You can advertise it on Facebook, but you just can't post pictures of it on facebook – marijuana, of course, which can be a fairly spotty subject for the social networking giant when dealing with those that seek to express their love of "herbal remedies" across their online personas.
Of course, that hasn't stopped those connected with Facebook's development team from jumping on the pro-pot bandwagon themselves. ABC News is reporting that Facebook co-founders Sean Parker and Dustin Moskovitz have both donated fairly significant sums in support of California's Proposition 19 campaign, which seeks to legalize marijuana use across the state come this November's election cycle.
Moskovitz, who left Facebook in 2008 after serving as a vice president at the company, has reportedly donated $70,000 in total toward the measure. Parker—co-founder of Napster and, perhaps more importantly, depicted by pop star Justin Timberlake in the recent release of The Social Network—has kicked in $100,000 to support the measure.
"What's interesting here is that [Parker] is a member of the generation that really gets it," said Drug Policy Alliance spokesman Stephen Gutwillig in an interview with the Associated Press. "We think he's pivotal to the future of drug policy reform in the country."
Approximately $2.4 million has been raised in support of Proposition 19 thus far, reports ABC News. Though significant in that few others have given six-figure (or near-six-figure) donations toward the campaign, Moskovitz's and Parker's gifts pale in comparison to the $1.5 million in support coughed up by Richard Lee, a medical marijuana entrepreneur based out of Oakland, CA.
Parker currently works as a managing partner at The Founders Fund, a San Francisco-based venture capital firm that focuses on early-stage funding for Web 2.0 startups. Moskovitz is the co-founder of the Internet startup Asana, which is currently working on developing a free project management application for use by small businesses and individuals.
by David Murphy PCMag.com October 9, 2010
Facebook Founders Donate $170K to Pro-Pot Initiative | News & Opinion | PCMag.com
Showing posts with label facebook. Show all posts
Showing posts with label facebook. Show all posts
Sunday, October 10, 2010
Monday, September 6, 2010
Going Viral Is Goal As More Ads Target YouTube, Facebook - IBD - Investors.com
The Procter & Gamble (PG) ad campaign of Old Spice guy Isaiah Mustafa came out smelling like a rose .
Tens of millions of people watched a series of ads on YouTube of a bare-chested Mustafa extolling the benefits of Old Spice Body Wash. Launched in February on TV and the Internet, the campaign brought an Emmy award for the ad campaign's creator, Wieden+Kennedy. It also brought TV show appearances for Mustafa.
"It will go down in the pantheon of great ad campaigns," said Matt Cutler, chief marketing officer of research firm Visible Measures. "It really drove home the idea that we're not in Kansas anymore."
Where we are is in the Internet era, where videos can so quickly go "viral." That is, access to the message quickly multiplies.
The Old Spice video campaign's third phase, called "Responses," attracted 5.9 million YouTube views on the first day alone, as friends forwarded the link to Facebook friends, who tweeted the link on their Twitter accounts to followers who e-mailed the piece to their contacts. The three phases in all have attracted 102 million views to date.
And the message struck viewers. In the first six months of the campaign, Old Spice Body Wash sales rose 27% from the year-earlier period, according to Wieden+Kennedy. For the four weeks ended July 11, as the campaign was in full swing on the Web, sales more than doubled from the year-earlier period, according to SymphonyIRI.
The Old Spice campaign, which started with "The Man Your Man Can Smell Like," is an example of viral marketing. It used Web sites like YouTube, Facebook and Twitter to quickly spread the video.
A video ad is informally considered a "viral" hit when it gets at least 1 million views. Big winners get 20-million-plus.
"We're seeing a massive increase among brand advertisers who want to use viral marketing to get in front of a large audience for a modest price," Cutler said.
Easier said than done. Nine out of 10 viral marketing campaigns flop, says Patrick Spenner, managing director of the Marketing Leadership Council.
The trade group studied 300 social media campaigns to see how they boosted brand sales.
"You'd be surprised how low the scores are," Spenner said. "Nine out of 10 do not see business results, or maybe it's driving some business but they don't know it."
Successful ad campaigns, regardless of venue, face challenges. These include how rivals respond, product pricing and availability, and the ability to come up with content that resonates with a distracted, fickle audience.
By BRIAN DEAGON, INVESTOR'S BUSINESS DAILY September 3, 2010
Saturday, September 4, 2010
Patently Bold: Paul Allen's Internet Lawsuit (AAPL, EBAY, GOOG, MSFT, NFLX, ODP, YHOO)
Another day, and yet another audacious-sounding lawsuit in the tech world. This time it's Microsoft (Nasdaq: MSFT) co-founder Paul Allen's company, Interval Licensing, LLC, suing a host of big-name companies: Google(Nasdaq: GOOG), Facebook, eBay (Nasdaq: EBAY), Apple (Nasdaq:AAPL), Yahoo! (Nasdaq: YHOO), AOL, Netflix (Nasdaq: NFLX), Office Depot (NYSE: ODP), OfficeMax, Staples, and YouTube.
The lawsuit claims patent infringement over some basic, ubiquitous, and vital Web functions like reading news in a Web browser and information alerts. In the video below, Fool analyst Rex Moore and Fool Chief Legal Officer Lawrence Greenberg discuss Allen's possible motives, including monetary rewards and credit for inventing these things. The defendants may claim the patents are not valid because the inventions do not meet the patent law's requirement that they be "non-obvious," because people who understood the Internet at the time of their invention would have anticipated them.
The lawsuits may take a long time to work their way through the system if they're litigated and not settled quickly. Most of these companies have very deep pockets and the ability to absorb the costs involved. Though it seems unlikely these companies would be seriously hurt by the final outcome in a meaningful way, it's unlikely that they are happy to have been sued.
Watch the video here:
by Fool TV September 4, 2010
Thursday, August 19, 2010
Facebook Places: What You Need To Know - PCWorld
As expected, Facebook on Wednesday launched its new location-sharing feature called Places. Similar to other location-based services such as Gowalla and MyTown, it allows you to signal your presence at a bar, restaurant, arena, or other location via Facebook. The social network's focus appears to be on simply sharing your location with your friends as opposed to including gaming elements or promotional check-in incentives that you find with other location services such as Foursquare
Places promises to be an interesting addition to Facebook, and could increase the popularity of location sharing in general. But before you start checking in to every restaurant, movie theater, and bar you visit, here's what you need to know.
Places Basics
At launch, Places will be available to U.S. users only. You can check into a location in two ways: through the Facebook iPhone application or by pointing your mobile browser to touch.facebook.com. The browser-based version of Places will work only if your device supports HTML5 and geolocation.
Just tap the Places icon and you'll see a list of nearby Places. Tap on your location from the list, and you can check in, tag any friends who are with you, and add a status update. When you tag a friend, you will be checking them in if they allow third party check-ins. If your friend doesn't allow third party check-ins, then tagging them will be just like tagging them in a status update. No actual check-in will happen.
You can only check in people who are on your Facebook friends list and only when you first check into a location yourself. You can see who else is at your location under the "People Here Now" section for that place.
Facebook says all Places check-ins are visible only to friends by default unless your master privacy control is set to "Everyone."
For more detailed information about Places, consult PC World's report from Facebook's Places launch event. You can also find more information in this Facebook blog post and the Places information page.
Plays Nice With Others
Facebook has decided not to wipe other location-based services off the face of the Earth. Instead these services can use Places to enhance their own offerings.
It's not entirely clear how this will work, but Gowalla Chief Technical Officer Scott Raymond said in an interview with VentureBeat that Gowalla's plan was to allow users to push their check-ins from Gowalla into Facebook's Places feature. It appears you will also be able to import your check-in badges, pins, and Gowalla passport stamps into Facebook.
Bing Maps
It should come as no surprise that Facebook is using Microsoft's Bing Maps to pinpoint locations in Places.
Microsoft made a considerable investment in Facebook several years ago, and other Microsoft services such as Bing search and Microsoft Docs are already integrated with Facebook.
Not Yet Fully Functional
Some have reported seeing messages that Places is not yet available in their area, while others say they can activate Places but the check-in function is not operational.
If you're experiencing similar problems, hold tight the functionality is coming soon. Facebook is slowly rolling out the service and will make it available across the U.S. over the next few days, according to TechCrunch.
The Onslaught Begins Thursday
Facebook says it plans on turning on the Read API for third-party functionality on Thursday. What that means is that third-party services will be able to read your check-ins when you interact with those apps as well as the check-ins of people on your friends list (if their privacy settings allow it), according to programmableweb.
Any third-party application that wants to use your check-in data must specifically ask you for it when you authorize the app, according to Facebook. However, be aware of some downsides.
It appears there's no way to deny access to your Places data and still use the application. So if you want to use an application that requires your Places data, you either must deny the application completely or accept the fact that the application will be harvesting your location data. You can find out more about Facebook's privacy permissions here.
Privacy Concerns
The first criticisms over Places and privacy appear to be from the American Civil Liberties Union of Northern California. The civil rights group doesn't like the fact that there isn't a flat out "No" option to stop friends from checking you in.
If someone checks you in at a location, you receive a mobile notification that a friend has checked you in. Then you must decide to either permanently authorize third-party check-ins or deny them by selecting "not now," according to the ACLUNC. The concern is that by selecting "not now," the request to authorize third-party check-ins may come up again and again until you finally say yes. Also, if you use Places to check yourself in, then third-party check-ins are turned on automatically unless you adjust your privacy settings, according to the ACLUNC.
The ACLUNC also says that the "People Here Now" feature doesn't have enough granular control. The feature only has an option to be turned on (everyone can see your check-in) or turned off (no one can see your check-in). The ACLUNC would prefer to see an option that allows only your friends to see you under the " People Here Now" feature. It also appears that "People Here Now" is turned on by default "if you have previously selected that "Everyone" can see even a single piece of your information," according to the ACLUNC.
Have you tried Places yet? What do you think of the new service?
by Ian Paul PC World August 19, 2010
Tuesday, August 17, 2010
How People Are Signing In Across the Web [STATS]
Identity management provider Janrain has just released its latest usage study detailing what social networks and services people use to sign in and share activities across the web.
As in its last report back in April, Google and Facebookcontinue to dominate websites that offer third-party login options. Across the 250,000 sites that use Janrain Engage,Google
Facebook
Google is the dominant catch-all login in the aggregate, but other services, particularly Facebook, really take the lead when websites are segmented by type.
For example, for news media sites, Yahoo represents approximately 34% of all logins. For magazine publishers, Facebook is the clear choice amongst website visitors. Fifty-seven percent of logins are from Facebook, nearly triple its nearest competitor, Google, at 20%.
Likewise, with music sites, Facebook leads with 55% of logins and second place Twitter is at 18%. Retailbrand logins are also largely dominated by Facebook.
It makes sense that Facebook has such a strong presence in magazines, retail brands and in music. This can likely be tied with the brand and publishers’ usage of Facebook pages.
Facebook and Twitter Dominate Sharing
More and more publishers are integrating sharing options like Facebook Like buttons or the new Twitter Tweet buttons into their sites. Many publishers are seeing increases in traffic as a direct result of these sharing tools.
According to Janrain’s data, Facebook is the preferred sharing network for 53% of users. Twitter is close behind with 37%. Keep in mind, Janrain’s platform allows users to cross-share to multiple networks at once, which indicates that there may be some overlap.
Still, this is an important distinction from the single sign-in data. To us, this represents that while Google may be used as a frequent sign-in option — perhaps because of how closely the service is tied to an e-mail address — when it comes to engaging and identifying with information online, Facebook and Twitter are where users value their time.
by Christina Warren Mashable August 16, 2010
Sunday, August 15, 2010
Retailers use Web tools aimed at younger shoppers
Shoppers and retailers are turning to cellphones, "haul videos," virtual dressing rooms and social-networking sites such as Facebook and Twitter to make the most out of this year's back-to-school shopping season.
With billions of dollars at stake, retailers are going after back-to-school shoppers where they are spending an increasing amount of time - on their cellphones and on Facebook, MySpace and Twitter social-network sites.
They are launching applications, or "apps," for smartphones, running promotions and contests on Facebook, setting up sites where customers can show off their purchases online or superimpose their clothes on a customer sitting before a webcam.
Shoppers are relishing the novel ways to shop and the instant tips they get about special promotions and deals.
"It's the best way to reach teens," Staples Inc. spokeswoman Karen Pevenstein said of the new kit of marketing tools being embraced by retailers.
Young shoppers are expected to spend more than $200 billion of their own and their parents' money this year, making them one of retailers' most sought-after demographic groups.
Much of that will be spent from July to September on back-to-school supplies and clothes.
Katie Suarez of Phoenix consulted Forever 21's Facebook page before recently heading out to the retailer's Scottsdale store for some back-to-school shopping. The savvy consumer also looked at pages for independent stores she likes such as Rowdy Boutique in Phoenix.
"I go where the best deals are," she said.
Forever 21 is currently running a Hot Summer Sale with some "must-have" items as low as 79 cents.
Altogether, consumers are expected to spend $55 billion on back-to-school clothes, supplies and related items. That compares with $47.5 billion last year.
Columbus, Ohio-based Huntington Bank's annual Backpack Index estimates it could cost up to $474 to outfit a student for elementary school this year, $545 for middle school and $1,000 for high school.
Facebook and 'haul videos'
For most of the year, office-supply retailer Staples caters to small businesses. But in July and August, it turns its attention to parents and students.
"Back-to-school has become a really big event for us," Pevenstein said.
Staples brings in more than 1,000 specialty items for back-to-school and this year is turning to Facebook and Twitter to help market locker lights, Glam Rocks pens, binders and computers.
Customers also can access Staples' fliers, coupons and special promotions via their cellphones. The company just launched an app for iPhones that allows users to locate stores and receive offers through their phones.
Once-staid J.C. Penney Co. also has embraced new media.
J.C. Penney spokeswoman Kate Coultas said the company is focusing much of its back-to-school marketing this year on social-media sites, iPhone apps and other emerging marketing tools.
"We're using more non-traditional components to engage the teen customer, and we see that continuing," Coultas said.
This year, J.C. Penney has tapped into the teen trend of making "haul videos" to show off purchases after forays to the mall. There are more than 150,000 such videos on YouTube, and some are racking up millions of views by consumers.
J.C. Penney and other retailers such as American Eagle and Forever 21 have recruited some of the better-known shoppers to make haul video using their clothes. J.C. Penney recently flew five established "haulers" to its Dallas store, gave them $500 gift cards, and asked them to make videos of what they bought. The videos are posted on the company's Facebook page with links to the various products.
"It's teenage girls speaking to other teenage girls," Coultas said.
J.C. Penney also has partnered with Seventeen magazine to create a virtual dressing room for back-to-school, where teens can superimpose the company's clothes on an image taken by a webcam.
The company also is coming out with an iAd for iPhones. The advertisements appear on iPhone apps that appeal to teens and provide a link to J.C. Penney's haul video virtual dressing rooms and online retail site.
"We're providing tools that let consumers decide how they want to react to the brand," Coultas said.
Consumers' strategy
Phoenix shopper Yvonne Cordiero uses her cellphone to locate stores and find about specials and promotions.
"If I'm at home, I use my laptop," she said. "But if I'm out, I can get most of the information I need with my phone."
A recent study by accounting firm Deloitte found that three in 10 consumers plan to use their cellphones and social-networking sites to help with back-to-school shopping this year. Most will use the tools to access deals, compare prices and get the most for their money.
That offers a business opportunity for stores.
"Retailers' ability to influence purchase decisions beyond in-store interactions is growing significantly," said Alison Paul, head of the U.S. retail sector for Deloitte.
FastMall 3.0, a free iPhone app with floor plans of the seven largest malls in metro Phoenix, provides step-by-step directions to specific stores, restaurants, restrooms and other mall services. A new version coming out in September will notify stores when shoppers arrive at the mall so that they can send them last-minute offers and coupons.
Paul noted that companies that can directly engage consumers through mobile apps, text alerts and video content may "win an increased share of shoppers' back-to-school budgets this year."
Of the $55 billion in back-to-school spending, an estimated $34 billion will be spent by college students and their parents.
To reach that market, retailer Target Corp. has added a "College" tab to its Facebook page with coupons, supplies checklists and shareable cellphone apps to help students determine how to furnish their dorm rooms or apartments and manage shared bills and chores with roommates.
"Students continue to be on the leading edge of social-media usage, and we will reach them in their world," said Target spokeswoman Jenine Anderson.
by Max Jarman The Arizona Republic Aug. 14, 2010 09:51 PM
Retailers use Web tools aimed at younger shoppers
With billions of dollars at stake, retailers are going after back-to-school shoppers where they are spending an increasing amount of time - on their cellphones and on Facebook, MySpace and Twitter social-network sites.
They are launching applications, or "apps," for smartphones, running promotions and contests on Facebook, setting up sites where customers can show off their purchases online or superimpose their clothes on a customer sitting before a webcam.
Shoppers are relishing the novel ways to shop and the instant tips they get about special promotions and deals.
"It's the best way to reach teens," Staples Inc. spokeswoman Karen Pevenstein said of the new kit of marketing tools being embraced by retailers.
Young shoppers are expected to spend more than $200 billion of their own and their parents' money this year, making them one of retailers' most sought-after demographic groups.
Much of that will be spent from July to September on back-to-school supplies and clothes.
Katie Suarez of Phoenix consulted Forever 21's Facebook page before recently heading out to the retailer's Scottsdale store for some back-to-school shopping. The savvy consumer also looked at pages for independent stores she likes such as Rowdy Boutique in Phoenix.
"I go where the best deals are," she said.
Forever 21 is currently running a Hot Summer Sale with some "must-have" items as low as 79 cents.
Altogether, consumers are expected to spend $55 billion on back-to-school clothes, supplies and related items. That compares with $47.5 billion last year.
Columbus, Ohio-based Huntington Bank's annual Backpack Index estimates it could cost up to $474 to outfit a student for elementary school this year, $545 for middle school and $1,000 for high school.
Facebook and 'haul videos'
For most of the year, office-supply retailer Staples caters to small businesses. But in July and August, it turns its attention to parents and students.
"Back-to-school has become a really big event for us," Pevenstein said.
Staples brings in more than 1,000 specialty items for back-to-school and this year is turning to Facebook and Twitter to help market locker lights, Glam Rocks pens, binders and computers.
Customers also can access Staples' fliers, coupons and special promotions via their cellphones. The company just launched an app for iPhones that allows users to locate stores and receive offers through their phones.
Once-staid J.C. Penney Co. also has embraced new media.
J.C. Penney spokeswoman Kate Coultas said the company is focusing much of its back-to-school marketing this year on social-media sites, iPhone apps and other emerging marketing tools.
"We're using more non-traditional components to engage the teen customer, and we see that continuing," Coultas said.
This year, J.C. Penney has tapped into the teen trend of making "haul videos" to show off purchases after forays to the mall. There are more than 150,000 such videos on YouTube, and some are racking up millions of views by consumers.
J.C. Penney and other retailers such as American Eagle and Forever 21 have recruited some of the better-known shoppers to make haul video using their clothes. J.C. Penney recently flew five established "haulers" to its Dallas store, gave them $500 gift cards, and asked them to make videos of what they bought. The videos are posted on the company's Facebook page with links to the various products.
"It's teenage girls speaking to other teenage girls," Coultas said.
J.C. Penney also has partnered with Seventeen magazine to create a virtual dressing room for back-to-school, where teens can superimpose the company's clothes on an image taken by a webcam.
The company also is coming out with an iAd for iPhones. The advertisements appear on iPhone apps that appeal to teens and provide a link to J.C. Penney's haul video virtual dressing rooms and online retail site.
"We're providing tools that let consumers decide how they want to react to the brand," Coultas said.
Consumers' strategy
Phoenix shopper Yvonne Cordiero uses her cellphone to locate stores and find about specials and promotions.
"If I'm at home, I use my laptop," she said. "But if I'm out, I can get most of the information I need with my phone."
A recent study by accounting firm Deloitte found that three in 10 consumers plan to use their cellphones and social-networking sites to help with back-to-school shopping this year. Most will use the tools to access deals, compare prices and get the most for their money.
That offers a business opportunity for stores.
"Retailers' ability to influence purchase decisions beyond in-store interactions is growing significantly," said Alison Paul, head of the U.S. retail sector for Deloitte.
FastMall 3.0, a free iPhone app with floor plans of the seven largest malls in metro Phoenix, provides step-by-step directions to specific stores, restaurants, restrooms and other mall services. A new version coming out in September will notify stores when shoppers arrive at the mall so that they can send them last-minute offers and coupons.
Paul noted that companies that can directly engage consumers through mobile apps, text alerts and video content may "win an increased share of shoppers' back-to-school budgets this year."
Of the $55 billion in back-to-school spending, an estimated $34 billion will be spent by college students and their parents.
To reach that market, retailer Target Corp. has added a "College" tab to its Facebook page with coupons, supplies checklists and shareable cellphone apps to help students determine how to furnish their dorm rooms or apartments and manage shared bills and chores with roommates.
"Students continue to be on the leading edge of social-media usage, and we will reach them in their world," said Target spokeswoman Jenine Anderson.
by Max Jarman The Arizona Republic Aug. 14, 2010 09:51 PM
Retailers use Web tools aimed at younger shoppers
Thursday, July 8, 2010
Google, Working On A Facebook-Killer, Connects YouTube To Facebook (GOOG)
by Nick Saint 
July 8, 2010
Google, Working On A Facebook-Killer, Connects YouTube To Facebook (GOOG)
July 8, 2010
Google is reportedly hard at work on a new social network, apparently called Google Me.
So it's perhaps odd time to see Google start making real use of Facebook, rolling out a rare product that connects to the network to tap into its users' social graph. But that's exactly what Google is doing with YouTube Leanback, announced last night.
Leanback is somewhat neat in and of itself: it's essentially Pandora for YouTube, turning YouTube into a passive viewing experience rather than a series of searches and clicks.
Visitors to www.youtube.com/leanback are immediately presented with a full-screen, HD video, and when each video ends, another begins. The stream is populated based on your activity within YouTube (likes, subscriptions, etc.) and, if you connect to Facebook, what your friends are sharing.
The idea is to make YouTube more like TV, which starts playing video as soon as you turn it on and doesn't stop till you turn it off.
Tapping into Facebook to make a product smarter or help users find their friends is something other companies do all the time, which is the main reason for Google to be jealous of the social network -- it's letting Facebook put its stamp everywhere on the Internet. But Google itself very rarely does this. Buzz pulls in updates from Facebook, but that's about it.
It's also noteworthy that Google made this connection to Facebook a prominent feature of its announcement, even including a tutorial on linking the accounts in its demo video.
Knowing who people's friends are is incredibly useful in a very wide range of applications. If Google is finally getting religion on this point, that's great news for the quality of its products.
But if Google is about to launch a Facebook-killer, this is an odd time for it to start advertising how well Facebook already does this.
Here's Leanback:
Google, Working On A Facebook-Killer, Connects YouTube To Facebook (GOOG)
Thursday, July 1, 2010
Cashmore: Google building a Facebook rival? Let's hope so - CNN.com
By Pete Cashmore, Special to CNN July 1, 2010 12:50 p.m
Pete Cashmore says there is no truly competitive social network to which disgruntled Facebook users can flee.
Editor's note: Pete Cashmore is founder and CEO of Mashable, a popular blog about social media. He writes a weekly column about social networking and tech for CNN.com.
Cashmore: Google building a Facebook rival? Let's hope so - CNN.com
Pete Cashmore says there is no truly competitive social network to which disgruntled Facebook users can flee.
Editor's note: Pete Cashmore is founder and CEO of Mashable, a popular blog about social media. He writes a weekly column about social networking and tech for CNN.com.
(CNN) -- Google is working on a social service to rival Facebook, if Web rumors are to be believed.
And while Google's social-networking efforts have so far fallen flat, even satisfied Facebook users should hope that the search engine's efforts bear fruit.
First, to the rumor: A now-deleted Tweet last weekend from entrepreneur Kevin Rose claimed that Google is working on a Facebook competitor called "Google Me."
That claim gained credence as former Facebook CTO Adam D'Angelo weighed in. Posting a response on the question-and-answer service Quora, D'Angelo wrote: "This is not a rumor. This is a real project. There are a large number of people working on it. I am completely confident about this."
Google, he added, is threatened by Facebook's rise to prominence and feels the need to build a social network of its own.
The Facebook threat
The search giant has legitimate cause for concern. As I wrote in this column two months ago, Facebook is gathering masses of data through its recently launched "Likes" feature, which lets Web visitors express interest in a piece of content.
More than 50,000 websites implemented this "Like button" in the week after it launched, providing Facebook with a treasure trove of data about the preferences of Web users. This data could form the basis of a powerful search engine, ranking Web pages by "Likes" rather than the links that Google relies upon.
What's more, Facebook could serve up different search results to each user based on the preferences of his or her friends.
It gets worse for Google. Facebook's mountain of personal data could also provide the backbone of an ad network many times more targeted than Google's keyword-based advertising. If Facebook were to launch both a search engine and ad network, it could put a significant dent in Google's more than $23 billion in annual revenue.
But Google shouldn't be the only party concerned about Facebook's rapid ascent -- the lack of a Facebook alternative is a threat to consumer choice, providing no escape route when things turn sour.
No real alternative
Facebook's privacy issues over recent months have opened our eyes to a grim reality: There is no real alternative. While dissatisfied MySpace users hopped over to Facebook, there is no truly competitive social network to which disgruntled Facebook users can elope.
The demand for a legitimate alternative is so great that a project called Diaspora was able to raise more than $200,000 from Web users to develop its "privacy aware, personally controlled, do-it-all, open source social network."
Until such a rival emerges, Facebook has little incentive to maintain user trust -- the only option available to unhappy Facebookers is to delete their accounts and lose contact with their friends.
Google's social stumbles
Alas, Google has a dismal track record when it comes to social networks. Orkut, an early social-networking effort, has seen success in Brazil, but in the U.S. it's virtually unheard of. Google Friend Connect, a possible rival to the recently renamed Facebook Connect, went nowhere.
Open Social, a challenge to Facebook Apps, has been forgotten. And Google Buzz, a recent attempt to add Twitter-like status updates to Gmail, flopped -- and generated a regrettable privacy backlash for the company.
Google, the narrative goes, is exquisitely talented at solving problems with algorithms. But when it comes to the touchy-feely stuff -- like human interaction -- it falls flat.
Getting behind Google
So while it's definitely a long shot, it's time to rally behind Google. If the search giant is able to pull off a half-decent Facebook rival, the fast-growing social network will finally have a competitor to keep its power in check.
That would be a win not just for Google, but for the Web as a whole.
Cashmore: Google building a Facebook rival? Let's hope so - CNN.com
Sunday, May 23, 2010
The Facebook Effect excerpt: Full version - May. 6, 2010
By David Kirkpatrick Fortune May 6, 2010
(Fortune) -- If not for founder Mark Zuckerberg's stubborn streak, social-media pioneer Facebook might be just another part of a giant media or tech outfit today. Instead it's a giant on its own, with close to 500 million users, some $20 billion in market value, and millions of investors eagerly awaiting an IPO. For his new book, The Facebook Effect: the Inside Story of the Company That Is Connecting the World, Fortune contributor David Kirkpatrick gained unprecedented access to the company and Zuckerberg, who turns 26 this month. In this adapted excerpt, Kirkpatrick reveals Zuckerberg's turmoil as he resisted takeover offers from a parade of moguls.
The Viacom executive figured he'd impress the kid with a ride on the company jet, but clearly it was the youth who was in the driver's seat. Of all the suitors courting Mark Zuckerberg in the fall of 2005, one of the most enterprising was Michael Wolf, president of Viacom's MTV Networks. He had heard college students in MTV's focus groups talking incessantly about the new site, and he was determined to snag it for his parent company. But first he had to "friend" Zuckerberg. Wolf had figured out that the best way to reach the Facebook leader was to instant-message him, so he IM'd Zuckerberg periodically to say he planned to be in Palo Alto -- whether it was true or not -- and suggest a dinner. If Zuckerberg agreed, Wolf would fly out. But as the end of the year approached, Wolf got in touch with a better offer. He was planning to be in San Francisco with the Viacom corporate jet, he claimed. Would Mark like a ride back to New York for the holidays?
Zuckerberg took Wolf's bait. Since Viacom's corporate planes were in fact unavailable, Wolf chartered a top-of-the-line Gulfstream V for the trip from the San Francisco airport to Westchester County Airport, near Zuckerberg's parents' home in Dobbs Ferry, N.Y. Wolf flew out that morning from New York on American Airlines (AMR, Fortune 500). The MTV executive was waiting aboard the G5 as if it were the most normal thing in the world when Zuckerberg arrived, late, about 5:30 p.m. Then, as Wolf had shrewdly planned, they spent five uninterrupted hours together aboard the plane. He was resolved to find a way for Viacom to buy Facebook.
For much of the trip, however, the 21-year-old was in control of the conversation. He interrogated Wolf about MTV's business. How did companies like Viacom make their money? How m
uch did MTV charge for advertising? How do you build your audience?
During the trip Zuckerberg took to admiring the G5. "This plane is amazing," he said.
"Maybe you should just sell a piece of the company to us," Wolf replied. "Then you can have one for yourself."
Wolf invited his guest to sit in the jump seat in the cockpit as the powerful jet landed at Westchester. When it pulled up to the private aviation terminal, two cars were waiting. One was Wolf's corporate sedan to drive him into the city. The other was the Zuckerberg family minivan, from which Mark's parents emerged. They beamed and gave their son a big hug. It was as if he were merely coming home from a semester at college.
The MTV president kept up his pursuit after the holidays, flying to Palo Alto in January with an elaborate PowerPoint presentation and again the next month with a more personal appeal. He and Zuckerberg were becoming chums. They took a long walk around the palmy, well-groomed streets and stopped by Zuckerberg's one-bedroom apartment. The place was messy, with a mattress on the floor, piles of books, a bamboo mat, and a lamp. Then they headed for dinner at a nearby restaurant. Wolf popped the same question he'd asked on the plane. "Why don't you just sell to us?" he asked. "You'd be very wealthy."
"You just saw my apartment," Zuckerberg replied. "I don't really need any money. And anyway, I don't think I'm ever going to have an idea this good again." Viacom (VIA) would try money nonetheless, with a cash offer of $800 million and provisions that could make it worth as much as $1.5 billion. But like many other suitors, the Viacom executives discovered they were dealing with a formidable character. If his invention's early appeal was at a freshman level, exploiting the desire of college students to check each other out, his professed ambition was much higher: to change the world.
Fortune is on Facebook
Zuckerberg's financing needs were far from his mind when he launched the site on Feb. 4, 2004, from his dorm suite at Harvard. Zuckerberg, a code writer since middle school, had arrived at Harvard equipped with his own computer and a giant whiteboard, the geek's consummate brainstorming tool. He built the site using free, open-source software like the MySQL database and fueled his late-night coding sessions with plenty of Beck's and Red Bull. A month before the site launched, Zuckerberg paid $35 to register the web address thefacebook.com (the name was later shortened) and started paying $85 a month to a web-hosting company. But the infectious appeal of the service went beyond what anyone expected. At the end of the semester, when the user base had reached 100,000 students at 30 schools, a well-connected classmate took Zuckerberg around Manhattan to meet with potential investors. At one of those meetings a financier offered Zuckerberg $10 million on the spot for the company. Mark had just turned 20. His company was four months old. He didn't for a minute think seriously about accepting.
Instead, Zuckerberg decided to relocate his company for the summer to the promised land of technology, Palo Alto. Searching Craigslist, he found a four-bedroom house to sublet as an office and bunkhouse, and persuaded roommate Dustin Moskovitz to give up a summer computer-lab job at Harvard to become essentially his chief operating officer. Keeping Facebook running, which meant constantly adding more servers, was starting to cost real money. Zuckerberg spent about $20,000 in the first few weeks in Palo Alto, using money he had saved from programming jobs. But clearly much more cash would soon be necessary.
A block away in Palo Alto, Internet wunderkind Sean Parker was stressed out. It was a hot afternoon, and the skinny blond 24-year-old hated doing physical work. But his lease was up and he was short on cash. So there he was in June 2004 on the sidewalk in front of his girlfriend's family's house, unloading boxes from the white BMW he had bought when times were flush. When he noticed a group of boys heading toward him, he stiffened. His boxes contained expensive computer gear. He didn't like the look of these kids -- all wearing sweatshirts with hoods up despite the heat. He thought they had a menacing air, but the shortest one walked right up.
"Sean," the guy said. "It's Mark, Mark Zuckerberg." Suddenly it all snapped into place. This was the guy he had met at dinner in New York City two months earlier, the kid who had treated him like a legend for his role in helping Shawn Fanning launch Napster. Later Parker co-founded another Internet company, Plaxo, a contact-info-management venture that had raised millions of dollars from investors. Lately Parker had run into trouble with his backers, who found him brilliant but unreliable. Yet to these 20-year-olds, Parker was an industry sophisticate.
Over dinner in Palo Alto, Zuckerberg witnessed firsthand the denouement of Parker's battle with his Plaxo backers. While Zuckerberg was introducing Parker more fully to his Harvard chums, Parker got a call from his lawyer. The news was bad. The Plaxo board was not only kicking him out of the company but also refusing to allow about half of his remaining shares in the company to vest. Parker was enraged. He was getting screwed. The Facebook boys listened in awe and dismay. "VCs sound scary," Zuckerberg recalls thinking. It was a formative moment. Feeling for his friend, and thinking he might learn much from Parker, Zuckerberg invited him to move into the house with them. By September, Zuckerberg was calling him the company's president. Besides his sage advice, Parker came in handy for one other corporate role: The boys relied on him to buy the alcohol for house parties, since he was the only one in the group over 21.
As the fall semester of 2004 loomed, the company was on the verge of a crisis. Over the summer membership had almost doubled, to 200,000. That was good and bad. "We were just lucky it wasn't completely bringing down the architecture," says Moskovitz. Zuckerberg and Moskovitz had decided not to return to Harvard that fall so that they could focus on the company. But now they needed money. At this point a Silicon Valley startup would typically solicit venture capitalists to make a cash infusion in return for a very big chunk of the company, as much as a third. Zuckerberg didn't want to give up that much control.
Parker called his friend Reid Hoffman, the founder of LinkedIn and a key member of an important Silicon Valley subculture -- the wealthy former leaders of PayPal. Hoffman arranged for Parker and Zuckerberg to meet with PayPal's onetime CEO Peter Thiel, now a private investor. When the Facebook boys made their presentation (Zuckerberg in his usual Adidas flip-flops), Thiel was impressed, especially with what was happening at colleges where Facebook was newly introduced. Within days it typically captured almost the entire student body.
Thiel then made what may be one of the great investments of all time. He agreed to lend $500,000, which would convert into a 10.2% stake in the company, giving the company a valuation of $4.9 million. That was lower than other offers, but Zuckerberg was pleased to have found an investor who seemed to trust him. The extent of Thiel's early advice to Zuckerberg: "Just don't fuck it up." Thiel sold a large amount of his stock in 2009; his remaining shares are worth several hundred million dollars.
During the fall, the originally static Facebook had already started evolving into the revolutionary medium it is today by adding new features like "the wall," which allowed anyone to write on a friend's profile. Membership reached 500,000 by October, and it was soon clear that even Thiel's money wasn't enough to pay for the company's growing infrastructure. But Zuckerberg remained deeply wary of Silicon Valley moneymen. Their thinking was short-term, he felt. His was epic.
Through a classmate whose father worked at the Washington Post Co. (WPO, Fortune 500), Zuckerberg had struck up a friendship with CEO Donald Graham, a member of the family that has controlled the Washington Post since the 1930s. Graham, who was immersed in building the company's own web businesses, recalls being immediately taken. "I thought it was a simply stunning business idea," he says, and made Zuckerberg an investment offer more spontaneously than any he has made before or since. Zuckerberg was impressed with how different Graham was from a bloodthirsty VC. "I was just blown away by the difference in culture -- that it's just such a long-term focus there. I was just like, 'Wow, I want to be more like this guy.' And that's when I seriously started thinking about doing another [investment] round."
As soon as word got out that Facebook was contemplating an investment, the Silicon Valley greed machine kicked into high gear. By February, 12 venture capital firms, four major tech companies, and the Post company were pursuing an investing deal. Viacom suddenly expressed interest in buying the company outright for $75 million, which would have put about $35 million in Zuckerberg's pocket for a year's work. But he had no interest in selling. The Post offer came in at $6 million for 10% ownership, valuing the company at $60 million. Ron Conway, a veteran investor who was advising Parker, told him, "My God! Take it! Close that sucker!" After a bit more haggling, a deal seemed to be done. Until another party entered the picture.
The Accel Partners VC firm was looking for a bigger score. After making its mark in the 1990s with a series of software and telecom investments, the Palo Alto firm had missed out on social-media opportunities. Kevin Efrusy, a junior member of the Accel team, had heard about Facebook from a Stanford University grad student interning at Accel and started making overtures. Parker declined to return his phone calls at first, thinking the VC firm had lost its mojo. Finally, on April Fool's Day, 2005, Efrusy decided to just walk over to Facebook's office. The two executives he encountered, Moskovitz and Matt Cohler (a recruit from LinkedIn), were struggling to assemble office furniture from Ikea. Moskovitz's head was bleeding from hitting a piece of furniture, and Cohler's pants were torn after getting caught on a nail. But their presentation of the business was brilliant, Efrusy recalls. Four days later Efrusy again walked down University Avenue to Facebook's office, barged into a meeting, and slapped a term sheet on the table. It topped the Washington Post terms by far, a $10 million investment valuing Facebook at $80 million. (The deal eventually reached $12.7 million and a valuation of just under $98 million.) After Efrusy left, the young entrepreneurs looked at one another in jubilation. Eighty million? Amazing! "But what about the Post?" Zuckerberg asked. Nobody had a good answer.
That night Accel's co-managing partner, Jim Breyer, a Silicon Valley heavyweight who's also a director of Wal-Mart (WMT, Fortune 500), hosted a dinner for Facebook's leaders at the elegant Village Pub near Palo Alto. The Pub is known for its wine list, and Breyer, a connoisseur, ordered a $400 bottle of Quilceda Creek Cabernet. Zuckerberg, still only 20, ordered a Sprite. Breyer was doing everything he could to loosen Zuckerberg up. But Zuckerberg remained uncomfortable about something. Then he started to tune out, Matt Cohler noticed.
Zuckerberg went to the bathroom and didn't return for a surprisingly long time. Cohler got up to see if everything was okay. There, on the floor of the men's room with his head down, was Zuckerberg. And he was crying. "Through his tears he was saying, 'This is wrong. I can't do this. I gave my word!' " recalls Cohler. "He was just crying his eyes out, bawling. So I said, 'Why don't you just call Don up and ask him what he thinks?' " Zuckerberg took a while to compose himself and returned to the table.
The next morning he did call Graham. "Don, I haven't talked to you since we agreed on terms, and since then I've had a much higher offer from a venture capital firm out here. And I feel I have a moral dilemma," Zuckerberg began.
Graham was disappointed, but he was also impressed. "I just thought to myself, 'Wow, for 20 years old, that is impressive -- he's not calling to tell me he's taking the other guy's money. He's calling me to talk it out.' " Graham knew that even his first offer was very high for a company so tiny and so young. "Mark, does the money matter to you?" Graham asked. Zuckerberg said it did. It could, he went on, be the one thing that could prevent Facebook from going into the red or having to borrow money. "Mark, I'll release you from your moral dilemma," said Graham. "Go ahead and take their money and develop the company, and all the best." For Zuckerberg it was a huge relief. And it further increased his respect and admiration for Graham. (Zuckerberg eventually asked the publisher to take a seat on the Facebook board.)
Facebook entered a new kind of boom phase, hiring staff, adding new features like photo sharing, and attracting millions more users. But Facebook was not yet a real business, especially given Zuckerberg's disdain for intrusive advertising, so it was burning quickly through its capital at the rate of about $6 million a year. That failed to discourage the delegates from corporate America, who continued to enhance their temptations. Zuckerberg kept huddling with the moguls, which gave rise to grumbling at Facebook, especially among the growing number of executives whom Silicon Valley recruiter Robin Reed was bringing onboard. What did all these meetings mean, they wondered? Zuckerberg wasn't bothering to explain his thinking. He thought of these meetings as a learning process. Reed had become a close observer of all the unhappiness, partly because she had one of the only private offices at the company. Zuckerberg wouldn't listen, Facebook staffers said. Zuckerberg should be replaced. Zuckerberg didn't know what he wanted to do with the company.
Finally Reed reached the end of her rope. "The team was almost ready to mutiny," says Reed. She arranged to meet with Zuckerberg on his way back from an East Coast meeting. But his plane was delayed, so when they finally met it was at 2:30 a.m. in the neon glow of a diner. Reed unleashed her frustration. "Mark, nobody knows what's going on. If you want to sell your company, then stop dicking around and say you want a billion dollars. If it's 2 billion, say that. If you don't want to sell, then say that!"
"I don't want to sell the company," Zuckerberg answered.
"Then stop taking all these meetings! You're sending the wrong message." Then she unleashed her final barrage. "You'd better take CEO lessons or this isn't going to work out for you!"
"So now you're finally being straight with me," Zuckerberg replied, turning more animated. "This is the first time I feel like you're telling me what you really think." Over the next few weeks Reed noticed a distinct change in Zuckerberg. For one thing, he did agree to start seeing an executive coach to get lessons on how to be an effective leader. The week after the confrontation he called the entire staff together for Facebook's first all-hands meeting.
While the talks with Viacom eventually fell apart over the structure of the deals, other offers kept coming and reached numbers that Zuckerberg had trouble dismissing out of hand. In July 2006, Yahoo CEO Terry Semel offered to buy Facebook for $1 billion cash. Zuckerberg seemed more than relieved a few weeks later when Yahoo (YHOO, Fortune 500), its stock suffering, reduced its offer to $850 million. As soon as he heard, a grinning Zuckerberg strode over to Moskovitz's desk a few feet away and gave a big high-five. The deal was off.
As all this was underway, executives at other media and tech firms were starting to ask if they ought to buy Facebook. Microsoft CEO Steve Ballmer had flown to Palo Alto to visit his young counterpart twice. As Zuckerberg is wont to do, he took Ballmer on a long walk. Zuckerberg told Ballmer that Facebook was raising money at a $15 billion valuation. But Ballmer had come with something more sweeping in mind. "Why don't we just buy you for $15 billion?" he replied, according to a very knowledgeable source. Zuckerberg was unmoved even by this offer. "I don't want to sell the company unless I can keep control," said Zuckerberg, as he always did in such situations. Ballmer took this reply as a sort of challenge. He went back to Microsoft's headquarters and concocted a plan intended to acquire Facebook in stages over a period of years to enable Zuckerberg to keep calling the shots. But Zuckerberg rejected all the overtures. What Ballmer finally agreed to instead was an advertising deal that included a provision for Microsoft (MSFT, Fortune 500) to pay a huge amount, $240 million, for a sliver of Facebook, 1.6%. Microsoft's investment gave Facebook an implied value of $15 billion.
Since then the company has reached another level of dominance, where the most passionate buyers are likely to be the public when the company eventually launches an IPO. Facebook expects to become profitable this year and bring in close to $2 billion in revenues. Zuckerberg owns about 24% of the stock, which puts his stake at almost $5 billion. But he seems in no rush for an IPO or the next big thing. After all, what would he do all day? "Unless I feel like I'm working on the most important problem I can help with, then I'm not going to feel good about how I'm spending my time," he says. "And that's what this company is." The ultimate payday is not a priority. Changing the world is.
The Facebook Effect excerpt: Full version - May. 6, 2010
(Fortune) -- If not for founder Mark Zuckerberg's stubborn streak, social-media pioneer Facebook might be just another part of a giant media or tech outfit today. Instead it's a giant on its own, with close to 500 million users, some $20 billion in market value, and millions of investors eagerly awaiting an IPO. For his new book, The Facebook Effect: the Inside Story of the Company That Is Connecting the World, Fortune contributor David Kirkpatrick gained unprecedented access to the company and Zuckerberg, who turns 26 this month. In this adapted excerpt, Kirkpatrick reveals Zuckerberg's turmoil as he resisted takeover offers from a parade of moguls.
The Viacom executive figured he'd impress the kid with a ride on the company jet, but clearly it was the youth who was in the driver's seat. Of all the suitors courting Mark Zuckerberg in the fall of 2005, one of the most enterprising was Michael Wolf, president of Viacom's MTV Networks. He had heard college students in MTV's focus groups talking incessantly about the new site, and he was determined to snag it for his parent company. But first he had to "friend" Zuckerberg. Wolf had figured out that the best way to reach the Facebook leader was to instant-message him, so he IM'd Zuckerberg periodically to say he planned to be in Palo Alto -- whether it was true or not -- and suggest a dinner. If Zuckerberg agreed, Wolf would fly out. But as the end of the year approached, Wolf got in touch with a better offer. He was planning to be in San Francisco with the Viacom corporate jet, he claimed. Would Mark like a ride back to New York for the holidays?
Zuckerberg took Wolf's bait. Since Viacom's corporate planes were in fact unavailable, Wolf chartered a top-of-the-line Gulfstream V for the trip from the San Francisco airport to Westchester County Airport, near Zuckerberg's parents' home in Dobbs Ferry, N.Y. Wolf flew out that morning from New York on American Airlines (AMR, Fortune 500). The MTV executive was waiting aboard the G5 as if it were the most normal thing in the world when Zuckerberg arrived, late, about 5:30 p.m. Then, as Wolf had shrewdly planned, they spent five uninterrupted hours together aboard the plane. He was resolved to find a way for Viacom to buy Facebook.
For much of the trip, however, the 21-year-old was in control of the conversation. He interrogated Wolf about MTV's business. How did companies like Viacom make their money? How m
uch did MTV charge for advertising? How do you build your audience?During the trip Zuckerberg took to admiring the G5. "This plane is amazing," he said.
"Maybe you should just sell a piece of the company to us," Wolf replied. "Then you can have one for yourself."
Wolf invited his guest to sit in the jump seat in the cockpit as the powerful jet landed at Westchester. When it pulled up to the private aviation terminal, two cars were waiting. One was Wolf's corporate sedan to drive him into the city. The other was the Zuckerberg family minivan, from which Mark's parents emerged. They beamed and gave their son a big hug. It was as if he were merely coming home from a semester at college.
The MTV president kept up his pursuit after the holidays, flying to Palo Alto in January with an elaborate PowerPoint presentation and again the next month with a more personal appeal. He and Zuckerberg were becoming chums. They took a long walk around the palmy, well-groomed streets and stopped by Zuckerberg's one-bedroom apartment. The place was messy, with a mattress on the floor, piles of books, a bamboo mat, and a lamp. Then they headed for dinner at a nearby restaurant. Wolf popped the same question he'd asked on the plane. "Why don't you just sell to us?" he asked. "You'd be very wealthy."
"You just saw my apartment," Zuckerberg replied. "I don't really need any money. And anyway, I don't think I'm ever going to have an idea this good again." Viacom (VIA) would try money nonetheless, with a cash offer of $800 million and provisions that could make it worth as much as $1.5 billion. But like many other suitors, the Viacom executives discovered they were dealing with a formidable character. If his invention's early appeal was at a freshman level, exploiting the desire of college students to check each other out, his professed ambition was much higher: to change the world.
Fortune is on Facebook
Zuckerberg's financing needs were far from his mind when he launched the site on Feb. 4, 2004, from his dorm suite at Harvard. Zuckerberg, a code writer since middle school, had arrived at Harvard equipped with his own computer and a giant whiteboard, the geek's consummate brainstorming tool. He built the site using free, open-source software like the MySQL database and fueled his late-night coding sessions with plenty of Beck's and Red Bull. A month before the site launched, Zuckerberg paid $35 to register the web address thefacebook.com (the name was later shortened) and started paying $85 a month to a web-hosting company. But the infectious appeal of the service went beyond what anyone expected. At the end of the semester, when the user base had reached 100,000 students at 30 schools, a well-connected classmate took Zuckerberg around Manhattan to meet with potential investors. At one of those meetings a financier offered Zuckerberg $10 million on the spot for the company. Mark had just turned 20. His company was four months old. He didn't for a minute think seriously about accepting.
Instead, Zuckerberg decided to relocate his company for the summer to the promised land of technology, Palo Alto. Searching Craigslist, he found a four-bedroom house to sublet as an office and bunkhouse, and persuaded roommate Dustin Moskovitz to give up a summer computer-lab job at Harvard to become essentially his chief operating officer. Keeping Facebook running, which meant constantly adding more servers, was starting to cost real money. Zuckerberg spent about $20,000 in the first few weeks in Palo Alto, using money he had saved from programming jobs. But clearly much more cash would soon be necessary.
A block away in Palo Alto, Internet wunderkind Sean Parker was stressed out. It was a hot afternoon, and the skinny blond 24-year-old hated doing physical work. But his lease was up and he was short on cash. So there he was in June 2004 on the sidewalk in front of his girlfriend's family's house, unloading boxes from the white BMW he had bought when times were flush. When he noticed a group of boys heading toward him, he stiffened. His boxes contained expensive computer gear. He didn't like the look of these kids -- all wearing sweatshirts with hoods up despite the heat. He thought they had a menacing air, but the shortest one walked right up.
"Sean," the guy said. "It's Mark, Mark Zuckerberg." Suddenly it all snapped into place. This was the guy he had met at dinner in New York City two months earlier, the kid who had treated him like a legend for his role in helping Shawn Fanning launch Napster. Later Parker co-founded another Internet company, Plaxo, a contact-info-management venture that had raised millions of dollars from investors. Lately Parker had run into trouble with his backers, who found him brilliant but unreliable. Yet to these 20-year-olds, Parker was an industry sophisticate.
Over dinner in Palo Alto, Zuckerberg witnessed firsthand the denouement of Parker's battle with his Plaxo backers. While Zuckerberg was introducing Parker more fully to his Harvard chums, Parker got a call from his lawyer. The news was bad. The Plaxo board was not only kicking him out of the company but also refusing to allow about half of his remaining shares in the company to vest. Parker was enraged. He was getting screwed. The Facebook boys listened in awe and dismay. "VCs sound scary," Zuckerberg recalls thinking. It was a formative moment. Feeling for his friend, and thinking he might learn much from Parker, Zuckerberg invited him to move into the house with them. By September, Zuckerberg was calling him the company's president. Besides his sage advice, Parker came in handy for one other corporate role: The boys relied on him to buy the alcohol for house parties, since he was the only one in the group over 21.
As the fall semester of 2004 loomed, the company was on the verge of a crisis. Over the summer membership had almost doubled, to 200,000. That was good and bad. "We were just lucky it wasn't completely bringing down the architecture," says Moskovitz. Zuckerberg and Moskovitz had decided not to return to Harvard that fall so that they could focus on the company. But now they needed money. At this point a Silicon Valley startup would typically solicit venture capitalists to make a cash infusion in return for a very big chunk of the company, as much as a third. Zuckerberg didn't want to give up that much control.
Parker called his friend Reid Hoffman, the founder of LinkedIn and a key member of an important Silicon Valley subculture -- the wealthy former leaders of PayPal. Hoffman arranged for Parker and Zuckerberg to meet with PayPal's onetime CEO Peter Thiel, now a private investor. When the Facebook boys made their presentation (Zuckerberg in his usual Adidas flip-flops), Thiel was impressed, especially with what was happening at colleges where Facebook was newly introduced. Within days it typically captured almost the entire student body.
Thiel then made what may be one of the great investments of all time. He agreed to lend $500,000, which would convert into a 10.2% stake in the company, giving the company a valuation of $4.9 million. That was lower than other offers, but Zuckerberg was pleased to have found an investor who seemed to trust him. The extent of Thiel's early advice to Zuckerberg: "Just don't fuck it up." Thiel sold a large amount of his stock in 2009; his remaining shares are worth several hundred million dollars.
During the fall, the originally static Facebook had already started evolving into the revolutionary medium it is today by adding new features like "the wall," which allowed anyone to write on a friend's profile. Membership reached 500,000 by October, and it was soon clear that even Thiel's money wasn't enough to pay for the company's growing infrastructure. But Zuckerberg remained deeply wary of Silicon Valley moneymen. Their thinking was short-term, he felt. His was epic.
Through a classmate whose father worked at the Washington Post Co. (WPO, Fortune 500), Zuckerberg had struck up a friendship with CEO Donald Graham, a member of the family that has controlled the Washington Post since the 1930s. Graham, who was immersed in building the company's own web businesses, recalls being immediately taken. "I thought it was a simply stunning business idea," he says, and made Zuckerberg an investment offer more spontaneously than any he has made before or since. Zuckerberg was impressed with how different Graham was from a bloodthirsty VC. "I was just blown away by the difference in culture -- that it's just such a long-term focus there. I was just like, 'Wow, I want to be more like this guy.' And that's when I seriously started thinking about doing another [investment] round."
As soon as word got out that Facebook was contemplating an investment, the Silicon Valley greed machine kicked into high gear. By February, 12 venture capital firms, four major tech companies, and the Post company were pursuing an investing deal. Viacom suddenly expressed interest in buying the company outright for $75 million, which would have put about $35 million in Zuckerberg's pocket for a year's work. But he had no interest in selling. The Post offer came in at $6 million for 10% ownership, valuing the company at $60 million. Ron Conway, a veteran investor who was advising Parker, told him, "My God! Take it! Close that sucker!" After a bit more haggling, a deal seemed to be done. Until another party entered the picture.
The Accel Partners VC firm was looking for a bigger score. After making its mark in the 1990s with a series of software and telecom investments, the Palo Alto firm had missed out on social-media opportunities. Kevin Efrusy, a junior member of the Accel team, had heard about Facebook from a Stanford University grad student interning at Accel and started making overtures. Parker declined to return his phone calls at first, thinking the VC firm had lost its mojo. Finally, on April Fool's Day, 2005, Efrusy decided to just walk over to Facebook's office. The two executives he encountered, Moskovitz and Matt Cohler (a recruit from LinkedIn), were struggling to assemble office furniture from Ikea. Moskovitz's head was bleeding from hitting a piece of furniture, and Cohler's pants were torn after getting caught on a nail. But their presentation of the business was brilliant, Efrusy recalls. Four days later Efrusy again walked down University Avenue to Facebook's office, barged into a meeting, and slapped a term sheet on the table. It topped the Washington Post terms by far, a $10 million investment valuing Facebook at $80 million. (The deal eventually reached $12.7 million and a valuation of just under $98 million.) After Efrusy left, the young entrepreneurs looked at one another in jubilation. Eighty million? Amazing! "But what about the Post?" Zuckerberg asked. Nobody had a good answer.
That night Accel's co-managing partner, Jim Breyer, a Silicon Valley heavyweight who's also a director of Wal-Mart (WMT, Fortune 500), hosted a dinner for Facebook's leaders at the elegant Village Pub near Palo Alto. The Pub is known for its wine list, and Breyer, a connoisseur, ordered a $400 bottle of Quilceda Creek Cabernet. Zuckerberg, still only 20, ordered a Sprite. Breyer was doing everything he could to loosen Zuckerberg up. But Zuckerberg remained uncomfortable about something. Then he started to tune out, Matt Cohler noticed.
Zuckerberg went to the bathroom and didn't return for a surprisingly long time. Cohler got up to see if everything was okay. There, on the floor of the men's room with his head down, was Zuckerberg. And he was crying. "Through his tears he was saying, 'This is wrong. I can't do this. I gave my word!' " recalls Cohler. "He was just crying his eyes out, bawling. So I said, 'Why don't you just call Don up and ask him what he thinks?' " Zuckerberg took a while to compose himself and returned to the table.
The next morning he did call Graham. "Don, I haven't talked to you since we agreed on terms, and since then I've had a much higher offer from a venture capital firm out here. And I feel I have a moral dilemma," Zuckerberg began.
Graham was disappointed, but he was also impressed. "I just thought to myself, 'Wow, for 20 years old, that is impressive -- he's not calling to tell me he's taking the other guy's money. He's calling me to talk it out.' " Graham knew that even his first offer was very high for a company so tiny and so young. "Mark, does the money matter to you?" Graham asked. Zuckerberg said it did. It could, he went on, be the one thing that could prevent Facebook from going into the red or having to borrow money. "Mark, I'll release you from your moral dilemma," said Graham. "Go ahead and take their money and develop the company, and all the best." For Zuckerberg it was a huge relief. And it further increased his respect and admiration for Graham. (Zuckerberg eventually asked the publisher to take a seat on the Facebook board.)
Facebook entered a new kind of boom phase, hiring staff, adding new features like photo sharing, and attracting millions more users. But Facebook was not yet a real business, especially given Zuckerberg's disdain for intrusive advertising, so it was burning quickly through its capital at the rate of about $6 million a year. That failed to discourage the delegates from corporate America, who continued to enhance their temptations. Zuckerberg kept huddling with the moguls, which gave rise to grumbling at Facebook, especially among the growing number of executives whom Silicon Valley recruiter Robin Reed was bringing onboard. What did all these meetings mean, they wondered? Zuckerberg wasn't bothering to explain his thinking. He thought of these meetings as a learning process. Reed had become a close observer of all the unhappiness, partly because she had one of the only private offices at the company. Zuckerberg wouldn't listen, Facebook staffers said. Zuckerberg should be replaced. Zuckerberg didn't know what he wanted to do with the company.
Finally Reed reached the end of her rope. "The team was almost ready to mutiny," says Reed. She arranged to meet with Zuckerberg on his way back from an East Coast meeting. But his plane was delayed, so when they finally met it was at 2:30 a.m. in the neon glow of a diner. Reed unleashed her frustration. "Mark, nobody knows what's going on. If you want to sell your company, then stop dicking around and say you want a billion dollars. If it's 2 billion, say that. If you don't want to sell, then say that!"
"I don't want to sell the company," Zuckerberg answered.
"Then stop taking all these meetings! You're sending the wrong message." Then she unleashed her final barrage. "You'd better take CEO lessons or this isn't going to work out for you!"
"So now you're finally being straight with me," Zuckerberg replied, turning more animated. "This is the first time I feel like you're telling me what you really think." Over the next few weeks Reed noticed a distinct change in Zuckerberg. For one thing, he did agree to start seeing an executive coach to get lessons on how to be an effective leader. The week after the confrontation he called the entire staff together for Facebook's first all-hands meeting.
While the talks with Viacom eventually fell apart over the structure of the deals, other offers kept coming and reached numbers that Zuckerberg had trouble dismissing out of hand. In July 2006, Yahoo CEO Terry Semel offered to buy Facebook for $1 billion cash. Zuckerberg seemed more than relieved a few weeks later when Yahoo (YHOO, Fortune 500), its stock suffering, reduced its offer to $850 million. As soon as he heard, a grinning Zuckerberg strode over to Moskovitz's desk a few feet away and gave a big high-five. The deal was off.
As all this was underway, executives at other media and tech firms were starting to ask if they ought to buy Facebook. Microsoft CEO Steve Ballmer had flown to Palo Alto to visit his young counterpart twice. As Zuckerberg is wont to do, he took Ballmer on a long walk. Zuckerberg told Ballmer that Facebook was raising money at a $15 billion valuation. But Ballmer had come with something more sweeping in mind. "Why don't we just buy you for $15 billion?" he replied, according to a very knowledgeable source. Zuckerberg was unmoved even by this offer. "I don't want to sell the company unless I can keep control," said Zuckerberg, as he always did in such situations. Ballmer took this reply as a sort of challenge. He went back to Microsoft's headquarters and concocted a plan intended to acquire Facebook in stages over a period of years to enable Zuckerberg to keep calling the shots. But Zuckerberg rejected all the overtures. What Ballmer finally agreed to instead was an advertising deal that included a provision for Microsoft (MSFT, Fortune 500) to pay a huge amount, $240 million, for a sliver of Facebook, 1.6%. Microsoft's investment gave Facebook an implied value of $15 billion.
Since then the company has reached another level of dominance, where the most passionate buyers are likely to be the public when the company eventually launches an IPO. Facebook expects to become profitable this year and bring in close to $2 billion in revenues. Zuckerberg owns about 24% of the stock, which puts his stake at almost $5 billion. But he seems in no rush for an IPO or the next big thing. After all, what would he do all day? "Unless I feel like I'm working on the most important problem I can help with, then I'm not going to feel good about how I'm spending my time," he says. "And that's what this company is." The ultimate payday is not a priority. Changing the world is.
The Facebook Effect excerpt: Full version - May. 6, 2010
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