A story today in the FT reminded me of a conversation I'd had with a friend who is the head of a media buying agency a few weeks ago about how Facebook (and maybe Twitter) are becoming "dumb pipes" (more charitably, "platforms"). The argument: FB and Twitter are fostering large and growing economies (for free) that are (or will be) larger than the revenues of FB or Twitter themselves (if Twitter eventually does have revenue). FB and Twitter bear the expense of supporting these economies, but generate no revenue from them (or precious little given the ad rates on social media sites).
Case in point: my friend mentioned that his clients had spent "tens of millions of dollars" in the past 12 months on marketing activities that leveraged FB (e.g., marketing campaigns using FB groups, FB apps, etc.), but that none of the "spend" was on FB "advertising", so FB received no revenue from the "tens of millions of dollars".
The same may well be true for Twitter, although, as I've argued elsewhere, Twitter may well become a valuable company despite never having substantial revenues (a la ICQ, Hotmail, YouTube, et al.).
Interesting challenge for FB (and Twitter and MySpace) to figure out how to monetize the robust and growing economic activity that takes place through their "pipes" (on their platforms) in ways other than putting display ads on the page views generated by the economic activity.
Kind of like some challenges facing the providers of other potentially "dumb pipes": cable MSO's, phone companies, wireless carriers, etc.