It is difficult to argue with the data; however, I wonder about three possibilities that may explain the data:
1. if the universe of social networking consumers has plateaued for the time being, and/or
2. if the social networking consumers are finding new need-specific social networking sites beyond the generalist sites like MySpace and Facebook (consider a specific site like Wesabe), and/or
3. if consumers are creating their own social networking sites and, thus, relying less on a generalist site provider and more on their own ingenuity.

I am in the camp of “all the above” with an emphasis on the third option. Your blog, its tags, links and this correspondence are all a case in point.

As for advertising not working on these sites, I would agree. As for consumers going to other sites because of this advertising, I would agree, too.

But I wonder if the reason they are going to other environments to “escape” the advertising is a result of the content quality rather than the vehicle. Said differently, an interesting message, regardless if it is an advertisement or a piece of entertainment, always wins. I would argue that most brands that advertise online, on MySpace and on Facebook still operate from a pre-Web paradigm rather than a one-to-one, conversational approach. Thus, the consumer exodus.

Here is an example of a company/brand that I think has done a good job recently of creating a quasi-social networking environment on its e-commerce site: Burton snowboards (which is mentioned in your list of innovative companies). Check it out: http://www.burton.com/Default.aspx

Matt Hanson