[timdorr]

When they got rid of Networks. As they moved outside of schools, the natural grouping of everyone in the system around your college (and later by company) was lost. The Groups feature never really re-captured this kind of dynamic because the new groups are inherently smaller and not forced.

Another big factor was the introduction of the news feed. Now people are doing the same thing as ads (though, on a smaller scale) by posting updates and having them read through the news feeds of their friends. The old 2004 ads were the only way to communicate between users without posting on their wall.