Facebook is a social networking service launched in February 2004, owned and operated by Facebook, Inc. It was founded by Mark Zuckerberg with his college roommates and fellow Harvard University students Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes. The website’s membership was initially limited by the founders to Harvard students, but was expanded to other colleges in the Boston area, the Ivy League, and gradually most universities in Canada and the United States,corporations, and by September 2006, to everyone of age 13 and older with a valid email address.
Facemash, the Facebook’s predecessor, opened on October 28, 2003. Initially, the website was invented by a Harvard student, Mark Zuckerberg, and three of his classmates – Andrew McCollum, Chris Hughes and Dustin Moskovitz. Zuckerberg wrote the software for the Facemash website when he was in his second year of college. The website was set up as a type of “hot or not” game for Harvard students. The website allowed visitors to compare two student pictures side-by-side and let them choose who was “hot” and who was “not”.
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 dormitory 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 some farm animals and have people vote on which is more attractive.—9:49 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.—11:10 pm
Let the hacking begin.—12:57 am
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 the “facebooks” Harvard maintained to help students identify each other and used the images to populate his Facemash website.
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. That the initial site mirrored people’s physical community—with their real identities—represented the key aspects of what later became Facebook.
“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…” 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.
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.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.
Microsoft investment (Series D)
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.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. In November 2007, Hong Kong billionaire Li Ka-shing invested $60 million in Facebook.
Switch to profitability
In August 2008, BusinessWeek reported that private sales by employees, as well as purchases by venture capital firms, were being done at share prices that put the company’s total valuation at between $3.75 billion and $5 billion. In October 2008, Zuckerberg said “I don’t think social networks can be monetized in the same way that search did … In three years from now we have to figure out what the optimum model is. But that is not our primary focus today.”
Facebook hired Sheryl Sandberg as its Chief Operating Officer in March 2008. Sandberg is reported to have held a number of brainstorming sessions with Facebook employees on their long-term monetization strategy, which led to the conclusion that advertising would be the main source of monetization. Under Sandberg’s leadership, Facebook made a number of changes to its advertising model with the aim of achieving profitability. In September 2009, Facebook stated that it had turned cash flow positive for the first time.
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.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.
In August 2009, Facebook acquired social media real-time news aggregator FriendFeed, a start-up created by Gmail‘s first engineer Paul Buchheit. In February 2010, Facebook acquired Malaysian contact-importing startup Octazen Solutions. On April 2, 2010, Facebook announced acquisition of photo-sharing service called Divvyshot for an undisclosed amount. In June 2010, an online marketplace for trading private Facebook stock reflected a valuation of $11.5 billion. On April 12, 2012, Facebook acquired photo sharing service Instagram for approximately $1 billion in cash and stock. On March 8, 2013, Facebook announced that they acquired the team from Storylane, but not the product itself.