If there's going to be an end of SEO it's going to be gradual, and it will probably remain useful for a few niches. Then again, like the quoted part says Social Media Optimization has a halo effect of SEO benefits, which is no surprise considering that search engines themselves are reorienting themselves to fit the social media paradigm, so we may see this halo effect be more and more pronounced.
Like I said before, I like this trend personally, simply because I find more meaning in social relationships than in those short lived connections we often get from search engines. I suspect a lot of other people feel the same, which may be part of what's fueling this trend. There are connections between data which are useful, and they are always going to be there, but what really matters to us are relationships, and all this connected data are just there to fit that larger context. So the web is evolving to meet us as who we are as whole human beings, not just mere robotic data consumers. The web is beginning to connect our feelings towards each other and stuff we love or hate, not just our technical needs of the moment.
This really sums up the problems we had with building a community on a site that's built just about 100% on the direct match to search terms SEO kind of approach:
They move on. And when your whole audience is these people caught by your site with this mindset, good luck convincing them to stick around and form a community.Search offers a utility relationship, connecting users to content for the briefest of transactions; typically, it provokes users to just one pageview so they can find a piece of information, and then they move on.
As for the rest of the web shrinking I don't think that's so much a problem with the social media paradigm as much as with the current implementation of it. Social media may at some point evolve into something more decentralized or otherwise better conducive to the rest of the web. Then again, I can find positives in this issue just as it is. For example, it seemed like anyone can start a blog and compete with us, but nowadays it seems most people who might have such self-expressive ambitions might just be sucked into doing it on Facebook, and skip the whole "starting a blog" business. This means less content for us to compete with.
EDIT: I forgot to add that when the goal is to build relationships (SMO) as opposed to just traffic (SEO), I think more monetization opportunities open up, beyond just advertising. Relationships imply more than just eyeballs and attention. I imagine it might be easier to do affiliate marketing with social audiences, for example. If they trust you already (as opposed to you being just another random search result to slurp some benefit from and go away), you'll have an easier time pitching stuff to them, so long as you don't overdo it and this stuff is actually relevant to their interests (which you'll more likely have better access to than you ever had through search engines and their analytics).