Facebook - Looming Social Network Monopoly, or Hint of Open Future to Come?

I was having dinner with friends this evening when the discussion turned to Facebook. A concern was raised - is Facebook becoming a monopoly? If the value of a network expands with the number of nodes on the network, one could argue that Facebook is close to achieving serious market power in the social networking industry. According to the latest stats, Facebook now boasts 150 million members. That's nothing to sneeze at.

However huge their market share at the moment, what market power does Facebook really enjoy? Social networking applications are easy to build and promote. Infrastructure costs for nacsent Internet properties are minimal. Open Internet protocols and public APIs, the hooks that systems expose to other systems for communication purposes, make connecting to Facebook and other sites a snap. 

Facebook has a very good position today, a position built on innovation. So what could knock it off its perch? More innovation. Sooner or later someone will come along that will out-Facebook the people at Facebook. That's just the nature of the Internet, which makes the process of creative destruction almost effortless. You disagree? Just consider that Twitter, the current doyenne of the technorati, has a staff of 29. YouTube, when it agreed to a $1.2 billion buyout, had a staff just north of 120. When is the last time 100 people made a billion dollars worth of anything?

My current thinking is that within five to ten years, social neworking sites will evolve into an interconnected web of systems using standard APIs and some form of shared identity management. That approach will be a huge boon to users but will tend to undermine the market advantages of market leaders like Facebook. The current patchwork of identity plugins (give Facebook your Gmail credentials to import contacts) will not scale over the long term and must be replaced by a more robust, open system, giving customers a better experience and challengers in the space an opportunity to carve out their own niches.