Facebook is caught between a rock and a hard place with regard to user privacy. They already take a lot of flack from users who don't like what they perceive as Facebook's lax privacy protection. Facebook can't simply dilute it further without risking a flood of protest from its users. It can't afford that. That's not to mention the various state and federal privacy regulations already in place that will also constrain them.
Oh, and don't count out Google+ as competition just yet. Google isn't going to declare defeat in the social media space any time soon. They recently completely revamped the Google+ interface and have shown that they're in it for the long haul. They will be waiting for Zuckerberg & Co. to stumble and give users an excuse to jump ship. I suspect they won't have to wait long.
Of course, the investors will be howling for Facebook to bring in the numbers, especially now that GM has announced yesterday that they are cancelling all of their advertising on FB due to its lack of effectiveness. You can bet that move has caught the attention of every other large advertiser. Facebook is in trouble. They have very little maneuverability to enhance their revenue stream and a lot of pressure to do so. Something's got to give and I predict it will not be pretty for either FB's bottom line or their stock price.