864 million daily active users on average for September 2014

Facebook (formerly [thefacebook]) is an online social networking service headquartered in Menlo Park, California. Its website was launched on February 4, 2004, by Mark Zuckerberg with his college roommates and fellow Harvard University students Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes.[7] The founders had initially limited the website’s membership to Harvard students, but later expanded it to colleges in the Boston area, the Ivy League, and Stanford University. It gradually added support for students at various other universities and later to high-school students. Facebook now allows anyone who claims to be at least 13 years old to become a registered user of the website.[8] Its name comes from a colloquialism for the directory given to it by American universities students.[9]

Type Public
Traded as NASDAQ: FB
Founded February 4, 2004
(10 years ago)
Headquarters Menlo Park, California, US
Area served United States (2004–05)
Worldwide (2005–present)
Founder(s)
Mark Zuckerberg
Eduardo Saverin
Andrew McCollum
Dustin Moskovitz
Chris Hughes
Key people Mark Zuckerberg
(Chairman and CEO)
Sheryl Sandberg
(COO)
Industry Internet
Revenue Increase US$7.87 billion (2013)[1] Operating income Increase US$2.80 billion (2013)[1] Net income Increase US$1.50 billion (2013)[1] Total assets Increase US$17.89 billion (2013)[1] Total equity Increase US$15.47 billion (2013)[1] Employees 8,348 (September 2014)[2] Subsidiaries Instagram
WhatsApp
Oculus VR
PrivateCore
Website www.facebook.com Tor: facebookcorewwwi.onion[3] Written in C++, PHP (as HHVM)[4] and D language[5] Alexa rank Steady 2 (September 2014)[6] Type of site Social networking service
Registration Required
Users 864 million daily active users on average for September 2014[2] Available in Multilingual (70)
Current status Active

After registering to use the site, users can create a user profile, add other users as “friends”, exchange messages, post status updates and photos, share videos and receive notifications when others update their profiles. Additionally, users may join common-interest user groups, organized by workplace, school or college, or other characteristics, and categorize their friends into lists such as “People From Work” or “Close Friends”. Facebook had over 1.3 billion active users as of June 2014.[2] Due to the large volume of data collected about users, the service’s privacy policies have faced scrutiny, among other criticisms. Facebook, Inc. held its initial public offering in February 2012 and began selling stock to the public three months later, reaching a peak market capitalization of $104 billion.

2003–2005: Thefacebook, Thiel investment, Name change

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”[10][11]

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.[10][12]

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.[13]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.[12] 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.[14] On February 4, 2004, Zuckerberg launched “Thefacebook”, originally located at thefacebook.com.[15]

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.[16] The three complained to The Harvard Crimson and the newspaper began an investigation. They later filed a lawsuit against Zuckerberg, subsequently settling in 2008[17] for 1.2 millionshares (worth $300 million at Facebook’s IPO).[18]

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.[19]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.[20] It later opened to all Ivy League colleges, Boston University, New York University, MIT, and gradually most universities in Canada and the United States.[21][22]

In mid-2004, entrepreneur Sean Parker (an informal advisor to Zuckerberg) became the company’s president.[23] In June 2004, Facebook moved its operations base to Palo Alto, California.[20] It received its first investment later that month from PayPal co-founder Peter Thiel.[24] In 2005, the company dropped the from its name after purchasing the domain name facebook.com for US$200,000.[25]

Mark Zuckerberg co-creator of Facebook in his Harvard dorm room, 2005.

In May 2005, Accel partners invested $12.7 million in Facebook, and Jim Breyer[26] added $1 million of his own money. A January 2009Compete.com study ranked Facebook the most used social networking service by worldwide monthly active users.[27] Entertainment Weekly included the site on its end-of-the-decade “best-of” list, saying, “How on earth did we stalk our exes, remember our co-workers’ birthdays, bug our friends, and play a rousing game of Scrabulous before Facebook?”[28]

A high-school version of the site was launched in September 2005, which Zuckerberg called the next logical step.[29] (At the time, high-school networks required an invitation to join.)[30] Facebook also expanded membership eligibility to employees of several companies, including Apple Inc. and Microsoft.[31]

2006–2011: Public access, Microsoft alliance, Rapid growth

On September 26, 2006, Facebook was opened to everyone at least 13 years old with a valid email address.[32][33]

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.[34] Pages began rolling out for businesses in May 2009.[35]

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.[36]Microsoft’s purchase included rights to place international adverts on the social networking site.[37]

In October 2008, Facebook announced that it would set up its international headquarters in Dublin, Ireland.[38] Almost a year later, in September 2009, Facebook said that it had turned cash-flow positive for the first time.[39]

Traffic to Facebook increased steadily after 2009. The company announced 500 million users in July 2010[40] making it the largest online social network in the world at the time. According to the company’s data, half of the site’s membership use Facebook daily, for an average of 34 minutes, while 150 million users access the site by mobile. A company representative called the milestone a “quiet revolution.”[41]

In November 2010, based on SecondMarket Inc. (an exchange for privately held companies’ shares), Facebook’s value was $41 billion. The company had slightly surpassedeBay to become the third largest American web company after Google and Amazon.com.[42]

Facebook headquarters entrance sign at 1 Hacker Way, Menlo Park, California

In early 2011, Facebook announced plans to move its headquarters to the former Sun Microsystems campus in Menlo Park, California.[43][44] In March 2011, it was reported that Facebook was removing approximately 20,000 profiles offline every day for violations such as spam, graphic content, and underage use, as part of its efforts to boost cyber security.[45]

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.[46] According to a Nielsen Media Research study, released in December 2011, Facebook had become the second-most accessed website in the U.S. behind Google.[47]

2012–2013: Initial public offering, Lawsuit, One billion users

Facebook eventually filed for an initial public offering on February 1, 2012.[48] Facebook held an initial public offering on May 17, 2012, negotiating a share price of US$38. The company was valued at $104 billion, the largest valuation to date for a newly listed public company.[49][50][51]

Facebook Inc. began selling stock to the public and trading on the NASDAQ on May 18, 2012.[52] Based on its 2012 income of $5 billion, Facebook joined the Fortune 500 list for the first time in May 2013, ranked in position 462.[53]

Facebook filed their S1 document with the Securities and Exchange Commission on February 1, 2012. The company applied for a $5 billion IPO, one of the biggest offerings in the history of technology.[54] The IPO raised $16 billion, making it the third-largest in U.S. history.[55][56]

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).[57] The first day of trading was marred by technical glitches that prevented orders from going through;[58] only the technical problems and artificial support from underwriters prevented the stock price from falling below the IPO price on the day.[59]

In March 2012, Facebook announced App Center, a store selling applications that operate via the site. The store was to be available on iPhones, Android devices, and mobile web users.[60]

Billboard on the Thomson Reutersbuilding welcomes Facebook to Nasdaq, 2012

On May 22, 2012, the Yahoo! Finance website reported that Facebook’s lead underwriters, Morgan Stanley (MS), JP Morgan (JPM), andGoldman Sachs (GS), cut their earnings forecasts for the company in the middle of the IPO process.[61] The stock had begun its freefall by this time, 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.[62] Securities and Exchange Commission Chairman Mary Schapiro, and Financial Industry Regulatory Authority (FINRA) Chairman Rick Ketchum, called for a review of the circumstances surrounding the IPO.[63]

Facebook’s IPO was consequently investigated, and was compared to a pump and dump scheme.[58][61][63][64] A class-action lawsuit was filed in May 2012 due to the trading glitches, which led to botched orders.[65][66] Lawsuits were filed, alleging that an underwriter for Morgan Stanley selectively revealed adjusted earnings estimates to preferred clients.[67]

The other underwriters (MS, JPM, GS), Facebook’s CEO and board, and Nasdaq also faced litigation after numerous lawsuits were filed, while SEC and FINRA both launched investigations.[68] It was 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.[69] By the end of May 2012, Facebook’s stock lost over a quarter of its starting value, which led the Wall Street Journalto label the IPO a “fiasco”.[70]

In July 2012, Facebook added a same-sex marriage icon to its timeline feature.[71] 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.[72]

Zuckerberg announced to the media at the start of October 2012 that Facebook had passed the monthly active users mark of one billion—Facebook defines active users as a logged-in member who visits the site, or accesses it through a third-party site connected to Facebook, at least once a month. Fake accounts were not mentioned in the announcement, but the company continued to remove them after it found that 8.7% of its users were not real in August 2012. The company’s data also revealed 600 million mobile users, 140 billion friend connections since the inception of Facebook, and the median age of a user as 22 years.[40]

2013–present: Site developments, A4AI, 10th anniversary

On January 15, 2013, Facebook announced Facebook Graph Search, which provides users with a “precise answer,” rather than a link to an answer by leveraging the data present on its site.[73] Facebook emphasized that the feature would be “privacy-aware,” returning only results from content already shared with the user.[74]

The company became the subject of a lawsuit by Rembrandt Social Media in February 2013, for patents involving the “Like” button.[75] On April 3, 2013, Facebook unveiledFacebook 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.[76]

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.[77] 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.[78]

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”.[79] 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.”[80]

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.[81] 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 local government area of the company’s headquarters, 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), at $2,107 a week, or roughly $110,000 a year.”[82]

Russian internet firm Mail.Ru sold its Facebook shares for US$525 million on September 5, 2013, following its initial $200 million investment in 2009. Partly owned by Russia’s richest man, Alisher Usmanovhe, the firm owned a total of 14.2 million remaining shares prior to the sale.[83] In the same month, the Chinese government announced that it will lift the ban on Facebook in the Shanghai Free Trade Zone “to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone.” Facebook was first blocked in China in 2009.[84]

Facebook was announced as a member of The Alliance for Affordable Internet (A4AI) in October 2013, when the A4AI was launched. 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.[85]

A Reuters report, published on December 11, 2013, stated that Standard & Poor’s announced the placement of Facebook on its S&P 500 index “after the close of trading on December 20.”[86] Facebook announced Q4 2013 earnings of $523 million (20 cents per share), an increase of $64 million from the previous year,[87] as well as 945 million mobile users.

By January 2014, Facebook’s market capitalization had risen to over $134 billion.[49][88] At the end of January 2014, 1.23 billion users were active on the website every month.

The company celebrated its 10th anniversary during the week of February 3, 2014.[89] In each of the first three months of 2014, over one billion users logged into their Facebook account on a mobile device.[90]

In February 2014, Facebook announced that it would be buying mobile messaging company Whatsapp for US$19 billion in cash and stock.[91] In June 2014, Facebook announced the acquisition of Pryte, a Finnish mobile data-plan firm that aims to make it easier for mobile phone users in underdeveloped parts of the world to use wireless Internet apps.[92]

At the start of July 2014, Facebook announced the acquisition of LiveRail, a San Francisco, California-based online video advertising company. LiveRail’s technology facilitates the sale of video inventory across different devices. The terms of the deal were undisclosed, but TechCrunch reported that Facebook paid between US$400 million and $500 million.[93][94] As part of the company’s second quarter results, Facebook announced in late July 2014 that mobile accounted for 62% of its advertising revenue, which is an increase of 21% from the previous year.[95]

Alongside other American technology figures like Jeff Bezos and Tim Cook, Zuckerberg hosted visiting Chinese politician Lu Wei, known as the “Internet czar” for his influence in the enforcement of China’s online policy, at Facebook’s headquarters on December 8, 2014. The meeting occurred after Zuckerberg participated in a Q&A session at Tsinghua University in Beijing, China, on October 23, 2014, where he attempted to converse in Mandarin—although Facebook is banned in China, Zuckerberg is highly regarded among the people and was at the university to help fuel the nation’s burgeoning entrepreneur sector.[96] A book of Chinese president Xi Xinping found on Zuckerberg’s office desk attracted a great deal of attention in the media, after the Facebook founder explained to Lu, “I want them [Facebook staff] to understand socialism with Chinese characteristics.”[97]

Zuckerberg fielded questions during a live Q&A session at the company’s headquarters in Menlo Park on December 11, 2014. The question of whether the platform would adopt a dislike button was raised again, and Zuckerberg said, “We’re [Facebook] thinking about it [dislike button] … It’s an interesting question,” and said that he likes the idea of Facebook users being able to express a greater variety of emotions.[98][99]

Corporate affairs

Management

The ownership percentages of the company, as of 2012, are:

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.[102] 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.[103]

Key management personnel consist of: Chris Cox (Chief Product Officer), Sandberg (COO), and Zuckerberg (Chairman and CEO). As of April 2011, Facebook has over 7,000 employees, and offices in 15 countries.[104] Other managers include chief financial officer David Wehner and public relations head Elliot Schrage.[105]

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.[106]

Revenue

Revenues
(estimated, in millions US$)
Year Revenue Growth
2006 $52[107]
2007 $150[108] 188%
2008 $280[109] 87%
2009 $775[110] 177%
2010 $2,000[111] 158%
2011 $3,711[112] 86%
2012 $5,089[113] 37%
2013 $7,872[113] 55%

Most of Facebook’s revenue comes from advertising.[114][115] 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,[116] although specific comparisons can reveal a much larger disparity. For example, whileGoogle users click on the first advertisement for search results an average of 8% of the time (80,000 clicks for every one million searches),[117]Facebook’s users click on advertisements an average of 0.04% of the time (400 clicks for every one million pages).[118]

Sarah Smith, who was Facebook’s Online Sales Operations Manager until 2012,[119] 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.[120] By comparison, the CTR for competing social network MySpace 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.[121] 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.[122] 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.[123][124]

In December 2014, a report from Frank N. Magid and Associates found that the percentage of teens aged 13 to 17 who used Facebook fell to 88% in 2014, down from 94% in 2013 and 95% in 2012.[125]

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.”[126]

On pages for brands and products, however, some companies have reported CTR as high as 6.49% for Wall posts.[127] 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.[128]

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).[89] Revenue for the June 2014 quarter rose to $2.68 billion, an increase of 67 per cent over the second quarter of 2013. Mobile advertising revenue accounted for around 62 per cent of advertising revenue, an increase of approximately 41 per cent over the comparable quarter of the previous year.

Stock history

Chart of Facebook’s Stock

  • All-time closing high: US$72.03 on March 10, 2014
  • All-time intra-day high: US$76.74 on July 24, 2014

Mergers and acquisitions

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.[129]

Offices

In early 2011, Facebook announced plans to move to its new headquarters, the former Sun Microsystems campus in Menlo Park.[130]

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.[131]

In 2010, Facebook opened its fourth office, in Hyderabad[132][133][134] and the first in Asia.[135]

Facebook, which in 2010 had more than 750 million active users globally including over 23 million in India, announced that its Hyderabad center would house online advertising and developer support teams and provide round-the-clock, multilingual support to the social networking site’s users and advertisers globally.[136] With this, Facebook joins other giants like Google, Microsoft, Oracle, Dell, IBM and Computer Associates that have already set up shop.[137] In Hyderabad, it is registered as ‘Facebook India Online Services Pvt Ltd’.[138][139][140]

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,[141] 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.[142]In April 2012, Facebook opened a second data center in Forest City, North Carolina, US.[143]

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.[144] 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.[145]

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.[146]