In the long term, I think Facebook has the potential to become the defacto search engine probably partnering with Bing, with search results more relevant and personal, and rake in all the ad revenue. But that is far away. In the medium term to long term, I think Facebook's Instant Personalization feature has a brighter potential.
Think of Facebook as an information bank, your information bank. You have stored your info about friends, photos, likes, dislikes etc) in Facebook. This data is persistant, and as you browse through the web over time, a trail of your likes, fan pages, etc, if mined and organised according to context, can give a wealth of information. If you store your money in any bank, (in a savings account), you get interest. What do you get for storing your information in Facebook? What will Facebook get by allowing you to store your information and keeping track and organising your information? The answer to that lies in facebook's potential to make the web infinitely more relevant to you, for the given context at every point in time. As a facebook user, you will get relevancy, and trusted information to consume as browse through the web. Facebook will monetize from the business houses that need this information about you; I think this is a more stable strategy for Facebook.
Example: Take Yelp. One of the partner sites for Instant Personalisation.
As a Yelp user, if I search for Indian restaurants, I am confused by all the reviews I get to read, (organised by time). I dont know who is who, and I dont even know who is real. But, say somehow, when I search for Indian Restaurants in bay area, in Yelp, I get reviews organised by those written by my friends, and ordered by those written by Indian users (who share the same taste sense that I do), would it be more useful to me or not? I think yes. So how can this magic happen?
Facebook's instant personalization. Facebook could charge for this data. Facebook, shares your data only if you have explicitly authorized. You will authorise facebook, only if there is value for you - in this case, more relevancy in reviews leading to a happier dining experience. This information about you is dynamic. It will keep changing - you will keep adding friends, have more likes, do new things. So Facebook will continuously organise your information in a way useful to the businesses and share it with them so that they can then make the web and life more relevant for you because you want it that way. And businesses could pay Facebook a contracted amount, or per server call (each time the site makes a call to Facebook servers to request information about the user);
Privacy Concerns - What about them?
Of course, there are going to caveats and road blocks. Facebook cannot share all the information about you, and all the privacy concerns are going to be there. But they will soon fade away. See the trend about privacy concerns in the last 10 years. People are more and more willing to trade their privacy for relevancy and personalised experiences. Today, more and more people are using their real names in the web, especially in professional forums, because that is the identity they want to share about themselves online. Adoption rates for using credit card numbers in eCommerce transactions is another indicator this effect.
Facebook Connect is the first real workable alternative for SSO -single sign on - in the web. As it catches us, the web will be Facebooked all over. There will be a tipping point beyond which people will increasingly find it useful to connect their Facebook accounts because it is useful for them to do so, usefulness having derived from the increased relevancy owing to the presence their facebook network in those sites. A subtle network effect. By then, I expect people to increasingly give up their control on their data privacy, and this phenomenon will only get accelerated by institutional and technological measures erected to ensure that information is not misused.
Summary:
Using the Instant Personalization feature and Partnering with other online portals where the users hangout/transact/entertai
