This essay is a response to Facebook destroys real relationships.
Q. Is Facebook damaging to the ability of people to maintain social relationships?
A. It depends

I think that every argument about Facebook will, in fact, be subjective, since I really don't know two people who use it in exactly the same way or for the same purposes.  However, I think this is itself an argument against the idea that "Facebook destroys social relationships" (which, in a more well-specified form would probably translate best as "The overwhelming majority of ways in which Facebook is used are damaging to interpersonal relationships.") and for the counterargument "There are many ways of using Facebook that are beneficial to interpersonal relationships."  There are a handful of universal features about the way Facebook is used that give it the potential to do more good than harm when used wisely.

Moreover, Facebook would not be popular if it were not solving a problem.  It has created a whole new paradigm of social thinking, of course, which will naturally create new problems (which are then solved, and so on).  But it would be unwise to ignore the fact that there was a problem before Facebook existed and it solved it.  The first problem it solved was this: modern urban life (especially university life, where Facebook originated requires that one manage a larger group of contacts than the evolved human social capacity is designed to handle.  Keeping track of all the faces and names that are attached to them, and their relationships to one another that one is and has always been expected to keep track of is computationally intractable for a human brain. (See this study showing that urban social network sizes are larger--rampant urbanization compounds the problem.)  Furthermore, when Facebook expanded beyond the university setting, it solved another growing problem: in an increasingly interconnected world, more and more of one's contacts are distant and more and more social communities are formed whose only way of interacting is on the internet.  Restricting one's self to "letter-form" personal communications such as email for managing these internet-only social lives ends up being more time-consuming and less inclusive.  Restricting one's self to "asynchronous conversation" communications such as newsgroups and {forum|fora] requires more effort from all parties because it is not an inherently socially-aware medium, and forces social information recipients to mine for that information on their own.

There are a number of other existing problems that Facebook provides solutions for, but rather than getting into them, I will go on to the point-by-point rebuttal:

Trivializing friendship and personal relationships
Summary: Facebook conflates "acquaintance" with "friendship," and so people believe that they have a lot of friends because they have a lot of acquaintances.
Rebuttal: There is a reason that the term "Facebook friend" has entered the American English dialects.  No one actually thinks that being friends on Facebook means as much as being friends in meatspace.  Even though Facebook has chosen to use the word "friend" as a metonym for "social connection", even the Facebook system itself is aware of the difference.  Hence, the implementation of the "friend list" feature, which allows you to categorize your contacts into groups and control how much of your information each of those groups is allowed to see. You can, at the time of adding a new contact, immediately place them into any existing group.  Personally, I use only two categories: "Limited Profile" and unrestricted.  Everyone that I don't know closely goes in the "Limited Profile" category which heavily restricts the information they can see about me.  You can be sure that far more of my Facebook friends fall into this category than the unrestricted one.

Depersonalizing communication
Summary: Facebook users communicate with one another by broadcasting to their entire social network, and the burden of mining this information is placed on the person who wishes to learn about it.  This is not the way social communication is supposed to work.
Rebuttal: Facebook actually provides several modes of communication.  It provides forum-like communication modes in its Groups system.  It provides private messaging, which is just an extension of the email/SMS paradigm.  It provides BBS-like communication with the "Wall" system: a bulletin board that is "owned" by a person: it is found on their profile and contains messages that are to that person but are intended to be public.  And lastly, it contains the "update broadcast" mechanism which is referred to as "status," and this is the messaging paradigm criticized by this argument.

So Facebook contains four types of message: private conversations (PM), public conversations (fora), broadcast commentary (status), and targeted commentary (wall).  This covers about all the ways in which people can interact.  Yet, Facebook is detrimental for only one of these: broadcast commentary is somehow a detrimental form of communication. Why?

Because it is addressed to "no one in particular" and therefore contentless?  Is TV contentless because it is addressed to no one in particular?  Are websites contentless because they are addressed to no one in particular?  This is a ridiculous argument.

Because people use it to convey information they should be using one of the other paradigms for, such as PM? I know quite well that this is not the case.  I have yet to see anyone using status updates as a replacement for one-to-one communication.  If this was the case, then my news feed would be filled with updates containing information only meaningful to specific people.  But this isn't true.  Frequently, they contain information interesting to the entire world.

Is it because the burden should be on the person with information to share it with all their friends on a person-to-person basis?  This is ridiculous.  This would be like saying that one should write a personal letter to every invitee to a wedding.  If there are 300 people on your guest list, there just isn't enough time to do that.  Hence, engaged couple do and always have constructed a single message relevant to all potential guests, and then broadcast that message (the old-fashioned way).

Most likely, it's because the idea of broadcasting information about one's private life is somehow an abomination, because most of one's contacts aren't really interested in your private life.  This is true, and it was once a problem (as any new technology is bound to have) but it is a problem that Facebook has already solved: based on your activity, it heuristically determines which people you are closest to, and automatically filters the information broadcast by those about whom you do not care much.  And if it makes a mistake, electing to ignore all future updates from particular people is a single click procedure.  Note that this also solves the problem of putting the burden on the recipient to manually track and update information about their network.  Finally, every profile contains a history of major changes in their networked social life, including all such broadcast updates, so that if you find you need to "catch up" (in the limited internet social network sense of the term) with a person, you can do so in just a few moments.

Creating the illusion of contact
Summary: Rather than actively staying in touch with close friends, Facebook users passively follow their news feeds, believing that this censored summary of their activities is all they need to know to "be in touch" with that person.
Rebuttal: Along with the common understanding that Facebook friends are really only acquaintances comes the common understanding that all messages one finds on one's news feed are acquaintance-safe, and that to truly be knowledgeable about someone's life, one must directly engage with that person.  Some people push the envelope and share more private information than most with their extended network, but show me a person that believes they are getting the whole story from their news feed, and I will show you a person who doesn't actually have any close friends (or is well below average on the social intelligence scale, which probably implies the former).

As for the rest of the world, they have blithely continued with their normal social lives, under no illusion whatsoever that they could possibly replace it with an internet application.  Really, this argument is rather insulting to people in general.

Marginalizing non-users
Summary: Having a majority of a community's communication happen on Facebook may make it much easier for that community to keep one another updated in a timely manner, but it prevents those who are not on Facebook from receiving those timely updates.
Rebuttal: This is a ridiculous argument.  It would make sense if it were true that a large portion of the communities that used Facebook for their communications contained a large number of people without internet access or who were somehow otherwise unable to access Facebook, but that would preclude those communities from having been able to thrive in a mostly-Facebook-communication setting in the first place, so it can never happen.

Moreover, Facebook is available to everyone with an internet connection.

So what this actually says is "those who stubbornly refuse to create a Facebook account don't receive the benefits of having a Facebook account."  Let's put this in other terms: "folks without email can't get email messages!" "folks without mailboxes can't get mail!" "folks without phones can't get phone calls!" "folks without a web browser can't get to our website!"

Pinning the blame for failing to invest the miniscule time it takes to adopt the predominant communication technology of your community on that technology? That just makes zero sense.

Suggesting self-censorship
Summary: Users must censor the information about their lives they publish on Facebook, thereby limiting the information that friends can receive.
Rebuttal: Facebook provides ways of transmitting information to friends without publishing, and they are frequently used to transmit the "unpublishable bits."  Honestly, providing a venue to learn the benefits of self-censorship is a valuable service that Facebook provides.  Everyone has to learn how much they can trust people with in order to be able to manage the vagaries of real life politics and rumor mills (which, you'll note, existed long before Facebook).

Promoting mass invasion of privacy
Summary: Facebook users face peer pressure to publish as much of their private information as possible, because it equates "being social" and "sharing private information."
Rebuttal: First, this is patently untrue.  Although Facebook is about sharing, I have never seen a single instance of a message directly encouraging someone to share more than they do, or declaim them for not sharing enough.  There is zero evidence in my experience (as a Facebook user for the past six years) for peer pressure of this sort.  Secondly, the privacy controls now actually work and are fairly powerful and discriminating.  The recommended privacy settings are fairly reasonable, as well.

Consuming large amounts of time
Summary:  People spend a lot of time on Facebook and believe that this is equivalent to "time spent socializing," while in fact, they should be spending this time engaging in other sorts of interpersonal interaction?
Rebuttal: This is a mostly valid complaint, but it is not Facebook-specific and it is a manifestation of a deeper problem that exists independently of any particular medium.  There are many people in the world who spend a lot of time doing things that, if they spent them socializing with friends in a more tangible setting would probably be more fulfilled or more socially developed as individuals.  There are people who spend all their time drinking and watching TV. There are people who play so much Starcraft that they die of lack-of-sleep-induced heart attacks.  It's a weighty and prevalent problem.

The only Facebook-specific issue here is the assertion that time spent on Facebook is not "time spent socializing," whereas the users believe it is.  I reject this particular notion in the most general sense while allowing that it may be true in specific cases.  Some things one can do on Facebook are in the interests of maintaining an active social life, and to the extent that time spent on Facebook is spent doing these things, that time is "time spent socializing."

Conclusion
I reject the ability of a person to judge the benefit or harm of the use of any tool just by observing the use of that tool by a limited number of people, and without first trying it themselves.  To anyone that believes that Facebook is detrimental to their ability to socially interact but hasn't tested this belief, try the following experiment (if you value science more than your stubborn, dogmatic beliefs):  measure your level of interpersonal interaction with your friends (in whichever way you like), join Facebook, use it for a year in the way you believe that most users use it, and the measure your level of interpersonal interaction with your friends again.  If you find that it isn't about the same as it always was, then let me know.  I will be very surprised.

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