Thomas White Global Investing
Global Players

Global Players

February 2010

Mark Zuckerberg, Founder and CEO, Facebook


“I’m here to build something for the long term. Anything else is a distraction.”

— Mark Zuckerberg revealing his main reason for turning down Yahoo!, 2006


MySpace laid off 30% of its employees last year. U.S. holiday sales in December 2009 were robust. Recently, Google unveiled a new social application aptly named ‘Buzz.’ What’s the common thread among these stories? Facebook. The social networking site is influencing our world from retail behavior to our relationships. Now founder and CEO, Mark Zuckerberg, is toasting to the record 400 million users who made Facebook the biggest social networking site in the world.

After just six years, that is a phenomenal achievement for a dotcom venture. The social networking site, hatched in a Harvard dorm in 2004, is estimated by Forbes to be worth around $7.9 billion today, although Zuckerberg prefers to keep his Palo Alto-based company’s revenues undisclosed. But despite his success, the 25-year old still lives in a one-bedroom apartment near his office and walks or cycles to work.

Zuckerberg, the only son of a dentist, began computer programming as early as middle school. By the time he was in high school, Microsoft and AOL were fervently trying to recruit him. But Zuckerberg’s creation initially began as a hacking incident his sophomore year at Harvard. Along with his friends Dustin Moskovitz and Adam D’Angelo, the computer geeks accessed the university’s student information base, hoping to begin an online student directory.

Facebook began as a social tool restricted to Harvard College students. As it became wildly popular, Zuckerberg opened it to all Ivy League schools. Recognizing the potential of his creation, he dropped out of Harvard to begin operations of his new company in 2004, supported by a $500,000 investment from PayPal co-founder Peter Thiel.

By 2006, Facebook had expanded its reach beyond college and high school students, opening its arms to everyone over the age of 13. In two short years, Zuckerberg, who was now the darling of investors, was approached by Yahoo!, with an offer to buy Facebook for $1 billion. But Zuckerberg flatly refused. “If you sell your company, that is the exit,” Zuckerberg explained to online magazine FastCompany. Later, Microsoft did manage to extract a 1.6% stake in the company by inking a search advertising deal in 2007, for $240 million, which was renewed a year later.

But what makes Facebook special? Although there have been other social applications such as MySpace and Friendster, Facebook’s platform for constant and instant information through “status updates” has hooked an entire generation. The site sports a clean and professional looking interface, and promotes the ability to foster connections easily and to form special interest groups and communities. According to Zuckerberg, Facebook stands out because of its “social graph,” where real offline relationships find numerous ways to be expressed.

And it is Facebook’s very pervasiveness that has made it an ideal marketing platform, creating a bridge to the business world. The cornerstone of Facebook’s strategy is a mix of e-commerce with word-of-mouth marketing, which is more powerful than conventional advertising. Facebook places power squarely in the consumers’ hands, with the ability to promote a brand they prefer by becoming its “fan.” When a user’s choice becomes visible to his or her friends, it tends to become popular.

Encouraged by Facebook, “social shopping” as Tom Arrix, vice president of the firm’s U.S. sales, defines it, is taking off in a big way. Brands that range from IKEA to Coca-Cola to J. C. Penny have converged on the site, vying for those much sought after fans. The efforts appear to have paid off. In December 2009, Facebook, together with Twitter, the other social networking phenomenon, were shown to have influenced the decisions of 28% of holiday shoppers in the U.S.

Today, Facebook is available in 70 languages, accessed by one million users through mobile phones alone. It has become a convenient platform for everyone, from school children to great-grandmothers. Even104-year-old Ivy Bean, Facebook’s oldest user, uses the platform to swap stories, play games and share photos. The company has toppled MySpace from its high perch. MySpace, once THE social networking hangout, is now cutting back on employees, as the site quickly loses users as they shift to Facebook.

But Facebook has drawn its share of criticism as well. The application is banned in several countries like Iran and China where authorities disliked political activist groups cropping up on the network. Facebook still churns in the center of the stormy privacy debate as many users question its intrusiveness. Others still claim that the use of Facebook invites security breach issues. Zuckerberg himself faced charges that he stole the idea for the social network from fellow Harvard classmates, a controversy that ended in a $64 million settlement.

Zuckerberg, one of the youngest billionaires in the world, told Business Insider that Facebook’s success graph has remained consistently vertical because of its speed and boldness. The next frontier is to provide competition to Google’s Gmail. Zuckerberg and his team are now working on a new email program, a project named Titan, which is expected to include competitive features. In turn, Google recently rolled out its own answer to Facebook, termed ‘Buzz,” hoping to taste a wedge of Facebook’s sweet pie of success.

It appears that Zuckerberg, the wonderkid, has changed the way the world connects. Facebook has managed to spread its net across the world, evolving from a second-tier social network to a platform that challenges the way we operate on the internet.

 

 

 

 

Subscribe to get our global publications by email.

 

Use of this site signifies that you have read Terms & Conditions
© Thomas White International, Ltd. 2018