Facebook in 2011

8/3/2019 Facebook in 2011

1/28

C ASE : E-406DATE : 05/12/11

Arar Han (MBA 09) wrote this case using publicly available sources under t he supervision of Thomas M. SiebelProfessor of Business Leadership, Strategy, and Organizations William P. Barnett as the basis for class discussionrather than to illustrate either effective or ineffective handling of an administrative situation. Historical details of Facebook are largely drawn from Stanford GSB Case E- 220, Facebook, revised May 22, 2008.

Copyright 2011 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: [email protected] or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University,Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in aspreadsheet, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the permission of the Stanford Graduate School of Business. Every effort has been made torespect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concernsabout any material appearing in this case study, please contact the Case Writing Office at [email protected].

F ACEBOOK IN 2011

F ACEBOOK IN 2004

The original Facebook website went live on February 4, 2004 as a digital directory of undergraduate students enrolled at Harvard University. It was coded by then-sophomore Mark

Zuckerberg, who wanted to combine the sch ools dorm -exclusive online directories into aschool-wide resource. Those who joined Facebook could create a profile with their first and lastname, photo, residence, contact information, relationship status, personal interests, and evencourse schedule. A profile could be viewed by other users who had a confirmed digital friendrelationship with the owner of that profile ( Exhibit 1 : Sample Profile).

Facebook spread quickly. By the end of February, there were 10,000 Harvard users registered onthe site. Students at Columbia, Stanford, and Yale were invited to join on February 25, 26, and29, respectively. i Over half of the undergraduate student body at Stanford signed up in the firstweek. By June, Facebook spanned some 30 colleges and had approximately 150,000 users.

Zuckerberg was surprised by the demand for Facebooks services: Early on, we werent intending this to be a company. We had no cash to run it.We actually operated it for the first three months for $85 a month the cost of renting one ser ver. We had a network of banner ads, but its not like we weremaking money. ii

He decided to spend the summer of 2004 in Silicon Valley growing Facebook and fleshing outits business potential.


2/28

Facebook in 2011 E-406 p. 2

Social Networking Sites

When Zuckerberg arrived at Facebooks rented Palo Alto house in June 2004, there were at leastthree other companies offering internet-based social networking services:

Friendster , which was founded in 2002, was a prominent dating site with 1.5 million uniquevisitors in September 2003, up from just 110,000 in April. iii In October 2003, it rejected a$30 million buyout offer from Google, instead raising $13 million in a venture round led byKleiner Perkins Caufield & Byers and Benchmark Capital. iv

MySpace was founded in July 2003 as a self-desc ribed online community that lets you meetyour friends friends. It offered a range of services such as invitations, events, classifiedadvertising, and forums, and raised $11 million in a round led by Redpoint Ventures. v

Orkut was started by a Google programmer in January 2004. Membership to Orkut was byinvitation only, so the network grew organically through an existing network of trustedfriends. By July 2004, it had over 1 million users, many of whom lived in Brazil.

Facebook was set apart from other social networking sites in that it grew from college to college,using a dot- edu email address as verification of a new users identity and collegiate affiliation.Other services did not have explicit divisions within the overall network, nor an expansionstrategy that targeted colleges . Facebooks customer support page in 2004 explained that divisionby school was for the sake of user privacy:

Facebook was intentionally designed to limit the availability of your profile toonly your friends and other students at your school. This simple but importantsecurity measure promotes local networking and makes sure that your informationis seen by people you want to share it with, and not seen by folks you dont.

As Zuckerberg commented:

Were not asking anyone to put anything out there that they wouldnt becomfortable with. Were not forcing anyone to publicize any information aboutthemselves. We give people pretty good control over their privacy.

Indeed, Facebook allowed users to restrict who could access their profiles: friends, friends of friends, and certain networks of users. This was similar to other social networking sites, whichsupported similar restrictions, though not by school as Facebook did.

Facebook Becomes a Business

By the end of the summer of 2004, Facebook had achieved the following milestones:

Redesigned and relaunched the Facebook site. Upgraded and added to Facebooks back -end infrastructure. Appointed Sean Parker, co-founder of Napster and Plaxo, as president. Received $500,000 in seed capital from prominent venture capitalist Peter Thiel.


3/28


More important, Zuckerberg became convinced of the sites potential as a business: When wecame out to the Bay Area, we realized that no other site really had this kind of activity, that itcould be a big business, and it might be fun to do. Zuckerberg dropped out of Harvard to pursueFacebook full time, as its CEO.

2005-2006: G ROWTH AND C HALLENGES

Facebook hit 1 million users in December 2004. By May 2005, the site had 2.8 million users atmore than 800 colleges. Its growth reportedly sparked a bidding war among a dozen venturecapital firms eager to participate in Facebooks success. The winner was Accel Partners, whi chinvested $12.7 million in a deal valuing Facebook at $100 million. Thrilled, Accel partner JimBreyer praised the Facebook management team as intellectually honest and breathtakingly

brilliant in understanding the college student experience.

Facebook was on its way to capturing the 13.4 million U.S.-based college student audience, vi with a penetration rate of over 80 percent at each of the colleges it served. But $100 million wasa surprising value for a company that had little revenue and served only college students. Breyerhimself said in an interview, Certainly relative to many other deals, especially deals at this samestage, the price was significantly higher . Some in the venture capital industry wondered whetherAccels investment was testament to the return of the internet investment bubble of the 1990s. vii

In September 2005, Facebook entered the 17.1 million student high school market. Existing, i.e.collegiate, users could invite high school students they knew, and the first wave of high schoolstudents to join could invite their peers. Facebook grew quickly among the high school set.Although MySpace was already an established player, it took Facebook just seven months toreach 1 million registered high school users.

In April 2006, Facebook started offering membership to those affiliated with a limited number of corporations. viii These included Accenture, Amazon, Apple, EA, Gap, Intel, Intuit, Microsoft,Pepsi, PWC, and Teach for America. New users could register using their dot-com work emailaddresses. Later the same year, Facebook started expanding internationally by offeringmemberships to schools like the Indian Institutes of Technology and select high schools in Israel.

Competition

By the end of 2006, Facebook was the second largest social networking site after MySpace. At12 million active users, it was about a quart er of MySpaces estimated 43 million. ix The averageFacebook user spent about one hour on the site per day, a figure that grew each month, while theequivalent metric for MySpace, which was purchased by News Corp. in 2005 for $580 million,was holding steady at about two hours. x According to web traffic monitor comScore, MySpacewas the fifth most popular website in the U.S. as measured by number of page views. It was saidto have become a music destination, with over 350,000 bands and artists using it as a platformfor publicity and communications with fans. xi With 36 million members worldwide, Friendsteralso remained a prominent social networking site, though it was unclear how many of itsmembers were active users. xii Orkut was the dominant social networking site in Brazil and hadlaunched in India, to promising results.


4/28


In addition to the growth of the big four social networking sites, the social networking industrysaw aggressive investment into technology applications with a social focus:

Blogger was started in 1999 and bought by Google in 2003 for an undisclosed sum. Flickr, a photo sharing site, was launched by a Canadian gaming company in 2004 and

purchased by Yahoo! in 2005 for $35 million. Yelp, a social restaurant and business review site founded in 2004, had received a total of $12 million in venture capital financing by 2006.

Twitter, a microblog site with RSS functionality, launched in 2006 and in 2007 receivedbetween $1 million and $5 million in venture loans in a deal valuing it at $20 million. xiii

The boom in social networking businesses was a worldwide phenomenon. Beyond Orkut inBrazil and India, Facebook lookalike Bebo was founded in San Francisco in 2005 and gaining adominant position in the United Kingdom, Ireland, and New Zealand. xiv Chinese FacebookRenRen 1 also launched in 2005. Some, like South Kor eas Cyworld, predated Facebook, and hadalready achieved a penetration rate of 25 percent of the entire South Korean market, population

50 million.xv

Privacy

Limiting its user base to college-aged students with dot-edu email addresses had enabledFacebook to verify that its users were who they said they were. While the site still requiredmembers to use their real first and last names, opening up membership to others outside of thedot-edu network in September 2005 suspended Facebooks ability to confirm their identity andaffiliation. This led to a range of concerns about privacy in the network:

Press reports warned users against posting phone numbers and residential addresses.

College newspapers claimed that prospective employers were using Facebook and othersocial networks to screen job candidates. High school students feared that college admissions officers would do the same particularly

that they would reject applicants on the basis of any evidence of illegal drug use or underagedrinking found on student profiles.

Such concerns created a tension between Facebooks interest in fostering a freer flow of information, as Zuckerberg put it, and a justifiable interest on the part of parent s, schooladministrators, and law enforcement officials to protect students from the potential risks of disclosing private information in a semi-public realm. While Facebook took precautions toprotect its members from predatory users and encouraged them to report any suspicious

activities, it stopped short of censoring them or placing restrictions on anything it regarded astheir ability to express themselves.

Accel partner Breyer regarded the issue of privacy at Facebook as akin to the same at eBay in itsearly stages:

1 RenRen was founded by Stanford GSB MBA Joe Chen (99).


5/28


We certainly spend a lot of time thinking about what are the privacy issuesMedium and long term, perhaps the closest model out there would be how eBayhad to make some fundamental decisions along the way relative to thedemocratization, if you will, of their user base.

What constituted an appropriate level of privacy was not easy to define. Like the U.S.government, Facebook was scrupulous to steer clear of intervening in citizen self expression.However, its policy was also to keep its college and high school networks discrete a move thatdrew controversy when college users realized they could not view any high school profileswithout first being confirmed Friends .xvi Facebooks FAQ page at the time noted:

The high school and college networks are completely separate. This means thatfeatures like search, messaging, poking, and inviting people to be friends arerestricted to the network you use. This is primarily for security reasons, but alsobecause many people prefer it this way.

User RevoltIn September 2006, Facebook inadvertently challenged user expectations of privacy with thelaunch of News Feed and Mini Feed. Before the launch, users had to visit their friendsindividual profile pages to see a log of their activity on the site. Afterwards, the two featuresharvested user activity on Facebook and added them to an RSS-like queue to the users friends.News Feed was set as all users homepage after login ( Exhibit 2 : Sample News Feed).

User response to the new feeds was strongly negative. For example:

You went a bit too far this time, Facebook. Very few of us want everyoneautomatically knowing what we update. We want to feel just a LITTLE bit of privacy, even if it is Facebook. News Feed is just too creepy, too stalker-esque,and a feature that has to go.

Some Facebook users began to organize a boycott of the site on September 12, 2006. xvii

After several misdirected attempts to quell angry users, Facebook introduced modifications toNews Feed and Mini Feed that gave them more control over what would go into the feeds andwho would be allowed to see them. In addition, Facebook introduced new privacy controls.These included the ability to block certain users from accessing ones profile, the option of restricting directory searches from returning ones profile o r picture, and a range of user controlsfor who or which networks would be allowed to see various parts of ones profile.

Then, on September 26, 2006, Facebook announced it was open to the public at large.

Investments and Purchase Offers

In April 2006, Facebook had raised $27.5 million in a round of financing led by Greylock Partners and Meritech Capital Partners. The deal valued Facebook at $550 million. Shortly


6/28


thereafter, Yahoo! offered to buy a majority stake in Facebook for $1 billion cash, based on a $2billion valuation. Facebook rejected this offer and announced in December that Facebook wasnot for sale. As Zuckerberg explained in an interview:

We are not necessarily focused on what the exit is going to be whether its

selling the company or an IPO or when thats going to be. But we obviously think that theres a lot of potential to keep growing. xviii

2007-2008: A S TREAM OF N EW F EATURES

Resolved to grow the business organically, Facebook hired new employees especially programmers (developers) at a brisk pace. At 300 employees in November 2007, it was saidto be targeting roughly 700 by the end of 2008. xix Google was a frequent target of Facebooksrecruiting efforts. As reported in TechCrunch:

Facebook has already claimed YouTube CFO Gideon Yu, e-commerce productlead Benjamin Ling and GDrive developer Justin Rosenstein. But ex-Googlersinside Facebook are saying that the problem goes further than a few high profileexits caused by vesting stock. Facebook just seems a hell of a lot sexier thanGoogle. A steady stream of Google employees is making the switch to Facebook,and competition for top college grads is fierce as well.

Senior VPs at Google have dubbed it the Facebook problem according to anumber of sources. At least ten top performers have made the switch over thelast two months. Ex-Googlers expect to continue seeing at least two to four moreleave for Facebook each month. That doesnt sound like much, but Facebook istargeting the cream of the crop. The best Googlers are being actively recruited,and many are leaving.

Powered by its growing team of talented developers, Facebook launched a number of newfeatures during 2006 and 2007. These included:

Social Bookmarking (October 2006): allowed users to share items of interest from withinFacebook or across the Internet with friends or post them to their profiles.

m.facebook.com (January 2007): Facebook optimized for mobile phones. Users could uploadphotos and notes to Facebook and receive message from Facebook using SMS.

Virtual Gifts (February 2007): a small icon constituting a gift could be given and receivedamong Facebook users and posted to user profiles. The first gift was free; subsequent giftscost $1 each. Proceeds were donated to charity.

Flyers Pro (September 2007): an advertising market allowing advertisers to stipulate themaximum price they would pay for each time a user clicked on their ad. Using Facebooksknowledge of users gender, age, location, political views, relationship statu s, educationstatus, workplace, and key words, the ads could be finely targeted to relevant users.

Social Ads (November 2007): an advertising platform. Brands and businesses could createprofile pages akin to user profile pages. Called Pages, these profi les contained informationlike the company location, website, hours of operation, members, and the like.


7/28


Facebook Chat (April 2008): instant messenger for Facebook friends. Mini Feed extension (April 2008): users could import updates from other web services like

Flickr, Deli.cio.us, Digg, Picasa, and Yelp into their profiles. People You May Know (April 2008): allowed users to connect with additional users that

Facebooks algorithm suggested.

Facebook Connect (May 2008): enabled users to login to third-party websites using theirFacebook credentials and allow them to access their profile information. When usersactivated feature with a third-party site, the third-party could access as much user data asFacebook could access. xx

Facebook Beta (July 2008): a new graphic user interface for Facebook. Users were initiallyinvited to opt in to the new look, which integrated Mini Feed with the users profile Wall,among other attempts to create a less cluttered look and feel.

F8 and the Social Graph

In addition to building new features, Facebook launched a platform 2 called F8 in May 2007 for

developers to build applications that could run within the site. F8 allowed third-party developersto create applications that users could then add to the six standard Facebook applications: photos,events, groups, gifts, birthdays, and marketplace (also launched in May). Facebook QueryLanguage and Facebook Markup Language were concurrently released to support developers intheir efforts. F8 launched with 85 applications from 65 partners including Microsoft andAmazon. By June, 40,000 developers had launched more than 1,500 new Facebook applications.

At the unveiling of F8, Zuckerberg spoke of a concept called the social graph as foundationalto the Facebook user experience and to the sites growth potential. The term social graph and abroader school of thought on social network s had been popularized in the mid-fifties by socialscientists who used nodes and lines to graphically illustrate linkages among people. xxi3

Zuckerberg described Facebook as the largest social graph in the world.

On pace to hit 50 million users by the end of 2007, Facebook was adding 100,000 new users aday. The company had a record of all the links among its members, as well as the members linksto sites and places outside of the network. This data constituted Facebooks social graph, ahighly leverageable asset for Facebook and a tremendous advantage it had vis--vis othercompanies seeking to reach anyone who was in the Facebook network. Simply put, Facebook had more information about people s relationships and preferences than any other business did.Moreover, it was voluntarily given and highly reliable.

At the F8 conference, Facebook invited application developers to tap into its social graph. As

Zuckerberg described:

2 A technology platform prescribes a programming language and environment for an operating system or usercommunity. Developers create applications, or other additions or improvements to the platform, building out thesystems functionality or buttressing the communitys offerings. Facebook was based on the Internet. Over time, itwas accessible through the companys website, through cell phones, so -called smart phones, and even carspreinstalled with advanced telecommunications tools.3 This school of thought included the work of sociologist Duncan J. Watts, who researched and wrote aboutstructure and randomness in social networks in his 1999 book Small Worlds (Princeton University Press).


8/28


The Facebook platform is optimized for building applications in Facebook, andwith more value for people to develop on our base than we could do on our own.People are already building social apps, but they have to reconstruct the socialgraph all by themselves. We are going to allow developers worldwide to do

complete new things. Today social networks are completely closed netstodaywe are going to end that. With this [framework] any developer worldwide canbuild full applications on top of the social graph inside the Facebook Platform. xxii

More Investments, Competitive Responses, and a Privacy Problem

It was hard to overestimate the potential value of Facebook s platform. A few months after thelaunch of F8, Facebook announced a $10 million fund for Facebook application developers.Called the fbFund and administered by the Founders Fund and Accel Partners, the fund wouldprovide $25,000 to $250,000 in grants to aspiring application developers. 4

Successful investors to Facebook in 2007 and 2008 were Microsoft; Hong Kong billionaire LiKa-Shing; German brothers Marc, Oliver, and Alexander Samwer; and TriplePoint Capital.Together, they invested a total of $475 million in five transactions all valuing Facebook at $15billion ( Exhibit 3 : Facebook Valuation September 2004 to January 2011).

Google, which had competed with Microsoft to invest in Facebook, responded by launchingOpenSocial in November 2007. While not a direct competitor to F8, given their discreteoperating environments, OpenSocial was also an application platform. Instead of prescribing itsown language, as F8 did, developers could use common programming languages like Javascriptand HTML to build social applications on the Internet. Social network companies like Orkut,Salesforce, LinkedIn, Plaxo, and Friendster all joined the OpenSocial platform. In March 2008,MySpace and Yahoo! joined Google to jointly foster the development of OpenSocial.

Microsoft pointed to Facebooks enormous advertising potential to justify its $240 millioninvestment. Indeed, at no other time had so many people gathered in one place to willinglydivulge valuable marketing information about themselves, and at no other time was thisinformation so accessible, harvestable, and actionable. In June 2008, Facebook surpassedMySpace to become the largest social network. xxiii

The engine driving the growth of Facebooks social graph was Beacon, a feature in FacebooksSocial Ads platform that took Social Bookmarking to a new level. Beacon enabled users toconnect their profiles to 44 external partner sites. Beacon not only collected data on useractivities on those sites, it also published user activity on external sites to News Feeds allwithout notifying users or obtaining their permission.

Zuckerberg publicly apologized to Facebooks angry users :

Weve made a lot of mistakes building this feature, but weve made even morewith how weve handled them. We simply did a bad job with this release and I

4 In its second year, fbFund offered investments instead of grants. It was quietly discontinued in 2010.


9/28


apologize for it We were excited about Beacon because we b elieve a lot of information people want to share isnt on Facebook, and if we found the rightbalance, Beacon would give people an easy and controlled way to share more of that information with their friends. But we missed the right balance Peopleneed to be able to explicitly choose what they share, and they need to be able to

turn Beacon off completely if they don t want to use it.xxiv

But the damage was done. Facebook eventually shut down Beacon in September 2009 as part of the settlement for a successful class action lawsuit. 5 Then, in December 2009, it announced anew set of privacy standards that defaulted its users to sharing more profile information publicly.Again, users were aghast:

These new privacy changes are clearly intended to push Facebook users topublicly share even more information than before. The privacy transition tool that guides users through the configuration will recommend preselect bydefault the setting to share the content they post to Facebook, such as status

messages and wall posts, with everyone on the Internet, even though the defaultprivacy level that those users had acce pted previously was limited to YourNetworks and Friends on Facebook.

On a human level, one can look at the new privacy changes as akin to going tosleep at night with the assumption that the various doors and windows of yourhouse were locked, only to wake up and realize that while you were sleeping, the'locksmith' decided that you/they were better served if the doors were leftunlocked. xxv

2009-2010: C ONTINUED G ROWTH AND A S OARING V ALUATION

Throughout 2009, stories of lawsuits dominated public news reports about Facebook andZuckerberg. Since 2004, Facebook had been mired in several suits alleging that Zuckerberg wasnot the originator and founder of the site.

The drama surrounding its origins notwithstanding, Facebook continued to rapidly grow itsorganization. By the end of 2010, there were 2,174 Facebook employees listed on the careernetworking site LinkedIn. One in five also listed Google as a former employer. xxvi Key hiresfrom Google included former Google VP Sheryl Sandberg, who became Facebooks COO in2009, and former Google public relations chief Elliot Schrage, who became head of Facebookspublic relations in 2008.

As a response to the flow of its employees to Facebook and other hot startups, Googleannounced in November 2010 that it would give a 10 percent raise to all employees. The WallStreet Journal reported:

The pay hike comes as Google ramps up its battle with competitors, especiallyneighboring Facebook Inc., in a fight to secure talented staff Over the past year

5 See http://www.beaconclasssettlement.com for full details.


10/28


several former Google executives who helped run the company's advertisingbusiness, as well as Google product managers and engineers involved in Chromeand Android software projects, joined Facebook. xxvii

Facebooks growing developer team launched a range of new features including:

Like button (February 2009): A small Like button was added to each item that appearedon News Feed or on users profile pages. Users could c lick that button to indicate a simpleendorsement of the item liked, and could also add a comment below. xxviii

Usernames (June 2009): Users could register for a web address to their profile withinFacebook.com containing a username of choice. Instead of being a numbered profile whosepage was accessible by going to http://www.facebook.com/profile.php?id=20439234879,users could choose a name and instead be accessible via http://www.facebook.com/JohnDoe.

Messages (November 2010): Messages was an integrate d communications platform thatcombined text messaging, instant messaging, emails, and regular Facebook messages. Itreportedly took 15 months to develop. xxix

Each new feature tacitly invited speculation about Facebooks strategic intent in creating andreleasing it . For example, when Messages launched, many wondered if it would ultimately bean e -mail killer. When Usernames launched, observers speculated that Facebook would soonsupplant or replace independent business websites. However, when Facebook announced OpenGraph in April 2010, pundits immediately hailed it as a clear effort to make Facebook thecenterpiece of any individuals Web experience. xxx

Launched with 30 external site partners, Open Graph was essentially a revamped Beacon. Itallowed users to Like external content, such as a news article on CNN.com, and that activitywould be treated just as a Like was within the Facebook site, i.e. published to users walls and

News Feeds. Users friends would also see on the article itself on th e external site that the userhad Liked it . Open Graph spanned news articles to e-commerce sites, movie and music sites,sports teams, and more. Crucially, Open Graph allowed users to individually opt in to eachexternal site and allow activity on it to be announced back to Facebook.

Analysts concluded that as a result of Open Graph:

Facebook can essentiall y build a database of anyones L ikes that ranges acrossall categories. Most importantly, because of Facebooks focus on authenticity, thesuggesti ons generated by Facebooks database are much more likely to be usef ulto a user (and advertisers). xxxi

Potential implementations of Open Graph data included:

Suggestions to other products and services that a user might also like by using the usersLikes and comparing them to other users Likes and creating a proprietary algorithmmuch like Pandora did to generate song suggestions to its listeners.

Recommendations of Facebook Pages to a user based on Likes from friends.


11/28


In addition, pointed out one analyst, Facebook could determine from patterns of News Feedsand Likes who among a users friends was most influential to that user and others in therelevant network. Advertisers could use that information to specifically target a campaigntargeted toward those users. xxxii

Open Graph immediately took off as sites throughout the web implemented the Like button.After falling to $9 billion following the market crash of October 2008, Facebook rose to animplied valuation of $35 billion in November 2010, when Accel sold 17 percent of its stake for$516 million.

2011: A N A MBITIOUS O UTLOOK

By January 2011, Facebook comprised some 600 million users around the world xxxiii (Exhibit 4 :Average User Facts and Figures). It attained a valuation of $50 billion in a $500 millioninvestment from Goldman Sachs and Russian investment group Digital Sky Technologies.

Amid Facebooks rapid growth in services and features, it became difficult to describe thebusiness, and where its value came from. According to Wikipedia:

Facebook is a social networking service and website launched in February 2004,operated and privately owned by Facebook, Inc. Users may create a personalprofile, add other users as friends, and exchange messages, including automaticnotifications when they update their profile. Additionally, users may join commoninterest user groups, organized by workplace, school or college, or othercharacteristics.

The name of the service stems from the colloquial name for the book given tostudents at the start of the academic year by university administrations in theUnited States to help students get to know each other better. Facebook allowsanyone who declares themselves to be at least 13 years old to become a registereduser of the website According to Social Media Today, in April 2010 anestimated 41.6% of the U.S. population had a Facebook account. xxxiv

While Wikipedias description was basically right, many felt that Facebook was more than asocial network. One mobile application company cited the variety and range of exchanges thatoccurred on the site and through its mobile access points, and took to calling it acommunication platform. xxxv Facebook COO Sheryl Sandberg went as far as to position heremployer as a core of commercial and social activity. We think every ind ustry in going to berebuilt around social engagement, she declared in an interview. xxxvi

Indeed, the Wall Street Journal reported that by February 2011, Facebooks Open Graphincluded s ome 2.5 million websites that had incorporated the Like button into their productand media content. xxxvii

Dan Rose, Facebooks vice president of partnerships and platform marketing, agreed and hintedat the high potential of future growth: The foundation of a platform is one where people want to


12/28


build on top because there is equal value exchange. xxxviii He affirmed his intent to find newindustries and businesses as partners to engage in this value exchange.

Applications

One industry that was profoundly disrupted by Facebook was gaming, which dominated the listof most popular applications in Facebook. Less than a year following the launch of the F8platform, Slide and RockYou! had become the leading application developers, occupying six of the top ten app slots. xxxix They created then-popular apps like Super Wall and Top Friends, whichhad extended standard functionality on Facebook and had been installed by 28 million and 26million users, respectively.

By the end of 2007, there were more than 10,000 Facebook applications. By mid-2009, Venture Beat declared that Facebooks platform developers were on track to see $500 million inrevenue that year , mostly through the sale of virtual goods like poker chips and accoutrementfor other social games. xl

In 2011, there were more than 550,000 actively used applications offered on the Facebook Platform. The top ten list was dominated by game apps, particularly those by game developerZynga, which had raised over $500 million from Google, Kleiner Perkins Caufield & Byers, andothers since it started in 2007. xli Zynga commanded a higher valuation than Electronic Arts, theoffline game company that had produced Madden NFL and The Sims, among other dominanthits. As analysts noted, As of January 14, 2011,of the ten most-popular Facebook applications by Monthly Active Users, seven are games; of which Zynga developed six. xlii

The popularity of gaming apps had the potential to further shift the demographic mix of theFacebook user base, about half of whom were aged 25 and under (see Exhibit 5 ). Industrysurveys revealed:

[W]omen in their 50s were the most common demographic for social games,[with] the three most common age groups [being] people in their 50s (22%), 30s(21%), and 40s (20%). The number of gamers 60 and older (16%) is almost threetimes greater than the number of gamers 21 years old or younger (6%). xliii

While much of the developer energy around Facebook apps was centered around gaming,Sandberg thought that Facebook would have a similar impact as a platform for other businesses:[Like gaming,] news, health, finance, shopping and commerc e we think similarly, all of thesethings will be rebuilt by companies that work with us to put social at the core. xliv

Such grand proclamations triggered media predictions that Facebook is likely to tread on moretoes as it builds out [its] platform. xlv The question was: How did Facebook intend to penetratenew industries, and on whose toes would it inevitably tread? Online marketing proved to be anearly battleground.

Online Marketing


13/28


In February 2011, The Wall Street Journal reported:

In just two yea rs, Facebooks share of online display ads has surged to 13.6percent from 2.9 percent of the U.S. market, which reached $8.88 billion in 2010.Facebooks growth comes at the expense of companies such as Yahoo and AOL

Inc., and the site is also likely taking ad money away from traditional media likenewspapers and TV.

Yahoo has stopped trying to compete directly with the social network and insteadintegrates Facebook features into its sites, hoping to halt a slide in the time itsusers spend on Yahoo each month. Myspace, which like Yahoo has struck some

partnerships with Facebook, declined to comment Jeff Levick, the president of AOL advertising, said he viewed the rise of Facebook as complementary

because the companies are running two very, very different businesses.Facebook likely had revenue of $1.9 billion to $2 billion [in 2010], mostly inadvertising. xlvi

Unlike traditional web-based advertisements, ads shown to a user in Facebook could beaccompanied by a social endorsement by a friend of the user if that friend had previously clickeda button labeled Become a Fan. Similar to the Like button, this endorsement was carried onNews Feeds and noted in homepage ads.

A white paper by Facebook and Nielsen demonstrated the power of these new, social ads. Itstated that without a social endorsement, ad recall for an ad within the Facebook homepage was10 percent and purchase intent, just 2 percent. By contrast, homepage ads that referenced userfriends who had become fans of or liked a company or product drove recall to 16 percent andquadrupled purchase intent . And when users saw their friends Likes or fan -dom appear inNews Feeds, ad recall rose to a whopping 33 percent, while purchase intent jumped to 15percent. xlvii

Besides an increase in advertising effectiveness, a benefit of Facebook as an advertising vehiclewas the range of tools Facebook made available to advertisers: xlviii

Ways to offer free samples to customers, something ketchup maker Heinz has used. The ability to attract the attention of smartphone users making local check-ins. Clothing

retailer The Gap gave away 10,000 pairs of jeans to the first 10,000 customers to use theFacebook local check-in service. Mazda sold 100 cars with a 20-percent-off offer at fiveU.K. auto dealerships.

The ability to build e- commerce sites into Facebook pages. Max Factor didnt want to losevisitors to its Facebook page to another site when customers were ready to buy something, soa partnership with Amazon let customers buy products without leaving.

Reach block ads that change as many as five times in a 24 -hour period to send a sequenceof ad messages to Facebook users.

Surveys that let companies try to engage customers in company decisions. VitaminWaterused voting, among other mechanisms, to generate 1.3 million connections with possiblecustomers during its find a new flavor marketing campaign.


14/28


Applications built atop Facebooks interface let companies create custom -made interactiveprograms.

Local advertisers in Facebook could use two new products just for them: Places , whichcompeted directly with the start-up foursquare, allowed users to share with Facebook friends

their location when they were at businesses or other public places. Places enabled Facebook tointroduce Deals, which competed with group coupon giant Groupon, offering users discountsand other promotions based on their locations. xlix

In May 2011, news outlets reported that Facebook had captured nearly a third of the U.S. onlinedisplay advertising market in Q1 of 2011. It was followed by Yahoo! with about a tenth of themarket, and Microsoft with just under a twentieth. AOL and Google had smaller shares. l

Payment Processing via Facebook Credits

Facebook planned its foray into payments with the launch of its proprietary currency, which it

called Credits. Starting in June 2011, Facebook mandated the use of Credits to processtransactions that took place within its applications, including games like those offered by Zynga. li Facebook would assess a 30 percent fee on each transaction, a rate previously set by Apple forin-application transactions that took place within its platform. lii

According to analysts, the logic behind Credits was that:

[I]t is much easier for a consumer to purchase a large balance in virtual currencyand make many small purchases using the virtual currency than to make multiplesmall purchases using a traditional method of payment, like a credit card.Essentially, virtual currencies reduce the purchasing friction between the

consumer and the application.liii

They projected that Credits would be a big source of revenue:

Facebook credits will likely become a lucrative business for Facebook, and thereis potential over the longer term to move the service off Facebook, such as e-commerce payments (like PayPal), or even real-world payments via mobiledevices (like a credit card, except near-field-communication via mobile phone isthe method in which account information is transmitted to a retailer). liv

The promise of Credits as a revenue driver led the Wall Street Journal to speculate that:

Facebook could later extend its Credits system to other areas of commerce,including physical goods, potentially making it a competitor to PayPal andAmazon.com Inc PayPal President Scott Thompson plays down any rivalrywith Face book Payments is really, really hard to do, he said. lv


15/28


R ISKS

Many celebrated the social networking giants prowess across industries and foresaw sempiternaldominance for Facebook. Its basically Facebooks to lose, said Zynga CEO Mark Pincus. lvi

Others cautioned against such exuberance. The Economist warned:

Not so long ago, exactly the same thing might have been said of MySpace. Thesite was riding high when News Corp bought it for $580 million in 2005. But afew years later it was going downhill. Some see this as a sign that large socialnetworks are destined to disintegrate when they become too big. lvii

While nobody knew for certain what Facebooks ultimate path would be, there were a t least sixknown risks to Facebook s future growth :

Privacy and Security

A Pew survey revealed that 60 percent of users restricted access to their Facebook profiles, somevery tightly to a small group of friends. Facebook clearly had an interest in protecting users andpotential users, making them feel safe to use the site as intended, i.e. to share information aboutthemselves. However, said the Economist , this posed a risk to Facebooks revenue potential :

In order to attract users, sites need to offer ways for members to restrict theinformation about themselves that gets shared with a wider public. Withouteffective controls people would be reluctant to sign up. But if a site allowsmembers to keep too much of their information private, there will be less trafficthat can be turned into profit through advertising and various other means, so thenetworks business will suffer. lviii

To what extent and in what ways could Facebook push its users to be more open? Were its usersessentially a captive audience, or was there a point at which they would disengage or even quit,as one user did, publishing his reasons to his syndicated blog (see Exhibit 6 : Top Ten ReasonsYou Should Quit Facebook):

I often hear people talking about Facebook as though they were some sort of monopoly or public trust. Well, they aren't. They owe us nothing. They can dowhatever they want, within the bounds of the laws. (And keep in mind, even thosecriteria are pretty murky when it comes to social networking.) But that doesn'tmean we have to actually put up with them. Furthermore, their long-term successis by no means guaranteed - have we all forgotten MySpace? Oh, right, wehaveFacebook isn't the only game in town. I don't like their application nor howthey do business. I've made my choice to use other providers. And so can you.

At the time of writing, the post had 850,000 page views.

A closely related issue to user privacy was personal and corporate security. Security breachesleading to the compromise of profile data was a widespread concern as more people accessed


16/28


secure sites on unsecured public airwaves. In addition, experts warned of the unintentionaldisclosure of private and organizational information about corporations. For example:

By analyzing LinkedIn profiles and monitoring the information feeds fromFacebook and Twitter accounts, [security firm] Cyberoam uncovered things such

as the companies hierarchy, decision makers, employee morale, intellectualproperty, and financial health, all of which could be useful to competitors. Of thecompanies examined, 40 percent disclosed confidential information. lix

Mobile

Facebook was most often accessed through its full site, through computers with full-sizedscreens. However, a growing trend was to use it on the go, through mobile phones and smartphones with small screens and site limited functionality.

Accessing social-networking sites, particularly Facebook, was among the fastest-

growing activities over the past year among cell phone users, comScore saidNearly 58 million people n the Unites States went onto a social-networking siteusing a cell phone at least once in December, up 56 percent from the same time in2009, comScore said in its 2010 Mobile Year in Review. Most of that growth wasled by Facebook, which reached 90 percent of U.S. social media users and grewmore than 120 percent over the past year. lx

This trend posed a challenge to Facebooks ability to collect revenue, as advertisements weredifficult to place on Facebooks mobile application without compromising the user experience.Was a paid Facebook mobile app the solution? Or would new ways of monetizing the user forexample location-based technologies available on mobile phones provide opportunities forother efforts that took the place of traditional ads?

Or would mobile networks eventually supplant the Facebook network? As one press reportprojected:

[The] next big wave of social networking will revolve around mobile phones andthe places that people take them to. A new crop of networking firms has alreadysprung up to capitalize on the opportunities offered by mobile phones. That opensup the prospect of even broader changes in the social-networking landscape. lxi

Forced IPO

Another risk pertained to Facebooks ability to stay a private company. I ts growing number of private owners could trigger a United States Securities and Exchange Commission (SEC) rulethat required private companies with 500 or more owners or ownership entities to abide by theaccounting and disclosure practices required of public companies by the Sarbanes-Oxley Act of 2002. Already, there was an SEC probe underway following Goldman Sachs and Digital SkyTechnologies $500 million investment in January 2011. lxii


17/28


The Economist noted: Faced with such obligations, most firms seek a public listing. This rulewas one of the reasons that Google ultimately decid ed to go public in 2004. lxiii Would Facebook need to have an initial public offering (IPO) in the near future?

Organization

While it remained a popular recruiter, Facebook itself had lost some of its own key hires. Itsuffered a natural loss of traction with some young employees as they grew out of lateadolescence or decided to pursue other interests (sometimes both). However, the reasons foremployee departures were diverse, as online tech magazine Gigaom noted:

Many Facebook employees started at the company just out of college and havegrown up together. [Some] left college to join. Others are getting engaged andmarried (sometimes to each other) and starting to have kids. Theyre far removedfrom the early days of Facebook Proms and a company-sponsored Tahoe partycabin.

One frustration of early employees is that theyve had limited upward mo bility asFacebook has matured Another factor in the recent exodus could be thatFacebook offered employees the ability to cash out up to $1 million worth of stock options with the help of investor Digital Sky Technologies, in part toalleviate pressure toward an IPO. lxiv

International User Growth

As Facebook gained dominance in the domestic U.S. market, it needed more international usersto keep growing its user base, much as it had turned to high schools to add to its maturingcollegiate user growth rate in 2005. 6 Facebook had initially relied solely on some 300,000 userswho volunteered their time to build out versions of the site in other languages. lxv By 2008,Facebook maintained a small but growing team of post-MBA country marketing managerswhose role it was to drum up interest in and signups to Facebook in whatever ways possible.

This was an easier pursuit in countries where social networking had not caught on the way it hadin the United States. In others with a dominant player or regulatory pressure, growth was morechallenging:

In Spain, Tuenti 7 held a dominant position since 2006 and was positioned in much thesame way that Facebook was in the United States.

Facebook started a Chinese-language site in 2008. The following year, Facebook wasdeemed noncompliant to censorship rules by the Chinese government for Internet-basedmedia companies. It was blocked by the so- called Great Firewall of China, resulting in

6 As of February 2011, MySpace was put on sale by News Corp. After reaching a peak valuation of $12 billion in2007, it was estimated to be worth $50 million to $200 million (Source: Reuters). It was unclear how many activeusers MySpace had, although some estimates put the figure at about 43 million, or virtually unchanged from 2007.7 Tuenti was co- founded by a team that included Stanford GSB MBA Adeyemi de Ajao (10).


18/28


a dramatic decline in its user base: one million to 14,000. Renren , started in 2005, role toprominence and planned a U.S. IPO in 2011. It had 160 million users. lxvi

In 2010, Facebook met a similar fate in Vietnam as it had in China. lxvii

Still, Facebook showed promise, even in countries that had a dominant incumbent. In India, for

example, Facebook overtook Googles Orkut in July 2010 and strove to capture the countrys1.14 billion people lxviii (see top ten international Facebook markets in Exhibit 4 ).

Certainly Facebook showed no signs of shying away from a good growth challenge. It wasrumored that Facebook entered new countries in order of advertising market size rather thanbased on the presence or absence of a dominant incumbent. Some including the Google head of display ads estimated the size of the global display ad market in 2011 to be north of $20billion. lxix

The Weight of Expectation

A final risk was the weight of expectation. By February, share sales taking place on secondaryexchanges like SecondMarket placed Facebook s implied valuation at $84 billion from the $50 billion valuation of Goldman and Digital Sky Technologies deal. This marketplace is like theearly days of the junk - bond market, remarked one analyst. lxx

Online venture capital journal VentureBeat allowed that Facebook enjoyed a high valuation butwondered whether the valuation would be borne out over time:

Using historical numbers and comparing them to as like or similar companiesthe valuations are very rich. But their growth rates are as high as the expectations.While lofty valuations leave them little room to underexecute, some of them will

exceed these expectations. (Remember the naysayers who said Googles valuationwas too high at the IPO?) Nothing is certain and hopping on yesterday s trend or todays overpriced t rend is dangerous. lxxi

Were investors to Facebook simply risk-hungry, or did they know something that the publicmarket did not?


19/28


Exhibit 1:Sample Facebook Profile (2004)

Source: Mike Harkey and William P. Barnett. Facebook, Stanford GSB Case E-220 . May 3, 2006. 17.


20/28


Exhibit 2:Sample News Feed and Mini Feed

Source: Ziad Mokhtar, G. Tavridis, and W. P. Barnett. Facebook, Stanford GSB Case E-220 . May 22, 2008(Revised). 20.


21/28


Exhibit 3:Facebook Valuation (September 2004-January 2011)

Source: Alexia Tsotsis. The Rise of Facebooks Valuation from 2004 -2011, TechCrunch (accessed March 31, 2011). January 10, 2011.


22/28


Exhibit 4:Facebook.com Figures and Facts

Facebook generates 770 billion page views per month More than 30 billion pieces of content are shared each day

200 million people access Facebook via a mobile device each day Users than access Facebook on mobile devices are twice as active on Facebook compared tonon-mobile users

Average usero has 130 friends on the siteo sends 8 friend requests per montho spends an average 15 hours and 33 minutes on Facebook per montho visits the site 40 times per montho spends an 23 minutes (23:20 to be precise) on each visito is connected to 80 community pages, groups and eventso creates 90 pieces of content each month

Countries with the most Facebook users as of May 2011:1. United States 154,828,1402. Indonesia 36,479,4003. United Kingdom 29,781,9204. Turkey 28,309,9205. India 25,028,4206. Mexico 23,757,8207. Philippines 23,209,8408. France 21,909,3009. Italy 19,180,900

10. Germany 18,264,560

Source: facebook.com, pingdom.com via http://socialmediatoday.com/kenburbary/276356/facebook-demographics-revisited-2011-statistics (accessed April 22, 2011). Also, http://www.checkfacebook.com/ (accessed May 4, 2011).


23/28


Exhibit 5:Facebook Users by Gender and Age

Source: Ken Burbary. Facebook Demographics Revisited 2011 Statistics, SocialMediaToday (accessedMarch 31, 2011). March 7, 2011.


24/28


Exhibit 6:Top Ten Reasons You Should Quit Facebook

10. Facebook's Terms Of Service are completely one-sided

Let's start with the basics. Facebook's Terms Of Service state that not only do they own your data (section 2.1), butif you don't keep it up to date and accurate (section 4.6), they can terminate your account (section 14). You couldargue that the terms are just protecting Facebook's interests, and are not in practice enforced, but in the context of their other activities, this defense is pretty weak. As you'll see, there's no reason to give them the benefit of thedoubt. Essentially, they see their customers as unpaid employees for crowd-sourcing ad-targeting data.

9. Facebook's CEO has a documented history of unethical behavior

From the very beginning of Facebook's existence, there are questions about Zuckerberg's ethics. According toBusinessInsider.com, he used Facebook user data to guess email passwords and read personal email in order todiscredit his rivals. These allegations, albeit unproven and somewhat dated, nonetheless raise troubling questionsabout the ethics of the CEO of the world's largest social network. They're particularly compelling given thatFacebook chose to fork over $65M to settle a related lawsuit alleging that Zuckerberg had actually stolen the ideafor Facebook.

8. Facebook has flat out declared war on privacy

Founder and CEO of Facebook, in defense of Facebook's privacy changes last January: "People have really gottencomfortable not only sharing more information and different kinds, but more openly and with more people. Thatsocial norm is just something that has evolved over time." More recently, in introducing the Open Graph API: "...the default is now social." Essentially, this means Facebook not only wants to know everything about you, and ownthat data, but to make it available to everybody. Which would not, by itself, necessarily be unethical, except that ...

7. Facebook is pulling a classic bait-and-switch

At the same time that they're telling developers how to access your data with new APIs, they are relatively quietabout explaining the implications of that to members. What this amounts to is a bait-and-switch. Facebook gets youto share information that you might not otherwise share, and then they make it publicly available. Since they are inthe business of monetizing information about you for advertising purposes, this amounts to tricking their users intogiving advertisers information about themselves. This is why Facebook is so much worse than Twitter in this regard:Twitter has made only the simplest (and thus, more credible) privacy claims and their customers know up front thatall their tweets are public. It's also why the FTC is getting involved, and people are suing them (and winning).

6. Facebook is a bully

When Pete Warden demonstrated just how this bait-and-switch works (by crawling all the data that Facebook'sprivacy settings changes had inadvertently made public) they sued him. Keep in mind, this happened just before theyannounced the Open Graph API and stated that the "default is now social." So why sue an independent softwaredeveloper and fledgling entrepreneur for making data publicly available when you're actually already planning to dothat yourself? Their real agenda is pretty clear: they don't want their membership to know how much data is reallyavailable. It's one thing to talk to developers about how great all this sharing is going to be; quite another to actuallysee what that means in the form of files anyone can download and load into MatLab.

5. Even your private data is shared with applications

At this point, all your data is shared with applications that you install. Which means now you're not only trustingFacebook, but the application developers, too, many of whom are too small to worry much about keeping your datasecure. And some of whom might be even more ethically challenged than Facebook. In practice, what this means isthat all your data - all of it - must be effectively considered public, unless you simply never use any Facebook


25/28


applications at all. Coupled with the OpenGraph API, you are no longer trusting Facebook, but the Facebook ecosystem.

4. Facebook is not technically competent enough to be trusted

Even if we weren't talking about ethical issues here, I can't trust Facebook's technical competence to make sure mydata isn't hijacked. For example, their recent introduction of their "Like" button makes it rather easy for spammers togain access to my feed and spam my social network. Or how about this gem for harvesting profile data? These are

just the latest of a series of Keystone Kops mistakes, such as accidentally making users' profiles completely public,or the cross-site scripting hole that took them over two weeks to fix. They either don't care too much about yourprivacy or don't really have very good engineers, or perhaps both.

3. Facebook makes it incredibly difficult to truly delete your account

It's one thing to make data public or even mislead users about doing so; but where I really draw the line is that, onceyou decide you've had enough, it's pretty tricky to really delete your account. They make no promises about deletingyour data and every application you've used may keep it as well. On top of that, account deletion is incredibly (andintentionally) confusing. When you go to your account settings, you're given an option to deactivate your account,which turns out not to be the same thing as deleting it. Deactivating means you can still be tagged in photos and bespammed by Facebook (you actually have to opt out of getting emails as part of the deactivation, an incredibly easydetail to overlook, since you think you're deleting your account). Finally, the moment you log back in, you're back like nothing ever happened! In fact, it's really not much different from not logging in for awhile. To actually deleteyour account, you have to find a link buried in the on-line help (by "buried" I mean it takes five clicks to get there).Or you can just click here. Basically, Facebook is trying to trick their users into allowing them to keep their dataeven after they've "deleted" their account.2. Facebook doesn't (really) support the Open Web

The so-called Open Graph API is named so as to disguise its fundamentally closed nature. It's bad enough that theidea here is that we all pitch in and make it easier than ever to help Facebook collect more data about you. It's badenough that most consumers will have no idea that this data is basically public. It's bad enough that they claim toown this data and are aiming to be the one source for accessing it. But then they are disingenuous enough to call it"open," when, in fact, it is completely proprietary to Facebook. You can't use this feature unless you're on Facebook.A truly open implementation would work with whichever social network we prefer, and it would look something

like OpenLike. Similarly, they implement just enough of OpenID to claim they support it, while aggressivelypromoting a proprietary alternative, Facebook Connect.

1. The Facebook application itself sucks

Between the farms and the mafia wars and the "top news" (which always guesses wrong - is that configurablesomehow?) and the myriad privacy settings and the annoying ads (with all that data about me, the best they canapparently do is promote dating sites, because, uh, I'm single) and the thousands upon thousands of crappyapplications, Facebook is almost completely useless to me at this point. Yes, I could probably customize it better,but the navigation is ridiculous, so I don't bother. (And, yet, somehow, I can't even change colors or apply themes ordo anything to make my page look personalized.) Let's not even get into how slowly your feed page loads. Basically,at this point, Facebook is more annoying than anything else.

Facebook is clearly determined to add every feature of every competing social network in an attempt to take over theWeb (this is a never-ending quest that goes back to AOL and those damn CDs that were practically falling out of thesky). While Twitter isn't the most usable thing in the world, at least they've tried to stay focused and aren't trying tobe everything to everyone.

Source: Dan Yoder. Top Ten Reasons You Should Quit Facebook, Gizmodo < http://gizmodo.com/#!5530178/top-ten-reasons-you-should-quit-facebook> (accessed May 1, 2011). May 3, 2010.


26/28


i The Social Network, Chasing The Frog (accessed April 22, 2011).ii Ziad Mokhtar, G. Tavridis, and W. P. Barnett. Facebook, Stanford GSB Case E-220 . May 22, 2008 (Revised). 3.iii Ann Grimes, Powerful Connections, The Wall Street Journal. October 30, 2003.iv

Gary Rivlin. How Friendster Lost a Chance for a Jackpot, New York Times (accessed December 10,2009). October 15, 2006.v Matt Meyerhoff. Intermix, Unit Attract Funding, Los Angeles Business Journal . December 13, 2004.vi Hyon B. Shin. School Enrollment Social and Economic Characte ristics of Students, U.S. Census Bureau. (accessed December 10, 2009). October 2003.vii Gary Rivlin. Billion -Dollar Baby Dot-Coms? Uh- oh, Not Again, New York Times (accessed May 4, 2011). September 2, 2005.viii Facebook goes corporate, CNET News. April 28, 2006.ix Debunking the MySpace Myth of 100 million active users, ForeverGeek (accessed April 25,2011). September 27, 2006.x Yuki Noguchi. In Teens Web World, MySpace is So Last Year, Washington Post (accessed May 4,2011). October 26, 2006.xi Anthony Bruno. Facebook is the (online) place, Billboard . July 2, 2005.xii Friendster Poised for an Exciting 2007, Friendster Press Release . (accessed April 25, 2011). January 7, 2007.xiii Twitter Raises Over $35 million in Series C, Marketing Vox (accessed March 23, 2011). February 19, 2009.xiv Bebo, CrunchBase (accessed April 29, 2011).xv Om Malik. Will Cyworld Stop MySpace Juggernaut?, gigaom < http://gigaom.com/2006/04/16/will-cyworld-stop-myspace-juggernaut/> (accessed April 22, 2011). April 16, 2006.xvi Taryn Filomio. Facebook: One Year Later, The Quinnipiac Chronicle (accessed May 4, 2011). December 7, 2005.xvii Facebook Revolt: Not all Friends are Equal, Business Week . September 6, 2006.xviii Brian Sullivan and J. Thaw. Facebook Courted By Yahoo!, Wont Sell, Director Says, Bloomberg.com (accessed December 10, 2009).December 16, 2006.xix Nick Gonzalez. Facebook Stealing Googlers At An Alarming Rate, TechCrunch (accessed May 2, 2011).November 21, 2007.xx Om Malik. Facebook Launches Connect, Finally, Gigaom (accessed December 10, 2009). December 4, 2008.xxi Wikipedia contributors. Social network, Wikipedia (accessed April 22, 2011).xxii Dan Farber. Facebooks Zuckerberg Uncorks the Social Graph, ZDNet (accessed April 24, 2011).xxiii Michael Arrington. Facebook No Longer The Second Largest Social Network, TechCrunch (accessed May 4, 2011).

June 12, 2008.xxiv Michael Arrington. Counterstrike: Murdoch, DeWolfe Announce MySpace Platform and New PrivacyControls, TechCrunch (accessed October 17, 2007). October 17, 2007.xxv Mark Sigal. Is Facebook a Brand You Can Trust? OReilly Radar < http://radar.oreilly.com/2009/12/is-facebook-a-brand-the-you-ca.html> (accessed May 1, 2011). December 15, 2009.xxvi Clint Boulton. Top 10 Google Employee Defections to Facebook, Cloud Computing (accessed May 1, 2011). November 22, 2010.


27/28


xxvii Amir Efrati and Scott Morrison. Google to Give Staff 10% Raise, Wall Street Journal (accessed May 2, 2011).November 10, 2010.xxviii Steven Musil. Facebook turns on its Like button, Cnet < http://news.cnet.com/8301-1023_3-10160112-93.html> (accessed April 22, 2011). February 9, 2009.xxix Facebook Launches New Messaging System, San Jose Mercury News . November 15, 2010.xxx Schackart June 2010. 12. xxxi Schackart June 2010. 12. xxxii Schackart June 2010.xxxiii Nicholas Carolson. Facebook has more than 600 users, Goldman tells clients, Business Insider (accessed March 31, 2011). January 5, 2011.xxxiv Wikipedia contributors. Facebook, Wikipedia < http://en.wikipedia.org/wiki/Facebook> (accessed March 31,2011).xxxv Shayndi Raice. Digital Media: Social Media, Phones Ally --- People Increasingly Use Devices to Access TheirTwitter and Facebook Accounts, Wall Street Journal . February 18, 2011.xxxvi Geoffrey A. Fowler. Corporate News: Facebook creates new frenemies --- The social- networking sites

practices are disrupting the businesses of established companies like Yahoo and Google, Wall Street Journal .

February 16, 2011.xxxvii Fowler.xxxviii Fowler.xxxix Morgan Stanley, Internet Trends, March 18, 2008. xl Eric Eldon. Facebook platform developers could see $500M in revenue this year , Venture Beat (accessedMay 4, 2011). May 8, 2009.xli Evelyn M. Rusli. As Web Game Maker Negotiates, an I.P.O. Is Expected in 2012, New York Times . February18, 2011.xlii Ralph Schackart. The Future in Digital Media, William Blair & Company Equity Research . January 20, 2011.9.xliii Schackart January 2011. 14.xliv Fowler.xlv Fowler.xlvi Fowler.xlvii Advertising Effectiveness: Understanding the Value of a Social Media Impression, Nielsen and Facebook White Paper. April 2010.xlviii Stephen Shankland. Will Facebook replace company web sites? CNET News (accessed March 2, 2011). xlix Schackart February 2011. 8. l Mike Swift. Facebook shows growth in display ads, San Jose Mercury News (accessed May 5, 2011). May 5, 2011.li Ralph Schackart. 2010 Digital Media and Internet Funding Trends, William Blair & Company Equity Research .February 18, 2011. 8. lii Clint Boulton. Google One Pass to Challenge Apple Subscription Service, eWeek

(accessed April 29, 2011). February 16, 2011.liii Schackart January 2011. 25.liv Schackart January 2011. 25.lv Fowler.lvi Global swap shops, The Economist . January 28, 2010.lvii Global swap shops, The Economist . January 28, 2010.lviii Privacy 2.0, The Economist . January 28, 2010.lix James Temple. New technologies bring new threats; cloud computing, mobile devices, s ocial sites are topconcerns, The San Francisco Chronicle . February 17, 2011.


28/28


lx Benny Evangelista and Ellen Lee. Facebook adds civil union to its choices for relationship status, The SanFrancisco Chronicle . February 20, 2011.lxi The Economist January 28, 2010. lxii Jean Eaglesham and Aaron Lucchetti. Facebook Deal Spurs Inquiry, Wall Street Journal (accessed May 2, 2011).January 5, 2011.lxiii Is Facebook really worth $50 billion? The Economist . January 6, 2011.lxiv Liz Gannes. The Early Facebook Employee Exodus, Gigaom < http://gigaom.com/2010/08/16/the-early-facebook-employee-exodus/> (accessed May 1, 2011). August 16, 2010.lxv Facebooks Sandberg: Brands Can Be Social Too, NielsenWire (accessed May 4,2011). June 15, 2010.lxvi Alison Tudor. Global Finance: Chinas Renren.com Plans Foreign Listing, Wall Street Journal . February 22,2011.lxvii Defriended, The Economist (accessed March 2, 2011).lxviii Caitlin Fitzsimmons. Facebook Overtakes Orkut In India, All Facebook (accessed May 1, 2011). August 25, 2010.lxix Scott Morrison. Google Executive Sees Online Display Ad Market Reaching $100Bn, Wall Street Journal (accessed May 4, 2011). February 28, 2011.lxx Liz Rappaport and Jean Eaglesham. Private -share trade probed --- SEC searches for conflicts of interest inmarket for pieces of companies like Facebook, Wall Street Journal . February 24, 2011.lxxi Todays valuations: Is it 1999 all over again? VentureBeat (accessed March 2, 2011).

Facebook in 2011

Documents

Transcript of Facebook in 2011