The biggest challenge for popular social networks thus far has been finding sustainable ways to turn their massive audiences into massive piles of cash.

That could be the least of their concerns very soon, however.

If Google’s troubles monetising social networks coupled with Facebook’s leaky financials weren’t worrying enough for players in the social networking space, comScore’s release of user engagement metrics for popular social networks might be cause for even more concern. It looks like the novelty is wearing off.

Some of the engagement metrics that should be of most concern to those in the social networking space include:

  • The average Facebook user spent nearly 200 minutes on the site in February 2007. This declined to nearly 170 minutes by December 2007, with a steady monthly decrease seen in each of the months leading up to December.
  • In December 2006, the average MySpace user spent around 235 minutes on the site. In December 2007, this was down to just under 180 minutes.
  • The time users spend on Bebo and Friendster has dropped by 50% and 75%, respectively, over the past four months.

As Silicon Alley Insider correctly observes:

“It seems to be an industry-wide issue. The total audience of U.S. social networks seems to be stuck at a low-to-mid-single digit growth rate, while the engagement metrics are falling for just about everyone. This is not good news for social networks.”

Most of the hype and investment in the social networking space has been based upon the assumption that the popular social networks would not only continue to see solid audience growth, but would continue to serve as a new  “medium” where consumers can easily be reached and engaged, making them advertising cash cows.

Of course, the fact that social networks are seeing slower growth and that users aren’t spending as much time using them was very predictable.

I have been just one voice stating that the social networking market would inevitably cool off.

Anybody with a basic understanding of economics recognised that all markets are finite and that there would come a time when social networks would inevitably see slower audience growth as they captured large portions of the potential market.

Furthermore, anybody with common sense (or who has been around long enough to remember previous Internet fads like Geocities) probably recognised that social networks are little more than the modern equivalent of past fads and that, eventually, consumers would find “the next big thing” to become infatuated with. The psychology that fuels the growth of fads eventually fuels the decline of fads.

If consumers continue to demonstrate that social networks are becoming blasé, social networks will find themselves in considerable trouble.

Right now, their inability to effectively monetise is made forgiveable by virtue of the fact that they represent one of the most talked-out platforms for reaching consumers.

Because the popular social networks can deliver a large volume of advertising inventory, many advertisers have been eager to experiment and throw money their way despite the paltry results.

As the novelty of social networks wears off and more users start to spend their time elsewhere, it will be increasingly difficult for social networks to get a free pass.

They will lose leverage with advertisers and will urgently need to find ways to deliver tangible results (I suspect Mark Zuckerberg might hear the word “ROI” for the first time in his life).

When you consider that companies like Facebook have scaled their operations at a foolish pace and that it now appears that even the Googles of the world will not be immune from economic slowdown, it’s clear that social networking companies may find themselves second guessing some of their decisions.

While I do not expect social networks to disappear overnight and there is value in social networking, this value has been heavily exaggerated and a reality check has been long overdue.

Expect 2008 to be a make-or-break year for many social networks. If they want to become the valuable companies that they like to think they are, they just might have to start delivering like them.

Perhaps the most amusing part of the inevitable decline of social networking from its peak will be that the idiotic publications that fuelled the hype, such as BusinessWeek, will have to start fuelling the bust.