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There is a game of chicken between social networks and the stock market. Each new IPO raises more questions about valuations. Those questions may bring more skepticism from investors. The big social network that is the last to raise money may find it waited too long. That makes timing a much more important matter than it seemed just two months ago before LinkedIn (NYSE: LNKD) began the process to go public.

Groupon filed its S-1 yesterday. Most analysis of the document shows that the coupon firm will raise $750 million at a $30 billion valuation. That could change as bankers gauge demand. Groupon has lost $540 million since 2008. Its revenue in the first quarter of this year surged to $644 million, but it still lost $103 million. Groupon’s losses may break the back of social network IPO valuations which were set remarkably high by LinkedIn.

It is obvious to say that there is only so much demand in the market for social network stocks, but up until recently that demand was seen as almost insatiable. Now there are rumors that Zynga, the Facebook game company, has hired Goldman Sachs Group (NYSE: GS). The company’s value has been set as high as $8 billion.

Facebook is expected to go public next year, and Twitter may have an IPO about the same time. Facebook has been valued as high as $70 billion, and Twitter as high as $20 billion. Each may regret waiting as long as they plan to. There are several things that could make their IPOs disasters, at least from a valuation standpoint.

The value of the stock market has been nearly straight up since the March 2009. But, the rally has shown signs of flagging as bad economic news has increased along with inflation and employment concerns. IPOs values cannot entirely dodge the broader movements of the market, and that movement could be sharply downward next year.

Another factor in the value of Facebook and other social network companies that wait until next year is that their predecessors into the market will post weak results. Investors assume that these firms are still on the path to growth rates of four or five times year-over-previous-year. It will only take a single earnings stumble from LinkedIn or Groupon to reset the value of the entire sector lower.

The insatiable demand for social network shares could run into a dearth of interest. Valuations are already viewed as much too high by skeptics who question whether these companies are the next Google (NASDAQ: GOOG) or the next Pets.com. Investors may eventually be drawn to another sector. That happens frequently. Search was once a hot business. But, Google’s shares are well down from their all-time high of $747.

Finally, there is the problem of competition. Facebook, Twitter, Groupon, and LinkedIn are often described as companies with large moats. That is only true until another disruptive technology comes to market. MySpace learned that lesson two years ago.

Facebook, still a year away from its IPO, may want to accelerate the process quickly. There is no guarantee social networks will be considered as attractive in 2012 as they are now.

Douglas A. McIntyre