I agree with all of this. I bet Craig does too. What I didn't realize 1328 days ago was that Facebook had solved enough people's social network problems by that point. I came to Facebook late, and never really felt the need for FB or Google+. I saw Alexis Ohanian give a talk at UofM last year. One thing that he related that I recall was that Paul Graham had told him not to fret about the competition (Digg). He said something to the effect of: "Let your competition kill itself. Just worry about not killing yourself." I think that much is possible: it's Facebook's game to lose, not Google's game to win.
It's interesting, though - Digg was making money. Granted, they had to make a lot more money than Reddit; they had like ten times the staff at the time of implosion. But Reddit now has about 5x the staff it did at the Digg implosion and they're clearly attracting talent through options. Yet it not only makes no money, it doesn't even have a profit model. Digg should have won. Its content was fresh _enough_ for what they were doing, and they were monetizing it successfully. They just demonstrated succinctly that they cared much more about monetization than they did about their users and that was that. I read an economics book once that remarked that just because the Soviets lost the Cold War didn't mean the United States won... it just meant they lost second. I remain unconvinced about the long-term health of Reddit. You're right, though; it's Facebook's game to lose.