Most people can't use photoshop or linux. I can, but do everything in my power not to, especially for something as trivial as a social network. But, with photoshop and linux, and when a user fails, they get frustrated and ask for help or give up. With facebook, they unknowingly spew semi-private communications all over the web. You're right- it's a terrible business model for an established company, and one that should have been snuffed out years ago when they still had a chance. It's now institutional, and I fear, permanent. Thankfully, Google appears to be ready to pick up the slack.
A lot of people can't get around Linux or Photoshop at all.
I think most people here can probably make sense of the privacy settings, but facebook has 750 million members. I am certain most of them do not even know where to find privacy settings, let alone know how to use them. Yes, they may be idiots for posting personal data to a site they don't fully understand, but it is reality. Simply trusting facebook not to exploit these people seems naive to me.
I totally fail to see how it can ever be a good business model to encourage users to share embarrassing stuff. Pretty sure, as a private entity who looks out for their own interest, they work to reduce this happening otherwise people would be leaving in doves.