History
Main articles: History of Facebook and Timeline of Facebook
Pre-IPO
Zuckerberg wrote a program called Facemash on October 28, 2003 while attending Harvard as a sophomore. According to The Harvard Crimson, the site was comparable to Hot or Not and "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"[21][22]
To accomplish this, Zuckerberg hacked into protected areas of Harvard's computer network and copied private dormitory ID images. Harvard did not have a student "Facebook" (a directory with photos and basic information) at the time, although individual houses had been issuing their own paper facebooks since the mid-1980s. Facemash attracted 450 visitors and 22,000 photo-views in its first four hours online.[21][23]
The site was quickly forwarded to several campus group list-servers,[clarification needed] 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.[24] 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, and each image was featured with a corresponding comments section.[23]He shared the site with his classmates and people started sharing notes.
The following semester, Zuckerberg began writing code for a new website in January 2004. He said he was inspired by an editorial about the Facemash incident in The Harvard Crimson.[25] On February 4, 2004, Zuckerberg launched "Thefacebook", originally located at thefacebook.com.[26]
Six days after the site launched, three Harvard seniors (Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra) accused Zuckerberg of intentionally misleading them into believing he would help them build a social network called HarvardConnection.com. They claimed he was instead using their ideas to build a competing product.[27] The three complained to The Harvard Crimson and the newspaper began an investigation. They later filed a lawsuit against Zuckerberg, subsequently settling in 2008[28] for 1.2 million shares (worth $300 million at Facebook's IPO).[29]
Membership was initially restricted to students of Harvard College; within the first month, more than half the undergraduates at Harvard were registered on the service.[30] Eduardo Saverin (business aspects), Dustin Moskovitz (programmer), Andrew McCollum (graphic artist), and Chris Hughes joined Zuckerberg to help promote the website. In March 2004, Facebook expanded to the universities of Columbia, Stanford, and Yale.[31] It later opened to all Ivy League colleges, Boston University, New York University, the MIT, and gradually most universities in Canada and the United States.[32][33]
In mid-2004, entrepreneur Sean Parker (an informal advisor to Zuckerberg) became the company's president.[34] In June 2004, Facebook moved its operations base to Palo Alto, California.[31] It received its first investment later that month from PayPal co-founder Peter Thiel.[35] In 2005, the company dropped the from its name after purchasing the domain name facebook.com for $200,000.[36]
A high-school version of the site was launched in September 2005, which Zuckerberg called the next logical step.[37] (At the time, high-school networks required an invitation to join.)[38] Facebook expanded membership eligibility to employees of several companies, including Apple Inc. and Microsoft.[39]On September 26, 2006, Facebook was opened to everyone at least 13 years old with a valid email address.[40][41]
In late 2007, Facebook had 100,000 business pages (pages which allowed companies to promote themselves and attract customers). These started as group pages, but a new concept called company pages was planned.[when?][42]
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.[43] Microsoft's purchase included rights to place international adverts on the social networking site.[44] In October 2008, Facebook announced that it would set up its international headquarters in Dublin, Ireland.[45] In September 2009, Facebook said that it had turned cash-flow positive for the first time.[46] In November 2010, based on SecondMarket Inc. (an exchange for privately held companies' shares), Facebook's value was $41 billion; it slightly surpassed eBay's became the third largest American web company after Google and Amazon.com.[47]
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Traffic to Facebook increased steadily after 2009. More people visited Facebook than Google for the week ending March 13, 2010.[48]
In March 2011, it was reported that Facebook takes approximately 20,000 profiles offline every day for infractions including spam, inappropriate content and underage use, as part of its efforts to boost cyber security.[49]
In early 2011, Facebook announced plans to move its headquarters to the former Sun Microsystems campus in Menlo Park.[50][51]
Release of statistics by DoubleClick showed that Facebook reached one trillion page views in the month of June 2011, making it the most visited website tracked by DoubleClick.[52]
According to the Nielsen Media Research study, released in December 2011, Facebook is the second most accessed website in the US (behind Google).[53]
In March 2012, Facebook announced App Center, an store selling applications that operate via the site. The store will be available to iPhone, Androidand mobile web users.[54]
Facebook held an initial public offering on May 17, 2012, negotiating a share price of $38 apiece. The company was valued at at $104 billion, the largest valuation to date for a newly listed public company.[18]
Initial public offering
Main article: Initial public offering of Facebook
Facebook filed their S1 document with the Securities and Exchange Commission on February 1, 2012. The company applied for a US$5 billion initial public offering (IPO); one of the biggest in the history of technology and the biggest in Internet history.[55] Facebook valued its stock at $38 a share which priced the company at $104 billion – the largest valuation to date for a new public company.[56][57] The IPO raised $16 billion, making it the third largest in U.S. history.[58][59] The shares began trading on May 18; the stock struggled to stay above the IPO price for most of the day, but set a record for the trading volume of an IPO (460 million shares).[60] The first day of trading was marred by technical glitches that prevented orders from going through;[61] only the technical problems and artificial support from underwriters prevented the stock price from falling below the IPO price on the day.[62]
It was revealed later[when?] that Facebook's lead underwriters, Morgan Stanley (MS), JP Morgan (JPM), and Goldman Sachs (GS) cut their earnings forecasts for the company in the middle of the IPO roadshow.[63] The stock continued its freefall in subsequent days, closing at 34.03 on May 21 and 31.00 on May 22. A 'circuit breaker' was used in an attempt to slow down the stock price's decline.[64] Securities and Exchange Commission ChairmanMary Schapiro and Financial Industry Regulatory Authority (FINRA) Chairman Rick Ketchum called for a review of the circumstances surrounding the IPO.[65]
Facebooks' IPO is now under investigation and has been compared to pump and dump schemes.[61][63][65][66] A class-action lawsuit was filed in May 2012 due to the trading glitches, which led to botched orders.[67][68] Apparently,[according to whom?] the glitches prevented a number of investors from selling the stock during the first day of trading while the stock price was falling – forcing them to incur bigger losses when their trades finally went through.
Lawsuits have been filed alleging that an underwriter for Morgan Stanley selectively revealed adjusted earnings estimates to preferred clients.[69] The other underwriters (MS, JPM, GS) and Facebook's CEO and board are also facing litigation.[70] It is believed that adjustments to earnings estimates were communicated to the underwriters by a Facebook financial officer, who used the information to cash out on their positions while leaving the general public with overpriced shares.[71]
By the end of May 2012, the stock lost over a quarter of its starting value, which led to the Wall Street Journal calling the IPO a "fiasco."[72]
After IPO
In July 2012, Facebook added a gay marriage icon to its timeline feature.[73] On August 23, 2012, Facebook released an update to its iOS app (version 5.0), which changed how data was collected and displayed to make it faster. On January 15, 2013, Facebook announced Graph Search, which provides users with a "precise answer" rather than a link to an answer by leveraging the data present on its site.[74] Facebook emphasized that the feature would be "privacy-aware," returning only results from content already shared with the user.[75] The company is the subject of a lawsuit by Rembrandt Social Media for patents involving the "Like" button.[76] On April 3, 2013, Facebook unveiled Home, a user-interface layer for Android devices offering greater integration with the site. HTC announced the HTC First, a smartphone with Home pre-loaded.[77] On April 15, 2013, Facebook announced an alliance across 19 states with the National Association of Attorneys General to provide teenagers and parents with information on tools to manage social networking profiles.[78] On April 19, 2013, Facebook officially modified its logo to remove the faint blue line at the bottom of the "F" icon. The letter F moved closer to the edge of the box.[79]
Following a campaign by 100 advocacy groups, Facebook agreed to update its policy on hate speech. The campaign highlighted content promoting domestic and sexual violence against women, and used over 57,000 tweets and more than 4,900 emails that caused withdrawal of advertising from the site by 15 companies, including Nissan UK, House of Burlesque and Nationwide UK. The social media website initially responded by stating that "while it may be vulgar and offensive, distasteful content on its own does not violate our policies".[80] It decided to take action on May 29, 2013 after it "become clear that our systems to identify and remove hate speech have failed to work as effectively as we would like, particularly around issues of gender-based hate."[81]
On June 12, 2013, Facebook announced on its newsroom that it was introducing clickable hashtags to help users follow trending discussions or search what others are talking about on a topic.[82]A July 2013 Wall Street Journal article identified the Facebook IPO as the cause of a change in the U.S.' national economic statistics, as the company home (San Mateo County, California) became the top wage-earning county in the country after the fourth quarter of 2012. The Bureau of Labor Statistics reported that the average weekly wage in the county was US$3,240, 107% higher than the previous year. It noted the wages were "the equivalent of $168,000 a year, and more than 50% higher than the next highest county, New York County (better known as Manhattan), which came in at $2,107 a week, or roughly $110,000 a year."[83]
Russian internet firm Mail.Ru sold its Facebook shares for US$525 million on September 5, 2013, following its initial US$200 million investment in 2009. Partly owned by Russia's richest manAlisher Usmanovhe, the firm owned a total of 14.2 million remaining shares prior to the sale.[84] In the same month, the Chinese government announced that it will lift the ban on Facebook in theShanghai Free Trade Zone "to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone." Facebook has been blocked in China since 2009.[85]
Facebook is part of The Alliance for Affordable Internet (A4AI) (which was launched in October 2013). The A4AI is a coalition of public and private organisations that includes Google, Intel and Microsoft. Led by Sir Tim Berners-Lee, the A4AI seeks to make Internet access more affordable so that access is broadened in the developing world, where only 31% of people are online. Google will help to decrease Internet access prices so that they fall below the UN Broadband Commission's worldwide target of 5% of monthly income.[86]
A Reuters report, published on December 11, 2013, stated that Standard & Poor's announced the placement of Facebook onto its S&P 500 index "after the close of trading on December 20."[87]
Facebook announced Q4 2013 earnings of US$523 million (20 cents per share), an increase of $64 million since the previous year.[88] In February 2014, Facebook announced that it would be buying mobile messaging company Whatsapp for $19 billion in cash and stock.[89]
History of Facebook, inc.'s Stock
- All-Time Closing High: $71.57 on March 5, 2014
- All-Time Intra-Day High: $71.97 on March 5, 2014
Corporate affairs
Management
The ownership percentages of the company, as of 2012, are:
- Mark Zuckerberg: 28%,[90]
- Accel Partners: 10%
- Digital Sky Technologies: 10%[91]
- Dustin Moskovitz: 6%
- Eduardo Saverin: 5%
- Sean Parker: 4%
- Peter Thiel: 3%
- Greylock Partners: between 1 to 2%
- Meritech Capital Partners: between 1 to 2% each
- Microsoft: 1.3%
- Li Ka-shing: 0.8%
- Interpublic Group: less than 0.5%
A small group of current and former employees and celebrities own less than 1% each, including Matt Cohler, Jeff Rothschild, Adam D'Angelo, Chris Hughes, and Owen Van Natta, while Reid Hoffman and Mark Pincus have sizable holdings of the company. The remaining 30% or so are owned by employees, an undisclosed number of celebrities, and outside investors.[92] Adam D'Angelo, former chief technology officer and friend of Zuckerberg, resigned in May 2008. Reports claimed that he and Zuckerberg began quarreling, and that he was no longer interested in partial ownership of the company.[93]
Key management personnel consist of: Chris Cox (VP of Product), Sandberg (COO), and Zuckerberg (Chairman and CEO). As of April 2011, Facebook has over 2,000 employees, and offices in 15 countries.[94] Other managers include chief financial officer David Ebersman and public relations head Elliot Schrage.[95]
Facebook was named the 5th best company to work for in 2014 by company-review site Glassdoor as part of its sixth annual Employees' Choice Awards. The website stated that 93% of Facebook employees would recommend the company to a friend.[96]
Revenue
| Year | Revenue | Growth |
|---|---|---|
| 2006 | $52[97] | — |
| 2007 | $150[98] | 188% |
| 2008 | $280[99] | 87% |
| 2009 | $775[100] | 177% |
| 2010 | $2,000[101] | 158% |
| 2011 | $3,711[102] | 86% |
| 2012 | $5,089[103] | 37% |
| 2013 | $7,872[103] | 55% |
Most of Facebook's revenue comes from advertising.[104][105] Facebook generally has a lower clickthrough rate (CTR) for advertisements than most major Web sites. According to BusinessWeek.com, banner advertisements on Facebook have generally received one-fifth the number of clicks compared to those on the Web as a whole,[106] although specific comparisons can reveal a much larger disparity. For example, while Google users click on the first advertisement for search results an average of 8% of the time (80,000 clicks for every one million searches),[107] Facebook's users click on advertisements an average of 0.04% of the time (400 clicks for every one million pages).[108]
Sarah Smith, who was Facebook's Online Sales Operations Manager until 2012,[109] reported that successful advertising campaigns on the site can have clickthrough rates as low as 0.05% to 0.04%, and that CTR for ads tend to fall within two weeks.[110] By comparison, the CTR for competing social networkMySpace is about 0.1%, about 2.5 times better than Facebook's rate, but still low compared to many other sites.[citation needed]
The cause of Facebook's low CTR has been attributed to younger users enabling ad blocking software and their adeptness at ignoring advertising messages, as well as the site's primary purpose being social communication rather than content viewing.[111] According to digital consultancy iStrategy Labs in mid-January 2014, three million fewer users aged between 13 and 17 years were present on Facebook's Social Advertising platform compared to 2011.[112]However, Time Writer and Reporter Christopher Matthews stated in the wake of the iStrategy Labs results:
A big part of Facebook's pitch is that it has so much information about its users that it can more effectively target ads to those who will be responsive to the content. If Facebook can prove that theory to be true, then it may not worry so much about losing its cool cachet.[113]
Zuckerberg, alongside other Facebook executives, have questioned the data in such reports; although, a former Facebook senior employee has commented: "Mark [Zuckerberg] is very willing to recognize the strengths in other products and the flaws in Facebook."[114]
On pages for brands and products, however, some companies have reported CTR as high as 6.49% for Wall posts.[115] A study found that, for video advertisements on Facebook, over 40% of users who viewed the videos viewed the entire video, while the industry average was 25% for in-banner video ads.[116]
The company released its own set of revenue data at the end of January 2014 and claimed: Revenues of US$2.59 billion were generated for the three months ending December 31, 2013; earnings per share were 31 cents; revenues of US$7.87 billion were made for the entirety of 2013; and Facebook's annual profit for 2013 was US$1.5 billion. During the same time, independent market research firm eMarketer released data in which Facebook accounted for 5.7 per cent of all global digital ad revenues in 2013 (Google's share was 32.4 per cent).[20]
Mergers and acquisitions
Main article: List of acquisitions by Facebook
On November 15, 2010, Facebook announced it had acquired the domain name fb.com from the American Farm Bureau Federation for an undisclosed amount. On January 11, 2011, the Farm Bureau disclosed $8.5 million in "domain sales income", making the acquisition of FB.com one of the ten highest domain sales in history.[117]
Offices
In early 2011, Facebook announced plans to move to its new headquarters, the former Sun Microsystems campus in Menlo Park.
All users outside of the US and Canada have a contract with Facebook's Irish subsidiary "Facebook Ireland Limited". This allows Facebook to avoid US taxes for all users in Europe, Asia, Australia, Africa and South America. Facebook is making use of the Double Irish arrangement which allows it to pay just about 2-3% corporation tax on all international revenue.[118]
Facebook, which in 2010 had more than 750 million active users globally including over 23 million in India, announced that its Hyderabad centre would house online advertising and developer support teams and provide round-the-clock, multi-lingual support to the social networking site's users and advertisers globally.[123] With this, Facebook joins other giants like Google, Microsoft, Oracle, Dell, IBM and Computer Associates that have already set up shop.[124] In Hyderabad, it is registered as 'Facebook India Online Services Pvt Ltd'.[125][126][127]
Though Facebook did not specify its India investment or hiring figures, it said recruitment had already begun for a director of operations and other key positions at Hyderabad,[128] which would supplement its operations in California, Dublin in Ireland as well as at Austin,Texas.
A custom-built data center with substantially reduced ("38% less") power consumption compared to existing Facebook data centers opened in April 2011 in Prineville, Oregon.[129] In April 2012, Facebook opened a second data center in Forest City, North Carolina, US.[130]
On October 1, 2012, CEO Zuckerberg visited Moscow to stimulate social media innovation in Russia and to boost Facebook's position in the Russian market.[131] Russia's communications minister tweeted that Prime Minister Dmitry Medvedev urged the social media giant's founder to abandon plans to lure away Russian programmers and instead consider opening a research center in Moscow. Facebook has roughly 9 million users in Russia, while domestic analogue VK has around 34 million.[132]
The functioning of a woodwork facility on the Menlo Park campus was announced at the end of August 2013. The facility, opened in June 2013, provides equipment, safety courses and woodwork learning course, while employees are required to purchase materials at the in-house store. A Facebook spokesperson explained that the intention of the facility is to encourage employees to think in an innovative manner due to the different environment, and also serves as an attractive perk for prospective employees.[133]
Open source contributions
Facebook is both a consumer of and contributor to free and open source software.[134] Facebook's contributions include: HipHop for PHP,[135] Fair scheduler in Apache Hadoop,[136] Apache Hive, Apache Cassandra,[137] and the Open Compute Project.[138]
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