Toyzone, the e-tailing toy company controlled by PR guru Matthew Freud, this weekend conceded that it will struggle to survive as an independent business.

The company, which was launched in a blaze of publicity 18 months ago, is now considered vulnerable following the defection of three key staff members before Christmas. These include Jo Hall, its former managing director, poached from Toys 'R' Us, and co-founder Peter Norris.

'A standalone internet site operating just in Britain is hard to push through,' admitted the company's chief executive, Paul Miller. He said Toyzone would have to either broaden its product range or sell out to a medium sized bricks-and-mortar retailer.

News of Toyzone's difficulties comes as its main rival, eToys, last week pulled the plug on its European operation, having run out of cash.

To cap a gloomy week in the Freud household, his future father-in-law, Rupert Murdoch, is to write off more than £10 million of his ill-fated investment in collapsed internet firm Letsbuyit.com.

This weekend, Letsbuyit's Dutch administrators are urgently investigating the firm's accounts to establish if creditors can be paid in full.

Last week, Letsbuyit's top management resigned en masse, having closed the company after Christmas in the highest-profile internet crash since Boo.com last summer. Murdoch's BSkyB invested £10m in an undisclosed stake before Letsbuyit's flotation on Germany's Neuer Markt last July. The broadcaster agreed to take over £6m more in shares in a novel 'equity-for-advertising deal'.

Letsbuyit raised £120m in its brief but colourful two- year existence. Much of that was blown on high-profile TV advertising campaigns, including one featuring cartoon ants.