Facemash
That night, Zuckerberg wrote the following blog entries:[2][3][4]
I'm a little intoxicated, not gonna lie. So what if it's not even 10 pm and it's a Tuesday night? What? The Kirkland [dorm] facebook is open on my desktop and some of these people have pretty horrendous facebook pics. I almost want to put some of these faces next to pictures of farm animals and have people vote on which is more attractive.
—9:48 pm
Yea, it's on. I'm not exactly sure how the farm animals are going to fit into this whole thing (you can't really ever be sure with farm animals...), but I like the idea of comparing two people together.—11:09 pm
According to The Harvard Crimson, Facemash "used photos compiled from the online facebooks of nine Houses, placing two next to each other at a time and asking users to choose the 'hotter' person". To accomplish this, Mark Zuckerberg hacked into Harvard’s security network and copied the student ID images used by dormitories and used them to populate his Facemash website.Let the hacking begin.—12:58 am
Harvard at that time did not have a student directory with photos and basic information, and with the initial site generated 450 visitors and 22,000 photo-views in its first four hours online.[5] That the initial site mirrored people’s physical community—with their real identities—represented the key aspects of what later became Facebook.[6]
"Perhaps Harvard will squelch it for legal reasons without realizing its value as a venture that could possibly be expanded to other schools (maybe even ones with good-looking people...)," Zuckerberg wrote in his personal blog. "But one thing is certain, and it’s that I’m a jerk for making this site. Oh well. Someone had to do it eventually..."[7] The site was quickly forwarded to several campus group list-servers. However, the website was shut down by Harvard executives a few days after it opened. Mark Zuckerberg faced charges of violating copyrights, breach of security, and violating individual privacy for stealing the student pictures that he used to populate the website. He later faced expulsion from Harvard University for his actions. However, all the charges were eventually dropped.[8]
Zuckerberg expanded on this initial project that semester by creating a social study tool ahead of an art history final. He uploaded 500 Augustan images to a website, with one image per page along with a comment section.[6] He opened the site up to his classmates and people started sharing their notes. "The professor said it had the best grades of any final he’d ever given. This was my first social hack. With Facebook, I wanted to make something that would make Harvard more open," Zuckerberg said in a TechCrunch interview.
On October 25, 2010, entrepreneur and banker Rahul Jain auctioned off FaceMash.com to an unknown buyer for $30,201.[9][10]
thefacebook.com
Just six days after the launch of the site, three Harvard University seniors, Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra, accused Zuckerberg of intentionally misleading them into believing that he would help them build a social network called HarvardConnection.com, but instead using their idea to build a competing product.[14]
The three complained to the Crimson, and the newspaper began an investigation. Zuckerberg knew about the investigation so he used TheFacebook.com, to find members in the site who identified themselves as members of the Crimson. He examined a history of failed logins to see if any of the Crimson members have ever entered an incorrect password into TheFacebook.com. In the cases in which they had failed to login, Mark tried to use them to access the Crimson members' Harvard email accounts, and he was successful in accessing two of them. In the end, three Crimson members filed a lawsuit against Zuckerberg and was settled after.[14] The three later filed a lawsuit against Zuckerberg, later settling.[15]
Membership was initially restricted to students of Harvard University. Within the first month, more than half the undergraduate population at Harvard was registered on the service.[16] Eduardo Saverin (business aspects), Dustin Moskovitz (programmer), Andrew McCollum (graphic artist), and Chris Hughes soon joined Zuckerberg to help promote the website. In March 2004, Facebook expanded to Stanford, Columbia, and Yale.[17] This expansion continued when it opened to all Ivy League and Boston-area schools. It gradually reached most universities in Canada and the United States.[18][19][20] Facebook was incorporated in the summer of 2004, and the entrepreneur Sean Parker, who had been informally advising Zuckerberg, became the company's president.[21] In June 2004, Facebook moved its base of operations to Palo Alto, California.[17] The company dropped ‘The’ from its name after purchasing the domain name facebook.com in 2005 for $200,000.[22]
| Date | Users (in millions) |
Days later | Monthly growth[N 2] |
|---|---|---|---|
| August 26, 2008 | 100[23] | 1,665 | 178.38% |
| April 8, 2009 | 200[24] | 225 | 13.33% |
| September 15, 2009 | 300[25] | 160 | 9.38% |
| February 5, 2010 | 400[26] | 143 | 6.99% |
| July 21, 2010 | 500[27] | 166 | 4.52% |
| January 5, 2011 | 600[28][N 3] | 168 | 3.57% |
| May 30, 2011 | 700[29] | 145 | 3.45% |
| September 22, 2011 | 800[30] | 115 | 3.73% |
| April 24, 2012 | 900[31] | 215 | 1.74% |
In 2010, Facebook began to invite users to become beta testers after passing a question-and-answer-based selection process,[38] and a set of Facebook Engineering Puzzles where users would solve computational problems which gave them an opportunity to be hired by facebook.[39]
As of February 2011, Facebook had become the largest online photo host, being cited by Facebook application and online photo aggregator Pixable as expecting to have 100 billion photos by summer 2011.[40] As of October 2011, over 350 million users accessed Facebook through their mobile phones, accounting for 33% of all Facebook traffic.[41]
On March 12, 2012, Yahoo! filed suit in a U.S. federal court against Facebook weeks before the scheduled Facebook initial public offering. In its court filing, Yahoo said that Facebook had infringed on ten of its patents covering advertising, privacy controls and social networking. Yahoo had threatened to sue Facebook a month before the filing, insisting that the social network license its patents. A spokesperson for Facebook issued a statement saying "We're disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation".[42] The lawsuit claims that Yahoo's patents cover basic social networking ideas such as customizing website users' experiences to their needs, adding that the patents cover ways of targeting ads to individual users.[43]
Financials
With the sale of social networking website, MySpace, to News Corp on July 19, 2005, rumors surfaced about the possible sale of Facebook to a larger media company.[47] Zuckerberg had already stated that he did not want to sell the company, and denied rumors to the contrary.[48] On March 28, 2006, BusinessWeek reported that a potential acquisition of Facebook was under negotiation. Facebook reportedly declined an offer of $750 million from an unknown bidder, and it was rumored the asking price rose as high as $2 billion.[49]
In September 2006, serious talks between Facebook and Yahoo! took place concerning acquisition of Facebook, with prices reaching as high as $1 billion.[50][51] Thiel, by then a board member of Facebook, indicated that Facebook's internal valuation was around $8 billion based on their projected revenues of $1 billion by 2015, comparable to Viacom's MTV brand, a company with a shared target demographic audience.[52]
On July 17, 2007, Zuckerberg said that selling Facebook was unlikely because he wanted to keep it independent, saying "We're not really looking to sell the company... We're not looking to IPO anytime soon. It's just not the core focus of the company."[53] In September 2007, Microsoft approached Facebook, proposing an investment in return for a 5% stake in the company, offering an estimated $300–500 million.[54] That month, other companies, including Google, expressed interest in buying a portion of Facebook.[55]
On October 24, 2007, Microsoft announced that it had purchased a 1.6% share of Facebook for $240 million, giving Facebook a total implied value of around $15 billion.[56] However, Microsoft bought preferred stock that carried special rights, such as "liquidation preferences" that meant Microsoft would get paid before common stockholders if the company were sold. Microsoft's purchase also included the right to place international ads on Facebook.[57] In November 2007, Hong Kong billionaire Li Ka-shing invested $60 million in Facebook.[58]
In August 2009, Facebook acquired social media real-time news aggregator FriendFeed,[60] a startup created by Gmail's first engineer Paul Buchheit.[61][62][63] In September 2009, Facebook stated that it had turned cash flow positive for the first time.[64] In February 2010, Facebook acquired Malaysian contact-importing startup Octazen Solutions.[65] On April 2, 2010, Facebook announced acquisition of photo-sharing service called Divvyshot for an undisclosed amount.[66] In June 2010, an online marketplace for trading private Facebook stock reflected a valuation of $11.5 billion.[67]
In early 2012, Facebook disclosed that its profits had jumped 65% to $1 billion in the previous year when its revenue, which is mainly from advertising, had jumped almost 90% to $3.71 billion.[68] Facebook also reported that 56% of its advertising revenue comes from the U.S alone, and that 12% of its revenue comes from zynga, the social network game development company. Payments and other fees were $557 million up from $106 million the previous year.[69]
IPO
Facebook filed for an initial public offering on February 1, 2012.[70] The preliminary prospectus stated that the company was seeking to raise $5 billion. The document announced that the company had 845 million active monthly users and its website featured 2.7 billion daily likes and comments.[71] After the IPO, Zuckerberg will retain a 22% ownership share in Facebook and will own 57% of the voting shares.[72]Facebook valued the shares at $38 each, pricing the company at $104 billion, the largest valuation to date for a newly public company.[73] On 16 May, one day before the IPO, it announced that it would sell 25% more shares than originally planned due to high demand.[74] The IPO raised $16 billion, making it the third largest in U.S. history (just ahead of AT&T Wireless and behind only General Motors and Visa).[75][76] The stock price left the company valued higher than all but a few U.S. corporations – surpassing heavyweights such as Amazon, McDonald's, Disney, and Kraft – and made Zuckerberg's stock worth $19 billion.[75][76] The New York Times stated that the offering overcame questions about Facebook's difficulties in attracting advertisers to transform the company into a "must-own stock". Jimmy Lee of JPMorgan Chase described it as "the next great blue-chip".[75] Writers at TechCrunch, on the other hand, expressed skepticism, stating, "That's a big multiple to live up to, and [Facebook] will likely need to add bold new revenue streams to justify the mammoth valuation".[77]
Trading officially opened on the stock on May 18, but was initially delayed due to technical problems with the NASDAQ exchange.[78] The stock struggled to stay above the IPO price for most of the day, forcing underwriters to buy back shares to support the price.[79] At closing bell, shares were valued at $38.23,[80] only $.23 above the IPO price and down $3.82 from the opening bell value. The opening was widely described by the financial press as a disappointment.[81] The stock nonetheless set a new record for trading volume of an IPO.[82]
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