I’m convinced that your point isn’t limited to social networks. At the very least it also applies to all kinds of media. The latter is the first (but probably not the last) industry that arrived at a state of abundance. Yet, that doesn’t equate to cockaigne. Neither for consumers nor companies.
What has become scarce, today, is what you call time; I speak of attention (thus my blog’s name: attentionecono.me) but we refer to the same issue. I’m convinced that is going to present a very interesting challenge in the future.
One key to solving for this problem is certainly relevance. The first generation social networks managed to create relevance by having everybody on there. Network effects 101.
But they created a side-effect: As everything and everyone is now on there, it has become impossible for anybody to keep up with all the available stuff/content. Algorithms help. But they come with biases: while they pretend to be about relevance, they really are about stickiness & creating ad dollars.
So yeah, going niche and focusing on relevance is a smart move for new social networks. But that goes for anybody else, too.