• GigaOm, Monday, June 16, 2008 11:30 AM

GigaOm's Om Malik says the social networking sector is going through a "harsh, but necessary, sanity check." For starters, comScore reported plateauing growth for MySpace and Facebook in the U.S. Lower down the sector rung, Revision3 canceled a video show dedicated to social networking called SocialBrew, while Monster killed its social networking service, called Tickle, and Verizon shifted its little known social network to Facebook.

Malik claims these moves indicate that the plethora of Me-too networks out there are finally starting to shake out, due to a lack of monetization. Indeed, social networking is hard to make money from; eMarketer recently downgraded the sector's expected spending, from $1.6 billion to $1.43 billion in 2008. The market research firm expects Facebook to make $265 million and MySpace to make $755 million this year, instead of $305 million and $805 million, respectively. That means the big two will account for $1.02 billion of the expected $1.43 billion spent on social networking this year, leaving an awfully small pie for the also-rans.

EMarketer also calculated revenue per unique visitor for its study, finding that Google makes $65.55 per unique visitor, while MySpace and Facebook make $12.85 and $11.79 per unique visitor, respectively. When you consider the lowered revenue estimates and the fact that social networking traffic growth in the U.S. is plateauing, what you get is tough times for social networking going forward, Malik says.

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