This article needs to be updated. Please update this article to reflect recent
events or newly available information. (January 2019)
1 FaceMash
2 Financials
2.1 Initial funding
2.2 First angel investment
2.3 Accel investment (Series A)
2.4 Greylock investment (Series B)
2.5 Sales negotiations
2.6 Microsoft investment (Series C)
2.7 Switch to profitability
2.8 Acquisitions
3 Initial public offering
4 Timeline
5 See also
6 Notes
7 References
FaceMash
While writing the software, Mark Zuckerberg wrote the following blog entries:[10]
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 horrendiedous [sic] 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.
— 2:49 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 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".[9] Facemash attracted 450 visitors and 22,000
photo-views in its first four hours online.[11]
The site was quickly forwarded to several campus group list-servers, but was shut
down a few days later by the Harvard administration. Zuckerberg faced expulsion and
was charged by the administration with breach of security, violating copyrights,
and violating individual privacy. Ultimately, the charges were dropped.[9]
Zuckerberg expanded on this initial project that semester by creating a social
study tool ahead of an art history final exam. He uploaded art images to a website,
each of which was featured with a corresponding comments section, then shared the
site with his classmates, and people started sharing notes.[12]
On October 25, 2010, entrepreneur and banker Rahul Jain auctioned off FaceMash.com
to an unknown buyer for $30,201.[13][14]
Zuckerberg also stated his intention to create a universal website that could
connect people around the university. According to his roommate, Dustin Moskovitz,
"When Mark finished the site, he told a couple of friends ... then one of them
suggested putting it on the Kirkland House online mailing list, which was ... three
hundred people." Moskovitz continued to say that, "By the end of the night, we were
... actively watching the registration process. Within twenty-four hours, we had
somewhere between twelve hundred and fifteen hundred registrants."[18]
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.[19] 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 had ever entered an incorrect password into TheFacebook.com. In the cases
in which they had failed to log in, Zuckerberg 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 which
was later settled.[19][20]
Late in 2007, Facebook had 100,000 business pages, allowing companies to attract
potential customers and tell about themselves. These started as group pages, but a
new concept called company pages was planned.[46]
In 2010, Facebook began to invite users to become beta testers after passing a
question-and-answer-based selection process,[48] and a set of Facebook Engineering
Puzzles where users would solve computational problems which gave them an
opportunity to be hired by Facebook.[49]
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.[50] As of October 2011, over 350 million users
accessed Facebook through their mobile phones, accounting for 33% of all Facebook
traffic.[51]
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 long-time business partner of Facebook and a company that has substantially
benefited from its association with Facebook, has decided to resort to litigation".
[52] 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.[53] In 2012, Facebook App
Center, an online mobile store, was rolled out. The store initially had 500
Facebook apps which were mostly games.[54]
On April 24, 2014, Facebook and Storyful announced a new feature called FB
Newswire.[55]
Financials
Entrance to Facebook headquarters complex in Menlo Park, California
Facebook's former headquarters in downtown Palo Alto, California
Initial funding
Facebook was initially incorporated as a Florida LLC. For the first few months
after its launch in February 2004, the costs for the website operations for
thefacebook.com were paid for by Mark Zuckerberg and Eduardo Saverin, who had taken
equity stakes in the company. The website also ran a few advertisements to meet its
operating costs.[56]
First angel investment
In the summer of 2004, venture capitalist Peter Thiel made a $500,000 angel
investment in the social network Facebook for 10.2% of the company and joined
Facebook's board. This was the first outside investment in Facebook.[57][58][59]
In his book The Facebook Effect, David Kirkpatrick outlines the story of how Thiel
came to make his investment: former Napster and Plaxo employee Sean Parker, who at
the time had assumed the title of "President" of Facebook, was seeking investors
for Facebook. Parker approached Reid Hoffman, the CEO of work-based social network
LinkedIn. Hoffman liked Facebook but declined to be the lead investor because of
the potential for conflict of interest with his duties as LinkedIn CEO. He
redirected Parker to Peter Thiel, whom he knew from their PayPal days (both Hoffman
and Thiel are considered members of the PayPal Mafia). Thiel met Parker and Mark
Zuckerberg, the Harvard college student who had founded Facebook and controlled it.
Thiel and Zuckerberg got along well and Thiel agreed to lead Facebook's seed round
with $500,000 for 10.2% of the company. Hoffman and Mark Pincus also participated
in the round, along with Maurice Werdegar who led the investment on behalf of
Western Technology Investment. The investment was originally in the form of a
convertible note, to be converted to equity if Facebook reached 1.5 million users
by the end of 2004. Although Facebook narrowly missed the target, Thiel allowed the
loan to be converted to equity anyway.[60] Thiel said of his investment:
I was comfortable with them pursuing their original vision. And it was a very
reasonable valuation. I thought it was going to be a pretty safe investment."[60]
In April 2005, Accel Partners agreed to make a $12.7 million venture capital
investment in a deal that valued Facebook at $98 million. Accel joined Facebook's
board, and the board was expanded to five seats, with Zuckerberg, Thiel, and Breyer
in three of the seats, and the other two seats currently being empty but with
Zuckerberg free to nominate anybody to those seats.[61]
Greylock investment (Series B)
In April 2006, Facebook closed its Series B funding round. This included $27.5
million from a number of venture capitalists, including Greylock Partners and
Meritech Capital, plus additional investments from Peter Thiel and Accel Partners.
The valuation for this round was about $500 million.[59][62][63]
A leaked cash flow statement showed that during the 2005 fiscal year, Facebook had
a net gain of $5.66 million.[64]
Sales negotiations
With the sale of social networking website MySpace to News Corp on July 19, 2005,
rumours surfaced about the possible sale of Facebook to a larger media company.[65]
Zuckerberg had already stated that he did not want to sell the company, and denied
rumors to the contrary.[66] 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.[67]
In September 2006, serious talks between Facebook and Yahoo! took place concerning
acquisition of Facebook, with prices reaching as high as $1 billion.[68][69] 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.[70]
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."[71] In September 2007, Microsoft approached Facebook, proposing an
investment in return for a 5% stake in the company, offering an estimated $300–500
million.[72] That month, other companies, including Google, expressed interest in
buying a portion of Facebook.[73]
Microsoft investment (Series C)
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.[74] 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.[75] In November 2007, Hong Kong billionaire
Li Ka-shing invested $60 million in Facebook.[76]
Entrance to Facebook's former headquarters in the Stanford Research Park, Palo
Alto, California. In January 2012 the company moved to a new campus in Menlo Park,
California.
Switch to profitability
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.[78]
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.[79] 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.[80]
Acquisitions
On April 12, 2012, Facebook acquired photo sharing service Instagram for
approximately $1 billion in cash and stock.[88][89]
On March 8, 2013, Facebook announced that they acquired the team from Storylane,
but not the product itself.[90] On October 13, 2013, Facebook acquired Onavo, an
Israeli analytics company, for approximately $120 million.[91][92][93]
On March 25, 2014, Facebook announced they had acquired virtual reality startup
Oculus VR for $2 billion in cash and stock.[95]
In April 2020, Facebook, Inc. bought a 9.9% stake in Jio, which was the highest
foreign direct investment in the Indian technology sector.[96][97]
Initial public offering
Main article: Initial public offering of Facebook
Facebook filed for an initial public offering (IPO) on February 1, 2012.[98] 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.[99] After the IPO,
Zuckerberg retains a 22% ownership share in Facebook and owns 57% of the voting
shares.[100]
Underwriters valued the shares at $38 each, pricing the company at $104 billion,
the largest valuation to date for a newly public company.[101] On May 16, one day
before the IPO, Facebook announced that it would sell 25% more shares than
originally planned due to high demand.[102] 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 Inc.).[103][104] The stock price left the company with a
higher market capitalization than all but a few U.S. corporations – surpassing
heavyweights such as Amazon.com, McDonald's, Disney, and Kraft Foods – and made
Zuckerberg's stock worth $19 billion.[103][104] 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".[103] 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".[105]
Trading in the stock, which began on May 18, was delayed that day due to technical
problems with the NASDAQ exchange.[106] The stock struggled to stay above the IPO
price for most of the day, forcing underwriters to buy back shares to support the
price.[107] At closing bell, shares were valued at $38.23,[108] only $0.23 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.[109] The stock nonetheless
set a new record for trading volume of an IPO.[110] On May 25, 2012, the stock
ended its first full week of trading at $31.91, a 16.5% decline.[111]
Timeline of Twitter
Timeline of Instagram
Timeline of Pinterest
Timeline of Snapchat
Timeline of LinkedIn
Timeline of social media
Notes
An "active user" is defined by Facebook as a user who has visited the website in
the last 30 days.
This value is from an investment document. The date is from when the document
was revealed to the public, not the actual date that the website reached this many
users.
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