I think the problem with 1 is that the usefulness of Facebook, for a lot of people, comes from having darn near anyone they ever knew on the platform. There's

I think the problem with 1 is that the usefulness of Facebook, for a lot of people, comes from having darn near anyone they ever knew on the platform. There's the benefit of being able to trivially connect with friends, family and acquaintances by a few degrees. But since that applies to those users too, and the overlap is partial, the user graph grows unbounded. If you limit it in some way, then you necessarily will have some users at an edge with a restricted experience. That's likely very bad for business. With point 2 there's the general overall argument of whether these concrete, codified social networks should exist at all - whether they are healthy to society or people compared to the more limited gossip circles they would be in otherwise. I don't think it's clear cut to call it worse and I don't know if we can put that cat back in the bag even if we wanted to.