Because they are still serving an ad in that spot, just one that costs the advertiser more as the now have to bid in a larger pool.

FB actually ends up profiting pretty well from this change (at the cost of losing some of the small business advertising that was priced out)

Targeting larger pools should reduce per impression costs, because FB has more options for where and when to place your ad. Smaller groups have fewer opportunities, so if you want to show your ad to them specifically, you have to pay more.

No, this isn't right - because FB can no longer tell you as much information about the ad they're about to display, they're going to collect less money for it.

They can't correlate that ad to an action, which means they can't make you a happy chart that says the ROI is there. So you're going to pay less for it.

This isn't going to harm small businesses no matter what FB says.

That's one possibility. I'd like to offer a second one: that Facebook will charge the same amount and we are going to pay it. It's not like there are that many successful Facebook clones around.

Except that's not how the ads work. They're all being bid in real time, by both people using FB tools (small biz) and 3rd parties.

Whoever submits the highest bid wins that ad impression. Less information will mean people bid less, and the targeted ad prices will revert to their less targeted peers from a price perspective.

Instagram is AWS of FB at this point. It's a money printing machine.