In this insightful video, Derek Muller points out the fundamental problem with Facebook’s business strategy – and why that problem is a big problem for everyone who uses Facebook.

Briefly, Facebook’s attempt to generate revenue through ads in the sidebar has been a flop, because we don’t go to Facebook to shop, we go there to socialize. And so they are instead monetizing our social interactions, by throttling the amount of our friends posts that we see. They invite us to pay so that more of our friends will see our posts. In essence, Facebook turns us all into advertisers – and that doesn’t bode well either for we, the users, or for Facebook, the business.

Muller contrasts this business model with YouTube, where content providers actually get paid by YouTube. As he points out, at YouTube, the incentives of content providers, advertisers, and YouTube itself are all aligned, while at Facebook the incentives are out of whack.

Derek Muller does a great job of explaining all this more vividly.