only just finding out now . What kind of a commun…
Contrast this with Buzz, where they dropped it right in the middle of your inbox. Quite the opposite strategy.
I suppose the solution I favor is to ask the user if they want notifications when they sign up. Or at the very least making it very obvious how to turn on notifications if you want them.
The notification messages were also not very well thought out, it was often confusing what had changed, requiring you to log in to Wave just to read a new message that could have easily been read via email.