I have a question: Do you think we should be trying to compete for these users? In order to do that, wouldn’t this instance have to try to grow very large?

I don't mean this instance or any single instance specifically. The idea of the 'defederate Meta' pact is to create a separate network of instances that have all blocked Meta services. That network of instances would have a tiny userbase compared to the network of instances that federated with Meta's services. If a generic user is looking to create an account on an instance then they'd likely just default to the network that has 8 billion users rather than the one with 10 million.

I agree with the idea of smaller communities being more attractive but I think that a social network, like the Internet, works best when it is fully connected with as little friction as possible. Communities and instances can grow or limit themselves as much as they'd like but the entire network itself shouldn't become fragmented.

I think Meta's goal here isn't to take over the Fediverse and own it like they own Facebook. They likely want to be like Google where they control none of the content (and all of the associated costs and legal issues) but provide the core services and ad networks that are so profitable. Google's "content" is the entire web, they simply provide a useful service (search) and, because of that service, they have the ability to mine incredibly valuable data which they use to generate revenue through ad targeting. I think Meta is aiming for this kind of business model so that they can dump the headaches that come from hosting massive amounts of user data/content.

I'm imagining 10 years into the future where you would, instead of using Google's Ad Sense, use Meta's ad platform since it would provide more money from advertisements as the ad targeting is using information gathered from the ActivityPub extensions that Meta develops. Meta devotes tons developer hours to extending the social media protocols so that people use them and Meta profits from the data collection and other services (hosting instances, storing data, etc) that don't require them to actually run a social media website directly. This makes Meta more like an aspiring symbiote rather than a hostile instance that wants to 'take over' the fediverse.

I think that, to combat this, people who are motiviated should be looking at ways to create a software ecosystem that counters Meta dominance. Instead people are looking at this like it's just another instance that they don't like. I think that's a very short-sighted way of addressing the issue.