In the old days if you didn't have a product that "sold itself" (i.e. loved) then you'd just make it cheaper than the competition.
These days software products are by and large free (your users pay in time), so there is no obvious competitive strategy on similar products. If you don't have evangelical user base that loves your product and spreads it or at least a well defined niche use case, you've literally got nothing.
There is no room for "Facebook but cheaper". Heck there isn't even room for "Facebook but marginally better" anymore.
There's plenty of room for other Facebooks. In fact, there are major competitors to the likes of Facebook & Linkedin & Google.
They just happen to be national companies (russia, china, some european).
If anything. The thought that they have no competitors/alternatives is just a display that SV totally ignore the local non-english competitors (no matter how engrained they are in their market) and generally disregards anything that is under 1 billion unique users.
Actually I think these mostly succeed against Facebook where governments create an artificial environment by blocking Facebook.
Perhaps the most successful of the social networks that competed against Facebook on even terms was Orkut, and it's gone now.
Markets with strong network effects, like social networks, tend to be winner takes all. You'll never upset the market leader by making a marginally better product. If it's not 10 times better AND can't be copied by the leader you've got no chance really.
If Facebook is replaced it will be by people shifting to a different paradigm, not to an incrementally modified version of the same thing.
What if you want to sell users data? Isn't that what most free web and mobile apps are really selling?
I have a lot of great software ideas (great in that I wish they existed and want to use them), but no clue which could actually be monetized effectively. Billions of users seems like a tall order, and not a sensible thing to pursue.
Silicon Valley (or at least the large corps) is very aware of the regionalization of software adoption. Its simply that how success is defined for them is by, as you said, large numbers that often require something larger than small regions.
One of the difficulties of SV is that several people have made the "Facebook for Brazil" or the "X for Y region" but over long term iteration, the regionalized product gets overtaken by a supra-regional product's momentum.
Google had Orkut which was famously very popular in Brazil and India. Network effects couldn't sustain them when Facebook successfully went global and mobile.
I think Facebook acknowledges that they have competitors in china such as weibo,renren and wechat. That's the reason Mark Zuckerberg visits China so frequently to persuade chinese govt in allowing facebook access there to gain that enormous market share.
An increasingly popular strategy is "X but paid". People want to pay for software/products that is a real business, won't get acquihired, and will stay around for as long as they're users.
It's a competitive advantage to charge users. Because when user == customer, your incentives are aligned. People know that.
In the old days if you didn't have a product that "sold itself" (i.e. loved) then you'd just make it cheaper than the competition.
These days software products are by and large free (your users pay in time), so there is no obvious competitive strategy on similar products. If you don't have evangelical user base that loves your product and spreads it or at least a well defined niche use case, you've literally got nothing.
There is no room for "Facebook but cheaper". Heck there isn't even room for "Facebook but marginally better" anymore.