Also, I'd venture a guess that if you sum up the total cost that has gone into Facebook's Poke feature (development, maintenance, deciding whether or not to turn it off), it would dramatically eclipse the 1.2M that everyone is so up in arms about. No one is losing their marbles over that stuff.
Look, I agree it's a ridiculous app.. but if people use it and derive value from it, good! Utility created!
I think you could just stop at "people use it". What kind of value they derive from it (if any) is another inquiry, and can't be discerned from merely observing the fact that they use it. At least, not without some really strong assumptions to the effect that people always correctly make positive-utility choices. It's possible people use it, but derive negative utility from it, and mistakenly use it nonetheless.
There are some very popular things (tobacco, say) that in most reasonable analyses produce negative utility over the long run! The problem is that people are not very good at utility-maximization, especially when the analysis involves more than one factor, some uncertainty, different time scales, etc. People are generally not good at almost any vaguely arithmetically complex operation (e.g. correctly using conditional-probability information in their decision-making, even when known).
That's one reason neoclassical economics prefers to talk about simply "price", rather than the classical discussion of both "price" and "value". Modern economics is the empirical study of pricing and economic behavior, and is agnostic about value.
Your points are all very valid of course. While utility theory has largely been superseded by prospect theory, like Newtonian physics, it can still be useful for back-of-the-envelop thought.
Furthermore I'll be a devil's advocate however and just make the point that one could rationally defend tobacco use as utility deriving. Just because a (in my view) sane person would see all the horrible effects of tobacco as trumping any positive attributes, someone else may disagree. Depending on one's own discount rate, tobacco use at any point in time in fact be net positive in enriching their life. Even if you argue that some of the positives are created by advertising cigarettes as cool (Joe Camel, etc.), so what? Someone spending $50,000 on a fancy watch is also making the same sort of determination. If the user derives the benefit, regardless of whether it's endogenous or exogenous to the product itself, that isn't obviously inherently bad.
Now, of course, smoking has it's own set of problems because it negatively affects others... but again, it's not so clear that one can't attribute rational decision making to even a smoker.
If you told someone a top 10 app with over 300,000 users raised $1.2 million they probably wouldn't bat much of an eye. That's what Yo is now. It probably wont last, but that doesn't mean its creator can't take advantage of its success right now.
Look, I agree it's a ridiculous app.. but if people use it and derive value from it, good! Utility created!