1. They are supported by paying customers (the advertisers), not just VC money.
2. You don’t need to get rid of VCs, it’s orthogonal.
Just make interoperation/complete API coverage required by law to be available to any user if you have more users than certain amount. It would neuter the lock-in when anyone can make a third-party GUI that has no ads and interoperates with any other social platform (meaning no “all my friends are there” effect).
Yes, legally requiring open APIs and interop beyond X users is the best way forward. There is some tension with allowing product changes and deprecating old APIs though. Maybe something like mandate versioned APIs, and keep old versions around for at least 2 years after newer version is released.
2. How do you fix the incentives short of fixing capitalism to remove software VCs?