Om Malik wrote a very educated post about the state of the business of social networking. Because of my side project that became this crazy 17 person company, I’ve been watching the space since before social networking was a phrase that had any meaning.

What Om is pointing out is that is it’s actually quite hard to monetize billions of page serves a month. The biggest problem is it’s simply too much inventory for even the biggest ‘call to action’ advertisers to keep up with, but right behind that the problem is that massive topic-agnostic communities are the opposite of the focused, qualified prospective customers brand advertisers are looking for. My personal belief is that for all the talk and expectations around targeted advertising, I’ve seen very few successes to date for the advertisers or the platform. The big problem I see is that unless you have the scale of say Google Adwords with millions of visitors and hundreds of thousands of advertisers, there’s simply not enough inventory to be meaningful to each target group.

Don’t get me wrong Facebook and MySpace will do great assuming they figure out how to reduce expenses, realize their hypergrowth periods are over and get down to brass tacks on how to make money in the real world and stop thinking they can invent new business models the same way they invent new web features and interfaces.

So it was with great pleasure to get to the end of Om’s manifesto and see Dogster.com (and Catster.com let’s not forget) as examples of how he’s seeing the market change successfully to a much more realistic model.

The way I see it, the market has shifted its focus onto niche social networks, such as those dedicated to sports, music, automobiles and pets. You know, sites like Dogster! They have focused, engaged communities, which means they can attract a higher amount of advertising dollars.

Not only do they have a purpose, but they don’t depend on hit-or-miss behavioral targeting-based ad systems that many hope will one day turn social networks into a gold mine. After all, if you sell dog food, then everyone on Dogster is a potential customer. As for the rest of the sector, it’s only a matter of time before more companies go the way of Tickle, Verizon and CondeNast’s Flip.

I’ve misquoted Ferris Bueller before and I’ll do it again. “The internet goes by pretty fast. If you don’t stop and figure out how to make a profitable business, you could miss it.”

Thanks for recognizing Om.