The concept of social networking was still being defined. Now, facebook is social networking in most people's minds. The concept has been solidified. Google's recent offering does nothing to reinvent the concept.
Also, social networking was still something mostly young people were into. The network-effects now are much greater in magnitude than they were then.
The biggest factor in myspace's downfall was that it was perceived as a "ghetto" (I had multiple people describe it to me as such). People didn't join facebook because it was more compelling, they left myspace because it had degenerated to a ghetto and facebook was the most viable option.
The social networking battle is facebook's to lose, not google's to win. As long as facebook doesn't stumble majorly, they're not going anywhere.
edit: There is a serious anti-facebook downvote brigade going around here.