Some people don't mind this, but I for one don't want Facebook, MySpace, or any other social networking site knowing who my friend are or what I'm sharing with them. It's simply none of their business.
The only hope I see for a truly privacy-respecting social network is a distributed, peer-to-peer network. That way you'd be communicating only with those you know, at least in principle.
But even there there are major problems, such as the need for information to travel over untrusted hops to get to its destination. Encryption can help with some of it, but would still be subject to traffic analysis. Maybe a social network could be created over TOR. I don't know.
Still experimental though.
It is probably more likely that people are tired of Facebook, and aren't using it as much.