The game of building a facebook dependent start-up has many possible outcomes but we could break them down this way:
1. Destined to lose. Nobody wins, not FB, not YC, not founders. All three parties joined in making a mistake. Oops. Boring case.
1a. Destined to win barely. Maybe YC finds a break-even exit. FB is incrementally helped. Maybe the founders are happy or maybe restless. Boring case.
2. Destined to win big by unique, non-replaceable opportunity. E.g., Founders have an exclusive contract with Bob Dylan and their product is going to go big... they can stay independent. They've got an "f.u." contract with Dylan. FB wins a little on the margins of the revenues of the new firm. YC and the founders win really big. The only problem is, such unique, exclusive opportunities are rare.
3. The start-up OR AN UPSTART COMPETITOR (most often Facebook itself or a better "friend of FB") will win big and it's winner take all. This is half of the case that has Jason Calacanis' panties twisted. FB can often (we presume, act as if we knew to be true) brute force the firm out of the market by replacement or force them into an early acquisition with the threat of replacement.
There are two sub-cases:
3a) Facebook's dominance as market-maker cum market-player is hostile towards YC and the start-up. FB wins. YC and founders essentially break even or worse.
3b) Facebook is in a cooperative mode (e.g., FB invests products and services in the YC firms and then dominates by friendly acquisition or similar). FB wins big - low stakes and high return on their perceived value as market maker. YC wins non-stellar but more reliable returns: a respectable interest rate on 20K outlays. That's a sweet spot for YC (they aren't playing the lottery, they're managing a fund). Founders get, in effect, a very modest bonus and then either a (likely crappy, per Jason) job or just a nice bullet point on their C.V.
Uncompressed, Jason has a reasonable concern I think. There's a new case where founders barely win and wonder if the struggle was worth it, while YC and FB are quite happy.
And, nobody asked, but I think YC's fundamental mistake is interest in funding FB-related start-ups at all. The problematics of letting one particularly odd firm create and dominate a market like that are such that I think YC should generally shun the unfathomable risks and complexities.
I see the deal as YC submitting a bit to FB's domineering tendencies because by submitting on these terms, YC does OK and the founders aren't creamed. A better solution (in my biased view) would have been to decide just to not fund anything that cares about FB's actions at all.
4) You build a win-big type company that is outside Facebook's area-of-expertise but leverages the advantage the Facebook's platform give you.
Takes games for example. Facebook itself doesn't seem interested in writing games for it's platform. Yes, it's true they want you to use their in-game currency, but that's just a platform tax, not competition against your business.
I suspect location-based-services are similar. I doubt Facebook wants to compete with the game-based mechanics Four Square is building. There is still a question as to if Facebook will go after the coupon market, though.
There are also businesses where you may be able to build traction on the Facebook platform, and then pivot off it if required.
I'm not sure exactly what you mean by your (4) that isn't already in my (2).
Assuming that your (4) really is something other than my (2) or a subset of my (2): how big do you think the opportunity of (4)s is, realistically, over the next 5-10 years, from an investor's perspective?
Maybe it's the same as your (2), or maybe Facebook makes more than a small amount from it.
In any case, I think it's a mistake that you dismissed this as The only problem is, such unique, exclusive opportunities are rare. Big winning companies are always rare, and there are always a lot more ways for them to fail than them to succeed.
I think it would be a big mistake to ignore the opportunities here and shun the unfathomable risks and complexities. There are always risks and complexities, and any kind of partnership increases the complexity. That shouldn't be something people should run away from, though.
How big do I think it is over the next 5-10 years, from an investor's perspective?
I think it could be huge. Zynga seems to be doing pretty well, as do all the other social app vendors (Slide etc). But there are a lot more opportunities than Zynga have covered, both in the gaming as well as the non gaming market.