It was dawning on other people as well. Venture capitalists and other potential partners were eager to get a piece of Thefacebook. As early as March of 2005, Viacom offered to buy the site for $75 million, thinking that, with its youth demographic, Thefacebook (not Myspace) might be the MTV of the web generation.41 In lieu of a Viacom buyout or partnership, Sean Parker helped Thefacebook land a $12.7 million investment from the VC firm Accel Partners, which valued the company at around $100 million. The successful investment round was quite an achievement on Parker’s part. Google’s first major investment round had only valued it at $75 million.42 Thefacebook was only fifteen months old, but had gotten one of the richest private valuations in Silicon Valley history.
People began to speak in hushed tones about Thefacebook possibly being the “next Google.” Zuckerberg himself began playing up this comparison explicitly, recruiting Stanford computer science students behind a homemade sign that read WHY WORK AT GOOGLE? COME TO THEFACEBOOK.43 Thefacebook’s sudden high profile in Silicon Valley, along with its Accel connections, allowed the company to start hiring superstar talent. Steven Chen was such a superstar that he only worked at Facebook for a few months before going on to found YouTube. Facebook stopped renting out “casas de Facebook” and graduated to real office space in Palo Alto.
A final, important sign of the Zuckerberg pivot to taking Thefacebook seriously came when Sean Parker ceased day-to-day involvement in the company. As The Social Network movie suggests, there was, indeed, some sort of incident involving a party Parker hosted, though no charges were ever filed. Thefacebook’s new VC investors nonetheless demanded that Parker step down. After a long heart-to-heart between Parker and Zuckerberg, it was agreed that this was actually an opportune moment for change. It was finally time for Zuck to step up and not only take Thefacebook seriously, but take direction of it as well. It was time for him to lead.
This third-time ejection from a startup was more amicable for Parker than the others had been. He got to keep his own sizable chunk of equity. He continued to informally advise Zuckerberg for years afterward. And, crucially, Parker assigned his seat on the company’s board of directors to Zuckerberg, giving him control of three seats on the then five-seat board. “That solidified Mark’s position as the sort of hereditary king of Facebook,” Parker would say. “I refer to Facebook as a family business. Mark and his heirs will control Facebook in perpetuity.”44 Thanks to him.
Oh, and one of Parker’s last acts was to secure the domain Facebook.com. Sean had long argued that the “the” in the site’s title was superfluous. The company officially became Facebook on September 20, 2005.45
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A LOT OF THE FASCINATION surrounding the story of Mark Zuckerberg has been about the world watching a boy evolve into a legendary entrepreneur and leader. Zuckerberg’s trajectory mirrors that of another truly great entrepreneur who dropped out of Harvard to start a company. Bill Gates was almost exactly Mark Zuckerberg’s age when he founded Microsoft. He too was called socially awkward and he too had an early reputation for sophomoric behavior that verged on the juvenile. Gates didn’t start out to become one of the most successful entrepreneurs of all time. He grew into the role. It was only after he had one of the great business insights of all time—that software was the truly valuable nexus point of technology—that he seized his destiny. In truth, the “genius” of Bill Gates was his ability to evolve into the sort of man who could capitalize on his great entrepreneurial insight.
Not being a natural entrepreneur—and then stumbling onto a great entrepreneurial insight—and then having the fortitude, and discipline, and strength of will to become the sort of person who can bring that insight to reality? To me, that’s the more fascinating story.
What was Zuckerberg’s great insight about Facebook? Well, it was something along the lines of: humans are nothing more or less than highly social primates. Finding out what is happening with your friends and family is a core human desire, right smack in the middle of Maslow’s hierarchy of needs. Zuckerberg had once mused that someday somebody was going to make a community site that would satisfy the need to know what’s up with your friends—but for the entire planet. And when they did so, they’d be building an amazing company.
Maybe Facebook could be that amazing company.
In short, Zuckerberg began to believe in the power of the product he had already built. And he got strong evidence that he really was on to something thanks to a key new feature Facebook launched.
Over the summer of 2005, the site grew from 3 million members to 5 million.46 At times, 20,000 new users were joining daily.47 The site was getting 230 million pageviews daily. Revenues had climbed to $1 million a month.48 As it had done the previous year, Facebook decided that autumn was the best time to introduce major new features. Before he left, Sean Parker had been advocating for a photos feature to be added to Facebook. Instead of simply a profile photo, Facebook users should be able to share any photo, entire groups of photos, entire photo albums. On Myspace, an ecosystem of third-party companies like Photobucket and Slide had arisen to serve this purpose. And obviously, sites like Flickr showed that people were eager to share photos online. But Parker wanted Facebook to own the experience itself. “The theory behind photos was that it was an application that would work better on top of Facebook than as a free-standing application,” Parker says.49 And maybe if Facebook leveraged what it was already good at—its network effects—it could create something even more powerful still.
Facebook Photos was launched in October of 2005. It was actually a bare-bones application, lacking a lot of the features of more robust apps like Flickr. But it had one key innovation: if you uploaded a photo with a friend in it, you could “tag” them and they would receive a notification that you had posted a photo of them online. Facebook Photos took off right away. Within three weeks, Facebook hosted more photos than Flickr.50 After a month, 85% of the service’s users had been tagged in at least one photo.51 Zuckerberg and the rest of the team were amazed that an arguably inferior product could so quickly unseat the incumbents. The secret sauce had to be the network effects. Matt Cohler was one of the new wave of hires brought in to Facebook after the Accel investment. “Watching the growth of tagging was the first ‘aha’ for us about how the social graph could be used as a distribution system,” Cohler says. “The mechanism of distribution was the relationships between people.”52
Again, Facebook didn’t invent tagging. It was one of those big ideas floating around the Web 2.0 zeitgeist. But combining tagging of photos with Facebook’s unique network of real social connections proved impossibly potent. We’re monkeys that like to talk to each other—that like to see and be seen. When someone tagged you in a photo, how could you help but look? Again, the primary way Zuckerberg measured the success of Facebook was by monitoring how often users returned, and how much they clicked on when they did so. After photos, he saw that Facebook’s return traffic ramped up in a major way.
“Watching what happened with photos was a key part of what led Mark’s vision to crystallize,” Sean Parker says. “He was formulating a broader and broader theory about what Facebook really was.”53
The theory was something like this: human society is all about that small group of people you know and care about. Facebook had succeeded in capturing that, harnessing that, replicating that (at least, for college students). If Facebook really had tapped into one of the most powerful human impulses among college kids, why couldn’t it appeal to everyone? A product like Microsoft Windows was used by almost everyone who owned a computer. Billions of users. But a product like Coca-Cola was known to almost every human being alive, was used by almost every person alive. Could Facebook and the social graph be that powerful?
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IT WAS OVER THE COURSE of the next year, 2006, that Mark Zuckerberg and his company both began to mature. Hiring ramped up. After the blockbuster success of Photos, the company blew through all the storage capacity that had been allotted for the c
oming six months—in six weeks. Once again, Facebook needed more machines, servers, storage. Facebook raised another capital round to fund this expansion, this time at a $500 million valuation.54 And in the midst of what was now a full-blown movement around social networks and Web 2.0 generally, an even greater frenzy of interest arose around Facebook. Everyone wanted a piece of the site. And most of the circling sharks wanted to swallow Facebook whole.
Viacom expressed interest in purchasing Facebook again. As did Rupert Murdoch’s News Corp. As did Time Warner. For a period of months, it seemed like Zuckerberg took meetings with nearly everyone in the Fortune 100. To outsiders—and also to a lot of people inside the company—it looked like Zuckerberg was planning on cashing in while social networking was hot. Maybe he could flip Facebook for a cool billion or two. Not bad for a few years’ work. He could go back to Harvard or retire to the French Riviera. But in retrospect, it seems that Zuckerberg was actually using all this face time with some of the world’s most powerful CEOs in order to get a crash-course M.B.A. degree. By fielding offers and partnerships, he could learn the ins and outs of real-world business and finance at the highest levels. When a Viacom executive offered Zuckerberg the use of a corporate jet to fly home and visit his family, it was likely a ploy to get Mark alone for five or six hours so that he could be convinced to sell out. Instead, Zuckerberg spent the entire flight picking the executive’s brain about the day-to-day realities of running an advertising-based media company like Viacom.
Facebook still wasn’t profitable at this point, so it made sense to a lot of people that Zuckerberg would eventually sell. But there were intriguing signs that there could be a very powerful advertising-based business built off the social graph. One new feature that had been added to Facebook was the ability for businesses or brands to sponsor individual groups and eventually individual pages that would serve as Facebook profiles that users could “friend.” Since 2004, Apple had sponsored a popular group that, early on, was Facebook’s single biggest revenue generator. When Procter & Gamble sponsored a group for its Crest Whitestrips teeth-whitening product, 20,000 people joined.
From the beginning of the web, all the way through the launch of Google AdWords, the Internet had been monetized on the premise of taking the guesswork out of advertising. Well, on Facebook people were using their real names. They were volunteering their likes and dislikes. You could actually get people to tell you if they were interested in your product or not. It was advertising’s holy grail.
In his meetings with Viacom, Zuckerberg mentioned that he believed Facebook was worth $2 billion. Viacom eventually offered $1.5 billion in cash and stock, but only with earn-out and performance conditions, so Zuckerberg declined.55
That July, Yahoo offered $1 billion, all in cash. Both Accel and Peter Thiel thought the offer should be seriously considered. But when a board meeting was called to weigh options, Zuckerberg was brief.
“We’re obviously not going to sell here,” he told the group.
Peter Thiel urged him to at least think about it, pointing out that a billion dollars was a lot of money and there was a lot that he could do with that kind of money.
“I don’t know what I could do with the money,” Zuckerberg responded. “I’d just start another social networking site. I kind of like the one I already have.”56
The deal was rejected.
Each time an interested acquiring party would enter the picture, Zuckerberg would take meeting after meeting after meeting—but he never said yes to a sale. Some of the VCs who had backed Facebook were especially eager for a quick exit, and they began to pressure him intensely. But Zuck could never be persuaded. And if Zuck didn’t want to sell, then there would be no sale. Sean Parker had made sure of that. Parker was, in fact, still advising him to stay true to his vision. So was Marc Andreessen. The Netscape founder was just then beginning his new career as a prominent investor in Internet startups. He became a trusted Zuckerberg confidant and eventually joined Facebook’s board of directors.
It’s possible that Mark Zuckerberg could have sold Facebook during this period, and many people felt he would have been wise to. Friendster hadn’t sold at the height of its popularity, and look what had happened to it. Heck, in the dot-com days, TheGlobe had been a “community” site like Facebook. It had IPOed and then ridden the bubble down to pennies on the dollar. Zuck was not unaware of recent history. It’s possible a dollar figure could have been floated that he wouldn’t have been able to turn down. People began to whisper that Zuckerberg had gotten full of himself, that he was holding out for an impossible valuation, looking to make the deal of the century.
But the truth was, Zuckerberg couldn’t shake the feeling that somehow Facebook could be something bigger than a quick flip for a couple billion dollars. “When people say I’m greedy, they’re missing that I could already have more money than I’d know what to do with,” Zuckerberg told a Rolling Stone reporter during these months.57 He told people he was building Facebook for the long term. He still was nursing the crazy idea that Facebook could become a brand as ubiquitous as Coca-Cola. A billion dollars wasn’t cool. What would be cool? A billion users. “I don’t want to sell,” he told one of the more persistent executives looking to buy his company.58 “And anyway, I don’t think I’m ever going to have an idea this good again.”59
Facebook began to expand overseas, still following the tried and true school-by-school method. In almost every country it entered, Facebook encountered homegrown copycats. In most cases, Facebook quickly trounced the competition. The first steps were taken to expand beyond college users by opening the service up to high schoolers. Since high schools generally don’t have school-assigned email addresses, younger users were allowed in only if they were invited by someone they knew who was already in college. This proved irresistible to younger users, and though some existing members grumbled about the “kids” flooding in, the expansion was generally judged to be successful. The next logical step was to expand in the other direction. Already, 60% of members continued using Facebook after graduating and entering the workforce.60 So, plans were put in place to expand to older users by creating mini networks centered around employers and companies.
At the same time, work began on what would prove to be the single most important feature Facebook would ever develop. When studying the “Facebook trance,” the one that led users to click, click, click, Zuckerberg and the others saw that the reason people got so sucked in to the site was that they had to surf around to find out what had changed on every friend’s profile page. Users seemed to be most interested in learning what was new. Heck, every time a user simply changed their profile picture, Facebook’s engineers could see in the logs that that led to an average of twenty-five new pageviews.61 If Facebook’s key value proposition was the ability to find out what was up with your loved ones, then maybe they could design a better delivery system for this information. This would become the News Feed.
Again, the News Feed built on ideas that were already out there. Every user’s profile page would function as a glorified RSS feed, and the News Feed would collect all the updates, photos and status changes that your friends made in one central place—just like a feed reader collected blog posts. You wouldn’t have to visit profile page after profile page individually, you could just log in and Facebook would tell you what was new. It would all spool out in one, long, reverse-chronological stream, just like a blog.
But engineering the News Feed was a big ask, from both a design and an architecture perspective. Now when you logged on to the site, Facebook wouldn’t just need to call up information from one profile at a time; it would have to pull data from all your friends at once. On top of this, the developers wanted a complicated Google-style algorithm that would sort the updates in the feed based on what it thought you would be most interested in. You’d see updates from people Facebook had noticed you interacted with most often, for example. This was a huge technical challenge—a break from the computational simplicity
that, up until that point, Facebook had relied on to avoid Friendster-style slowdowns. So, of course, the News Feed required yet more servers, more databases, more computing power. Facebook would need to ramp up to Google levels of computational sophistication.
In retrospect, the News Feed is so obviously Facebook’s “killer application,” that it’s almost surprising social networks got as popular as they did before the News Feed was even invented. And so, it came as a shock to everyone at Facebook that users hated the News Feed. The feature was launched in the early morning of Tuesday, September 5, 2006.62 By breakfast time, Facebook staffers were deluged with messages of pure outrage. Only one in a hundred postings about the News Feed was positive.63 Ben Parr, a junior at Northwestern University, created a Facebook group called Students Against Facebook News Feed. It had 700,000 members by that Friday.64 By some estimates, fully 10% of Facebook users were actively protesting the changes. Most of the complaints about the News Feed centered around the perceived breach of privacy. “Very few of us want everyone automatically knowing what we update,” wrote one angry missive, “news feed is just too creepy, too stalker-eque [sic], and a feature that has to go.”65
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