Masterclassing Connect

Facebook Turns 10 - A Brief History

Alex Spencer

It's been 10 years since Facebook first went live, as thefacebook.com, a social network site for students at Harvard University.

We'll be taking a closer look at where Facebook is today and where it could be headed, with the help of some industry experts, later this week. But first, let's remind ourselves how it got to the position it is in today – a public company reporting annual profits of $1.5bn (£920m), with a monthly userbase of 1.2bn and growing.

2004: The first million

Mark Zuckerberg FacebookToday, Facebook might be aiming to make every person in every country, developed and developing alike, a member of its social network. But when it first launched, on 4 February 2004, it was shooting for a much smaller population: the 20,000 or so students attending Harvard University.

Taking its name from the pictorial directory of students available in print or online at many US universities, thefacebook.com – created by Mark Zuckerberg, along with fellow students Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes – initially stuck closely to those roots.

The site quickly expanded to other US universities; in March, Columbia, Stanford, and Yale, and before long all of the countries' prestigious Ivy League colleges, plus MIT, Boston and New York University.

Advertising wasn't far behind, with the first banner ads sold by Saverin appearing on the site in April. The founders had no real ad strategy and a “primitive” pitch, according to a Mashable interview with Matt Britton, founder of marketing agency Mr Youth, one of Facebook's first advertisers – but the opportunities for reaching a select audience were already present.

“Before Facebook, there really wasn't a way to target college students specifically based on university,” said Britton. By buying 'Facebook Flyers', marketers could target users by the .edu email address they had registered with. In a way, it was a limited version of location-based marketing, and an early indicator of what would make Facebook's ad offering so attractive in the years to come.

After gaining its first investor in June – PayPal co-founder Peter Thiel, who invested $500,000 – Facebook filed for incorporation on 29 July, with Sean Parker, co-founder of Napster, acting as president.

By the end of 2004, with its userbase still limited to campuses in the US and Canada, thefacebook.com broke the 1m user mark.

2005-2006: Opening the floodgates

Welcome to FacebookOver the course of 2005, Facebook started to expand, first to US high schools, then internationally, to select universities in the UK, Mexico, Puerto Rico and the US Virgin Islands.

With the backing of a $13m investment from Accel Partners, Facebook made a few vital tweaks as it got ready to take its product to the world stage. In August 2005, with the purchase of the facebook.com domain, the company officially dropped the 'the' from its name. The site added the ability to upload photos that October, and to tag friends in them in December.

Then, on 26 September 2006, Facebook opened its doors to anyone aged 13 or over with a valid email address.

Less than two years later, following a period of rapid growth which saw its userbase nearly double each month, the number of users broke 100m. While Facebook wasn't yet making any money – a leaked cash flow statement showed it made a net loss of $3.6m during 2005, and the company wouldn't reach a positive cashflow until 2008 – these kinds of user numbers were hard to ignore. And not coincidentally, it was around this time that some of the biggest names in tech turned their attentions to Facebook.

In September 2006, Facebook was reportedly in talks with Yahoo over a potential $1bn acquisition – roughly the same figure that Yahoo would later pay to acquire Tumblr, and Facebook itself for Instagram.

The following year, the company was courted by Microsoft, eager to match Google's April 2007 acquisition of Doubleclick. The acquisition offer was rejected by Zuckerberg, and the two instead struck a deal which saw Microsoft take a 1.6 per cent stake in the company for $240m. The terms of the deal also gave Microsoft international advertising rights on the social network, and precluded Facebook from accepting any investment from Google.

Microsoft still holds this share in Facebook – it's now worth around $1.6bn.

[caption id="attachment_40623" align="alignleft" width="167"]Facebook's first iOS app arrived on 10 July 2008, the day after the Apple opened the App Store. An Android version followed in September 2009 Facebook's first iOS app arrived on 10 July 2008, the day after Apple opened the App Store. An Android version followed in September 2009.[/caption]

2007-2011: Acquisitions and expansions

Facebook made its first acquisition in July 2007, buying hybrid app platform Parakey for an undisclosed sum. The company was incorporated into the Facebook Mobile division, which launched a mobile site optimised for iPhones in August.

Since then, Facebook has acquired more than 40 companies, including social networking aggregator FriendFeed (bought for $47.5m in August 2009); photo-sharing service Divvy (for an undisclosed sum in March 2010); and Israeli app developer Snaptu ($60-70m, March 2011).

In June 2008, Facebook settled its lawsuit with ConnectU – founded by fellow Harvard students Cameron and Tyler Winklevoss and Divya Narendra, who accused Zuckerberg of stealing their idea – by effectively acquiring the company for $20m in cash and over $1.2m in shares.

The story of this lawsuit formed the backbone of The Social Network, a film telling the story of Facebook's founding, released in October 2010.

Shortly after the film's release, Zuckerberg contested the accuracy of how he was portrayed on screen, with one exception – his dress sense: “Every single shirt and fleece they had in that movie is actually a shirt or fleece that I own,” he told an audience at Stanford University.

In May 2010, Facebook made one of its first moves towards reaching emerging markets, with the launch of Facebook Zero, a text-only mobile site which, with selected operator partners, could be accessed by subscribers for free.

It followed up this launch with Facebook for SIM in October 2011, developed with Gemalto, which enabled people to access the social network via SMS, without requiring data connectivity. These services are emblematic of the direction Facebook is heading in today.

shutterstock_1030183732012-2014: IPO

On 1 February 2012, Facebook filed with the US Securities and Exchange Commission for its Initial Public Offering (IPO).

With an eye on the IPO, Facebook had already made a start on improving monetisation that January, with the launch of targeted 'Featured Post' ads, displayed in users' news feed, but the S1 filing revealed a major risk to the company's future: mobile.

Although Facebook saw over half of its users coming from mobile at the time, the channel did not “directly generate any meaningful revenue”, because its apps and mobile site didn't yet feature advertising.

Nevertheless, when the IPO rolled around on 17 May, it was the largest ever for a newly-listed public company. Facebook was valued at $104bn, with shares offered at $38. The stock price quickly dropped, however, and after three weeks of trading, shares were valued at $27.10.

The IPO was so disastrous that shareholders brought a lawsuit against Zuckerberg, Facebook and the underwriting banks, accusing them of hiding the company’s weakened growth forecasts in the weeks leading up to the IPO.

Today, however, the stock price stands at $62.50. Facebook quickly introduced ads to its mobile offerings and by Q4 2013, the channel accounted for approximately 53 per cent of all advertising revenue – more than double the share mobile contributed a year earlier.

2012 also saw two other major milestones for Facebook: its biggest acquisition to date, as it bought photo sharing service Instagram for $1bn, and its active user count, which topped 1bn for the first time.

It took around 78 months for Facebook to reach 500m users – and another 27 months to double it.

Looking forward: The next billion

InternetorgFacebook's monthly growth has slowed dramatically, however, as it starts to hit a ceiling in the countries where it is most established. Facebook's focus is on developing markets, and working to “connect the next billion people”, as Zuckerberg put it in a 2012 interview with Bloomberg.

To this end, Facebook partnered with a whole host of tech companies – including Qualcomm, Nokia and Samsung – to launch Internet.org on 20 August 2013. This is an initiative to bring the internet to the remaining two-thirds of the world's population who aren't online. The company is also part of The Alliance for Affordable Internet, along with Google, Microsoft and others.

Technology isn't the only obstacle to Facebook's growth, however. Access to Facebook has been blocked by the government in China, the world's biggest market, since 2009, and in some countries, most notably Russia, its userbase is dwarfed by domestic alternatives.

In the meantime, Facebook is consistently evolving, both as a product – with changes to privacy policy, the introduction of hashtags and stickers, and the launch of Home for Android and Paper for iOS – and as a company. In the last six months, it has made several acquisitions, including mobile analytics firm Onavo, Indian app performance firm Little Eye Labs and, to found its 'Conversations' team, Branch Media.

Facebook's oft-quoted mantra for development is 'Move fast and break things'. Throughout its 10-year history, that attitude has seen it make plenty of mistakes: its hybrid app, built using HTML5, which Zuckerberg declared “the biggest mistake we’ve made as a company”, or the release of its poorly-received Android launcher Home, for example. But it's also set the company apart from its peers, and allowed it to experiment and, occasionally, innovate.

Here's hoping Facebook continues to move as fast and break as many things in the next 10 years as it has in the past 10. With trials of its third-party ad network currently taking place, enabling advertisers to leverage its unified log-in to target users, it look like Facebook is in for another decade of change.

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