Everyone, or at least 1 out of every 10 people in the world, has a Facebook account.
People seem to like connecting with friends and relatives, keeping up with what's new in their lives, and sharing what's going on.
But do those two things have to intersect? I don't think so, despite the enormity of Facebook's size and ubiquitousness. Most people I know on Facebook don't really like it much, but stick around because it's the only game in town. Generally everyone is aware of how Facebook is dying to make money off of them, the complexity of the settings, the constant changes, the fear that the next little game or app that you give rights to will steal everything you own. It feels like a benevolent dictator that you are never quite sure might not suddenly become a monster.
The history of business has shown that it is quite rare for someone to dominate indefinitely no matter how large the market share might be. The history of internet related businesses is full of people who ran the table only to be run out of town by the next big thing. Facebook is huge yet as vulnerable as anyone.
For one thing, Facebook doesn't really make money, in 2010 something like $1 per account, which is chump change. So if they have an IPO they need to generate a lot more income to justify the business, which means making it off the users. No on yet has figured out how to make billions and billions of dollars off of people who have no interest in paying anything to talk with their friends.
So why try to compete with a giant? Why approach venture capitalists (or even your own pockets) with ideas of competing with the largest non-search, non store company?
Because it's fun to do what other people think is impossible. Taking on giants is what the internet is best at, witness the succession of huge companies that didn't exist 15 years ago, 10 years ago or even 5 years ago. Creating new websites and web systems is so easy today any competent bunch of people can develop at idea into an internet destination in a very short time. With enough smart people trying enough ideas all at the same time something is bound to be successful.
I doubt anyone will ever come up with a pure internet company that makes Apple kind of income and spread of products; when I read about how much money people invest in stuff these days I wonder how the companies that result will ever justify the investment of anyone other than the early investors. But it doesn't stop them from pumping money into everything. So why not another Facebook? It's just as likely something will come along and replace it as it did MySpace or the death of AOL. It might take a while and lots of tries or happen overnight, you never know.
After all what is Facebook offering besides all the connections you have with friends? Games, most of which you can get elsewhere. Funny little apps? Chat which you can get elsewhere. An API for applications to let you connect with your friends; sure it's convenient but nothing something else could not provide. Basically Facebook wins because everyone is on it. It's like saying horses are the transportation of the future back in 1890 because everyone is riding them. But today you don't have to invent the automobile or even have a factory.
Some people are trying to replace it, but the numbers are way to small in my opinion. The folks at https://joindiaspora.com/ are certainly trying the hardest but I wonder if they have investment at all.
Personally I would rather have something that was simply (1) private first (2) allowed me to share text and media with my friends (3) had a nice sharing API. After all, what matters to almost all of my friends is the network of friends, not where that network is hosted. Ideally what I want (and probably most people) is ability to get these things but not be locked into one site or system or company. After all I can call my friends on the phone regardless of the carrier (though sadly there are fewer and fewer options there); I have a phone number and list of my friend's phone numbers and that is sufficient to make a network. I just want something like that but on the internet.
There is absolutely nothing in Facebook that makes it the only option for social connecting. Even Twitter, the other darling of the social set, has nothing special other than volume. Ultimately both of them are simply two ways of connecting people together but hardly the only possibilities.
So never give up on an idea simply because the competition has 700 million subscribers. Pick up a stone, stick it in your slingshot and fire away.