But that’s the perspective of marketers and advertisers – what’s it like for the social networks and the business of monetizing the web’s largest aggregated, engaged audiences? The USA Today ran an interesting piece today about the challenges social networking sites are facing in becoming profitable businesses. And while this story is not new, you can expect this issue to reach a tipping point in the near future.

The big players in the social networking space – Facebook, YouTube, MySpace – each with bloated valuations, all face a series of market forces that are conspiring to complicate both the marketing and monetization hurdles: increasing privacy concerns, a growing $50 billion online advertising industry, more and more new entrants into the social networking arena and the pressure that’s mounting on both marketers and the social networks themselves to effectively – and profitably – exploit the largest and most available online consumers.

The USA Today article includes some interesting quotes that are worth examining: Facebook’s new COO, Sheryl Sandberg makes the accurate point that ‘advertisers follow people,’ but dismissively suggests the obvious difficulty in turning these users into sustainably profitable assets for the company by stating, ‘[W]e have 70 million active members. Once you have engaged users, the revenue will follow in that order.’ Really? If so, how? And if this is simply a matter of allowing economics to take its natural course, when can we expect the revenue – the profitable revenue – to follow? In this context, I’m intrigued by this comment the author makes: ‘It is also conceivable that social networking, like email, will never make piles of cash.’ Now that’s a sobering thought for VCs, social networking sites and advertisers alike – and a topic I plan to explore in a future post.

The first iteration of the web saw the rise and fall – and then the rise again – of the Portal. Though obviously different in numerous respects, the business and monetization challenges between social networking sites and portals are remarkably similar. What portals didn’t do initially was act and behave like media properties – instead, they focused on acquiring millions of users, but with no real plan to turn these consumers, well, into consumers. ‘If you have the right audience and the right engagement, you can build a real media business.’

Stated Tina Sharkey, CEO of BabyCenter.com – a site (I like to think of it as a product) that BSSP led the wholesale redesign of last year. Social networking sites would benefit from adopting a similar mindset and accompanying set of strategies, embracing an approach that will continuously force business and management decisions that turn ‘active members’ into active consumers.

While the Facebook phenomena is a wildly interesting study about the monetization of a social networking platform that boasts some 69 million members, I am more interested in exploring the craze, hysteria and near-panic that seems to accompany the Next Big Thing. Before Facebook, it was YouTube and before that it was MySpace, and before that something else…the point is, marketers rush to exploit these applications or new destinations before we fully understand them and the potential for marketing and advertising to peacefully coexist within these environments.

The decline in Facebook application development activity – already! – suggests that social networking applications may in fact not be the most effective or appropriate way to connect with your audience. Just because you can, doesn’t mean you should. The broader point that I’m trying to make is that it’s not about being first to market, it’s about being right in the market. Be sure your social network marketing strategy aligns with the broader goals of the brand and that the experience you introduce speaks to your audience in a useful, relevant and appropriate fashion.