I don't know the actual story with Facebook, but it is worth bearing in mind what many founders of net companies were thinking when they started out.

There tend to be three kinds of stories, and quite often they are all mixed in together.

1) Idealistic stories

There are people that just wanted to make something that they wanted and needed for themselves. They also saw that it would be useful to others, and made it public without much thought of making money from it. e.g. Craiglist, Google, Wordpress. The Google guys interestingly were originally very much from the commerce-and-advertising-is-ungodly school of thought. If you've been around the internet much, you'll know that there is *strong* element of hippie-dom among many of the originators of the net, hence things like the Electronic Frontier Foundation and the Open Source movement, among other things.

2) Build something great, worry about money afterwards

This might well have been Facebook's approach. It's certainly been Twitter's approach, and there was a good deal of this in Google's approach too. The net is such that it can take a long time to figure out the right business model for an idea. Will it work to give away lots of stuff free and hope to sell some premium features? Will it work to charge a subscription? Will it work to put advertising on a site? Many startups for sure take the attitude that they'll figure out how to make money later. YouTube was another of those too.

3) Have a revenue model in mind from the beginning

Not everyone leaves figuring out how to make money til later. There are some things where it's pretty clear what might or might not be a possible revenue stream, and the business plans for that from the outset. For example, if you are building PayPal, it is pretty clear right from the beginning that you a good option is to take a small slice from transactions as your fee. If you are building a site like Basecamp that is useful to businesses, you can decided pretty early on that you will go for charging a monthly subscription.

Now without going to the effort of studying all that it known about the history of Facebook, my guess is that that all three strands were present, but (1) and (2) were much stronger.

They started out building a thing for themselves and their classmates, and for a long time it was just used by Harvard students and grads to keep in touch with each other. One reason they built something that people like is they built something they needed and wanted themselves, and knew what features were useful.

Obviously they recognized pretty quickly that it could take off and be something really big. And their backers probably realized the important thing was to catch the wave, building something good, and scale it up fast, and not worry too much about exactly where the money would come from. (This may or may not be a smart way to think, but it certainly is a way that many tech investors and VCs think a lot of the time!)

That said, it doesn't take a genius to guess that a likely possible source of revenue would be advertising that used the information about people's interests and friendships to offer things they'd be likely to buy.

Obviously Facebook has never had that completely figured out, but they've tried a few different ways of coming at it, including the infamous Beacon.

Overall I don't think there is a mastermind sitting in Facebook with a grand secret plan that's been unfolding for years. But they have been asking themselves for years "So how could we make money from this thing?" And they've coming up with various answers, which may or may not actually work, like: "I know... when my friends buy something FB will tell me what they bought so I'll be tempted to go check it out too".

Short summary:

People's motives are complicated., and there aren't many actual Bond villains out there. No one is smart enough to be that much of an evil mastermind, even if they'd like be. :)

Admittedly though some people are stupid enough to think they are an evil genius and their cunning plan for world domination can't possibly fail. :)

Maybe I'm naive, but I think Facebook started out smallish, then caught fire, subsequently dusted MySpace, etc. I really hope this current info sharing BS is a result of what happens when an entity becomes too powerful and is too widespread. It's not just the social networking aspect of conversation between users. There's Farmville (as we all know) and so much more. We, the members of Facebook, made it too easy to access our stuff. Plain and simple. I never saw any disclaimer stating that they would never share your personal information. If anyone can find a statement to that effect, that would go a long way toward putting the reins on this one.

It's very possible. Any site on the Internet exists to be a database to sell to advertisers, after all. It's just like how with television, the product isn't the television show, but the viewers themselves; the viewers are the product that the TV networks deliver to their advertisers. The show itself is just a vehicle to get those viewers watching.

Now, of course, you can take this as far as you want to. The law is really lenient with this, and recent Supreme Court decisions suggest that it's only going to get more and more so (corporate personhood is well-entrenched, after all.) I think it's a safe statement, however, to say that Facebook has taken it WAY too far, and I just wish there was more of a backlash. There won't be, though. Not over this. It's like the layout changes. People complained for a few days and threatened to quit, but it didn't do anything.

Facebook will only fade out if something more appealing replaces it. Like what happened to Friendster and Myspace and Xanga. They still exist and plenty of startups would KILL for their traffic, but they're not the zeitgeist. If that makes any sense.

A primary income source for all free web sites is advertising revenues and everyone I've ever built (I'm a developer) was intended to make money. But the extent to which it currently is came afterwards.

Facebook was originally created as a social place for college kids to share information about parties, hook ups, wasted stories that parents weren't supposed to be let in on. The whole point of facebook was that you had to have a .edu email address to register.

At a certain point (I want to say 3 years ago) the decision was made to allow high school students to create facebook accounts and that's when it blew up and became what is (an advertiser's dream).