Monopoly Power


Facebook shouldn't own the social graph created by the users of Facebook, but Facebook wields control over it, and extracts monopoly rents from it. Network externalities make any competing product inferior due to a weaker social graph. Even Google with Google+ was unable to compete with Facebook.

Facebook's purchase of potential compitetors Instagram and WhatsApp further prevents competition.

Capitalism works because competition allows consumers to reap any surplus. Capitalism fails with monopolists because the lack of competition hurts consumer welfare. This presents a classical case for the need for government regulation.

Facebook's power is so total that it is even able to insert advertisements into streams of posts amongst friends. This represents an unacceptable intrusion of commercialism into personal space.