E-406 DATE: 05/12/11 FACEBOOK IN 2011 FACEBOOK IN 2004 The original Facebook website went live on February 4, 2004 as a digital directory of...

CASE : E-406 DATE : 05/12/11 Arar Han (MBA ‟09) wrote this case using publicly available sources under t he supervision of Thomas M. Siebel Professor of Business Leadership, Strategy, and Organizations William P. Barnett as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Histori cal details of Facebook are largely drawn from Stanford GSB Case E -220, “Facebook,” revised May 22, 2008. Copyright © 2011 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to r eproduce materials, e -mail the Case Writing Office at: [email protected] or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305 -5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns about any material appearing in this case study, please contact the Case Writing Office at [email protected] . F ACEBOOK IN 2011 FACEBOOK IN 2004 The original Facebook website went live on February 4, 2004 as a digital directory of undergraduate students enrolled at Harvard University . It was coded by then -sophomore Mark Zuckerberg, who wanted to combine the sch ool‟s dorm -exclusive online directories into a school -wide resource. Those who joined Facebook could create a profile with their first and last name, photo, residence, contact information, relationship status, personal interests, and even course schedule. A profile could be viewed by other users who had a confirmed digital “friend” relationship with the owner of that profile ( Exhibit 1 : Sample Profile). Facebook spread quickly. By the end of February, there were 10,000 Harvard users registered on the site. Students at Columbia , Stanford, and Yale were invited to join on February 25, 26, and 29, respectively .i Over half of the undergraduate student body at Stanford signed up in the first week. By June, Facebook spanned some 30 colleges and had approximately 150,000 users. Zuckerberg was surprised by the demand for Facebook‟s services: Early on, we weren‟t intending this to be a company. We had no cash to run it.

We actually operated it for the first three months for $85 a month – the cost of renting one ser ver. We had a network of banner ads, but it‟s not like we were making money. ii He decided to spend the summer of 2004 in Silicon Valley growing Facebook and fleshing out its business potential. Facebook in 2011 E -406 p. 2 Social Network ing Sites When Zuckerberg arrived at Facebook‟ s rented Palo Alto house in June 2004, there were at least three other companies offering internet -based social network ing services:  Friendster , which was founded in 2002, was a prominent dating site with 1.5 million unique visitors in September 2003, up from just 110,000 in April. iii In October 2003, it rejected a $30 millio n buyout offer from Google, instead raising $13 million in a venture round led by Kleiner Perkins Caufield & Byers and Benchmark Capital. iv  MySpace was founded in July 2003 as a self -desc ribed “online community that lets you meet your friends‟ friends.” It offered a range of services such as invitations, events, classified advertising, and forums, and raised $11 million in a round led by Redpoint Ventures. v  Orkut was started by a Google pr ogrammer in January 2004. Membership to Orkut was by invitation only, so the network grew organically through an existing network of trusted friends. By July 2004, it had over 1 million users, many of whom lived in Brazil. Facebook was set apart from othe r social networking sites in that it grew from college to college, using a dot -edu email address as verification of a new user‟s identity and collegiate affiliation . Other services did not have explicit divisions within the overall network , nor an expansio n strategy that targeted colleges . Facebook‟s customer support page in 2004 explained that division by school was for the sake of user privacy: Facebook was intentionally designed to limit the availability of your profile to only your friends and other st udents at your school. This simple but important security measure promotes local networking and makes sure that your information is seen by people you want to share it with, and not seen by folks you don‟t. As Zuckerberg commented: We‟re not asking anyon e to put anything out there that they wouldn‟t be comfortable with. We‟re not forcing anyone to publicize any information about themselves. We give people pretty good control over their privacy. Indeed, Facebook allowed users to restrict who c ould access their profiles: friends, friends of friends, and certain networks of users. This was similar to other social networking sites , which supported similar restrictions, though not by school as Facebook did. Facebook Becomes a Business By the e nd of the summe r of 2004, Facebook had achieved the following milestones:  Redesigned and relaunched the Facebook site.  Upgraded and added to Facebook‟s back -end infrastructure.  Appointed Sean Parker, co -founder of Napster and Plaxo, as president.  Received $500,000 in se ed capital from prominent venture capitalist Peter Thiel. Facebook in 2011 E -406 p. 3 More important, Zuckerberg became convinced of the site‟s potential as a business: “When we came out to the Bay Area, we realized that no other site really had this kind of activity, that it could be a big business, and it might be fun to do.” Zuckerberg dropped out of Harvard to pursue Facebook full time, as its CEO . 2005 -2006 : GROWTH AND CHALLENGES Facebook hit 1 million users in December 2004. By May 2005, the site had 2.8 million users at more t han 800 colleges. Its growth reportedly sparked a bidding war among a dozen venture capital firms eager to participate in Facebook‟s success. The winner was Accel Partners, whi ch invested $12.7 million in a deal valu ing Facebook at $100 million. Thrilled, Accel partner Jim Breyer praised the Facebook management team as “intellectually honest and breathtakingly brilliant in understanding the college student experience.” Facebook was on its way to capturing the 13.4 million U.S. -based college student audienc e,vi with a penetration rate of over 80 percent at each of the co lleges it served . But $100 million was a surprising value for a company that had little revenue and served only college students . Breyer himself said in an interview, “ Certainly relative to ma ny other deals, especially deals at this same stage, the price was significantly higher .” Some in the venture capital industry wondered whether Accel‟s investment was testament to the return of the internet investment bubble of the 1990s. vii In September 20 05, Facebook entered the 17.1 million student high school market . Existing, i.e. collegiate, users could invite high school students they knew, and the first wave of high school students to join could invite their peers. Facebook grew quickly among the hig h school set. Although MySpace was already an established player, it took Facebook just seven m onths to reach 1 million registered high school users. In April 2006, Facebook started offering membership to those affiliated with a limited number of corporat ions. viii These included Accenture, Amazon, Apple, EA, Gap, Intel, Intuit, Microsoft, Pepsi, PWC, and Teach for America. New users could register using their dot -com work email addresses. Later the same year, Facebook started expanding internationally by offe ring memberships to schools like the Indian Institutes of Technology and select high schools in Israel . Competition By the end of 2006, Facebook was the second largest social networking site after MySpace. At 12 million active users, it was about a quart er of MySpace‟s estimated 43 million. ix The average Facebook user spent about one hour on the site per day , a figure that grew each month , while the equivalent metric for MySpace , which was purchased by News Corp. in 2005 for $580 million, was holding stead y at about two hours. x According to web traffic monitor comScore, MySpace was the fifth most popular website in the U.S. as measured by number of page views. It was said to have become a music destination, with over 350,000 bands and artists using it as a platform for publicity and communications with fans. xi With 36 million members worldwide, Friendster also remained a prominent social networking site, though it was unclear how many of its members were active users. xii Orkut was the dominant s ocial networking site in Brazil and had launched in India, to promising results. Facebook in 2011 E -406 p. 4 In addition to the growth of the big four social networking sites , the social networking industry saw aggressive investment into technology a pplications with a social focus :  Blogg er was sta rted in 1999 and bought by Google in 2003 for an undisclosed sum.  Flickr , a photo sharing site, was launched by a Canadian gaming company in 2004 and purchased by Yahoo! in 2005 for $35 million.  Yelp, a social restaurant and business review site founded in 2004, had received a total of $12 million in venture capital financing by 2006.  Twitter, a microblog site with RSS functionality , launched in 2006 and in 2007 received between $1 million and $5 million in venture loans in a deal valuing it at $20 million. xiii The boom in social networking businesses was a w orldwide phenomenon. Beyond Orkut in Brazil and India, Facebook lookalike Bebo was founded in San Francisco in 2005 and gaining a dominant position in the United Kingdom, Ireland, and New Zealand. xiv “Chines e Facebook” RenRen 1 also launched in 2005 . Some, like South Kor ea‟s Cyworld, predated Facebook, and had already achieved a penetration rate of 25 percent of the entire South Korean market, population 50 million. xv Privacy Limiting its user base to college -aged students with dot -edu email a ddresses had enabled Facebook to verify that its users were who they said they were. While the site still required members to use their real first and last names, o pening up membership to others outside of the dot -edu net work in September 2005 suspended Facebook‟s ability to confirm their identity and affiliation. This led to a range of concerns about privacy in the network:  Press reports warned users against posting phone numbers and residential addresses.  College newspa pers claimed that prospective employers were using Facebook and other social networks to screen job candidates.  High school students feared that college admissi ons officers would do the same – particularly that they would reject applicants on the basis of any evidence of illegal drug use or underage drinking found on student profiles. Such concerns created a tension between Facebook‟s interest in fostering “a freer flow of information,” as Zuckerberg put it, and a justifiable interest on the part of parent s, school administrators, and law enforcement officials to protect students from the potential risks of disclosing private information in a semi -public realm . While Facebook took precautions to protect its members from predatory users and encouraged them t o report any suspicious activities, it stopped short of censoring them or placing restrictions on anything it regarded as their ability to express themselves. Accel partner Breyer regarded the issue of privacy at Facebook as akin to the same at eBay in it s early stages: 1 RenRen was founded by Stanford GSB MBA Joe Chen (‟99). Facebook in 2011 E -406 p. 5 We certainly spend a lot of time thinking about what are the privacy issues… Medium and long term, perhaps the closest model out there would be how eBay had to make some fundamental decisions along the way relative to the democratization, if you will, of their user base. What constituted an appropriate level of privacy was not easy to define. Like the U.S. government, Facebook was scrupulous to steer clear of intervening in „citizen‟ self expression. However, its policy was also to keep it s college and high school networks discrete – a move that drew controversy when college users realized they could not view any high school profiles without first being confirmed “Friends .”xvi Facebook‟s FAQ page at the time noted : The high school and colleg e networks are completely separate. This means that features like search, messaging, poking, and inviting people to be friends are restricted to the network you use. This is primarily for security reasons, but also because many people prefer it this way. User Revolt In September 2006, Facebook inadvertently challenged user expectations of privacy with the launc h of “News Feed” and “Mini Feed. ” Before the launch, users had to visit their friends‟ individual profile pages to see a log of their activity on t he site . Afterwards, t he two features harvested user activity on Facebook and added them to an RSS -like queue to the user‟s friends. News F eed was set as all users‟ homepage after log in ( Exhibit 2 : Sample News Feed). User response to the new feeds was str ongly negative. For example : You went a bit too far this time, Facebook. Very few of us want everyone automatically knowing what we update. We want to feel just a LITTLE bit of privacy, even if it is Facebook. News Feed is just too creepy, too stalker -esq ue, and a feature that has to go. Some Facebook users began to organize a boycott of the site on September 12, 2006. xvii After several misdirected attempts to quell angry users , Facebook introduced modifications to News Feed and Mini Feed that gave them mor e control over what would go into the feeds and who would be allowed to see them. In addition, Facebook introduced new privacy controls . These included the ability to block certain users from accessing one‟s profile, the option of restricting directory sea rches from returning one‟s profile o r picture, and a range of user controls for who or which networks would be allowed to see various parts of one‟s profile. Then, on September 26, 2006, Facebook announced it was open to the public at large . Investments and Purchase Offers In April 2006, Facebook had raised $27.5 million in a round of financing led by Greylock Partners and Meritech Capital Partners. The deal valued Facebook at $550 million. Shortly Facebook in 2011 E -406 p. 6 thereafter, Yahoo! offered to buy a majority stake in Fa cebook for $1 billion cash, based on a $2 billion valuation. Facebook rejected this offer and announced in December that Facebook was not for sale. As Zuckerberg explained in an interview: We are not necessarily focused on what the exit is going to be – whether it‟s selling the company or an IPO or when that‟s going to be. But we obviously think that there‟s a lot of potential to keep growing. xviii 2007 -2008: A STREAM OF NEW FEATURES Resolved to grow the business organically, Facebook hired new employees – esp ecially programmers (“developers”) – at a brisk pace. At 300 employees in November 2007, it was said to be targeting roughly 700 by the end of 2008. xix Google was a frequent target of Facebook‟s recruiting efforts. As reported in TechCrunch: Facebook has al ready claimed YouTube CFO Gideon Yu, e -commerce p roduct lead Benjamin Ling and GDrive developer Justin Rosenstein. But e x-Googler s inside Facebook are saying that the problem goes further than a few high profile exits caused by vesting stock. Facebook just seems a hell of a lot “sexier” than Google. A steady stream of Google employees is making the switch to Facebook, and competition for top college grads is fierce as well. Senior VPs at Google have dubbed it “the Facebook problem” according to a number of sources. At least ten “top performers” have made the switch over the last two months. Ex -Googler s expect to continue seeing at least two to four more leave for Facebook each month. That doesn‟t sound like much, but Facebook is targeting the crea m of the c rop. The best Googler s are being actively recruited, and many are leaving. Powered by its growing team of talented developers , Facebook laun ched a number of new features during 2006 and 2007. These included :  Social Bookmarking (October 2006): allowed use rs to share items of interest from within Facebook or across the Internet with friends or post them to their profiles.  m.facebook.com (January 2007): Facebook optimized for mobile phones. Users could upload photos and notes to Facebook and receive message from Facebook using SMS.  Virtual Gifts (February 2007): a small icon constituting a gift could be given and received among Facebook users and posted to user profiles. The first gift was free; subsequent gifts cost $1 each. Proceeds were donated to charity.  Flyers Pro (September 2007): an advertising market allowing advertisers to stipulate the maximum price they would pay for each time a user clicked on their ad. Using Facebook‟s knowledge of users‟ gender, age, location, political views, relationship statu s, education status, workplace, and key words, the ads could be finely targeted to relevant users.  Social Ads (November 2007): an advertising platform . Brands and businesses could create profile pages akin to user profile pages. Called “Pages,” these profi les contained information like the company location, website, hours of operation, members, and the like. Facebook in 2011 E -406 p. 7  Facebook Chat (April 2008): instant messenger for Facebook friends.  Mini Feed extension (April 2008): users could import updates from other web service s like Flickr, Deli.cio.us, Digg, Picasa, and Yelp into their profiles.  People You May Know (April 2008): allowed users to connect with additional users that Facebook‟s algorithm suggested.  Facebook Connect (May 2008): enabled users to login to third -part y websites using their Facebook credentials and allow them to access their profile information. When users activated feature with a third -party site, the third -party could access as much user data as Facebook could access. xx  Facebook Beta (July 2008): a new graphic user interface for Facebook. Users were initially invited to opt in to the new look, which integrated Mini Feed with the user‟s profile Wall, among other attempts to create a less cluttered look and feel. F8 and t he Social Graph In addition to b uilding new features, Facebook launched a platform 2 called F8 in May 2007 for developers to build applications that could run within the site. F8 allowed third -party developers to create applications that users could then add to the six standard Facebook a pplications: photos, events, groups, gifts, birthdays, and marketplace (also launched in May). Facebook Query Language and Facebook Markup Language were concurrently released to support developers in their efforts. F8 launched with 85 applications from 65 partners including Microsoft and Amazon. By June, 40,000 developers had launched more than 1,500 new Facebook applications. At the unveiling of F8, Zuckerberg spoke o f a concept called the “social graph” as foundational to the Facebook user experience and to the site‟s growth potential. The term “social graph” and a broader school of thought on “social network s” had been popularized in the mid -fifties by social scientists who used nodes and lines to graphically illustrate linkages among people. xxi 3 Zuckerber g described Facebook as the largest social graph in the world . On pace to hit 50 million user s by the end of 2007 , Facebook was adding 100,000 new users a day . The company had a record of all the links among its members, as well as the members‟ links to s ites and places outside of the network. This data constituted Facebook‟s social graph, a highly leverageable asset for Facebook and a tremendous advantage it had vis -à-vis other companies seeking to reach anyone who was in the Facebook network . Simply put, Facebook had more information about people ‟s relationships and preferences than any other business did. Moreover, i t was voluntarily given and highly reliable. At the F8 conference, Facebook invited application developers to tap into its social graph . As Zuckerberg described: 2 A technology platform prescribes a programming language and environment for an operating system or user community. Developers create applications, or other additions or improvements to the pla tform, building out the system‟s functionality or buttressing the community‟s offerings. Facebook was based on the Internet. Over time, it was accessible through the company‟s website, through cell phones, so -called “smart” phones, and even cars preinstall ed with advanced telecommunications tools. 3 This school of thought included the work of sociologist Duncan J. Watts, who researched and wrote about structure and randomness in social networks in his 1999 book Small Worlds (Princeton University Press). Facebook in 2011 E -406 p. 8 The Facebook platform is optimized for building applications in Facebook, and with more value for people to develop on our base than we could do on our own.

People are already building social apps, but they have to reconstruct the s ocial graph all by themselves. We are going to allow developers worldwide to do complete new things. Today social networks are completely closed nets…today we are going to end that. With this [framework] any developer worldwide can build full applications on top of the social grap h inside the Facebook Platform. xxii More Investments, Competitive Responses , and a Privacy Problem It was hard to overestimate the potential value of Facebook ‟s platform. A few months after the launch of F8, Facebook announced a $10 millio n fund for Facebook application developers . Called the fb Fund and administered by the Founders Fund and Accel Partners , the fund would provide $25,000 to $250,000 in grants to aspiring application developers. 4 Successful investors to Facebook in 20 07 and 2008 were Microsoft; Hong Kong billionaire Li Ka -Shing; German brothers Marc, Oliver, and Alexander Samwer; and TriplePoint Capital. Together, they invested a total of $475 million in five transaction s all valuing Facebook at $15 billion (Exhibit 3 : Facebook Valuation September 2004 to January 2011 ). Google , which had competed with Microsoft to invest in Facebook, responded by launching OpenSocial in November 2007 . While not a direct competitor to F8, given their discrete operating environments, Ope nSocial was also an application platform . I nstead of pre scribing its own language, as F8 did, developers could use common programming languages like Javascript and HTML to build social applications on the Internet. Social network companies like Orkut, Sale sforce, LinkedIn, Plaxo, and Friendster all joined the OpenSocial platform . In March 2008, MySpace and Yahoo! joined Google to jointly foste r the development of OpenSocial. Microsoft pointed to Facebook‟s enormous advertising potential to justify its $24 0 million investment. Indeed, at no other time had so many people gathered in one place to willingly divulge valuable marketing information about themselves , and at no other time was this information so accessible, harvestable , and actionable . In June 2008 , Facebook surpassed MySpace to become the largest social network. xxiii The engine driving the growth of Facebook‟s social graph was Beacon, a feature in Facebook‟s Social Ads platform that took Social Bookmarking to a new level . Beacon enabled users to conne ct their profiles to 44 external partner sites. Beacon not only collected data on user activities on those sites, it also published user activity on external sites to News Feeds – all without notifying users or obtaining their permission . Zuckerberg publi cly apologized to Facebook‟s angry users : We‟ve made a lot of mistakes building this feature, but we‟ve made even more with how we‟ve handled them. We simply did a bad job with this release and I 4 In its second year, fbFund offered investments instead of grants. It was quietly discontinued in 2010. Facebook in 2011 E -406 p. 9 apologize for it… We were excited about Beacon because we b elieve a lot of information people want to share isn‟t on Facebook, and if we found the right balance, Beacon would give people an easy and controlled way to share more of that information with their friends. But we missed the right balance… People need to be able to explicitly choose what they share, and they need to be able to turn Beacon off completely if they don‟ t want to use it.xxiv But the damage was done. Facebook eventually shut down Beacon in September 2009 as part of the settlement for a successful class action lawsuit. 5 Then, in December 2009, it announced a new set of privacy standards that defaulted its users to sharing more profile information publicly.

Again, users were aghast: These new “privacy” changes are clearly intended to push Facebook users to publicly share even more information than before. The privacy “transition tool” that guides users through the configuration will “recommend” – preselect by default – the setting to share the content they post to Facebook, such as status messages a nd wall posts, with everyone on the Internet, even though the default privacy level that those users had acce pted previously was limited to “ Your Net works and Friends” on Facebook. On a human level, one can look at the new privacy changes as akin to going to sleep at night with the assumption that the various doors and windows of your house were locked, only to wake up and realize that while you were sleeping, the 'locksmith' decided that you/they were better served if the doors were left unlocked. xxv 2009 -2010: CONTINUED GROWTH AND A SOARING VALUATION Throughout 2009, stories of lawsuits dominated public news reports about Facebook and Zuckerberg. Since 2004, Facebook had been mired in several suits alleging that Zuckerberg was not the ori ginator and founder of the site. The drama surrounding its origins notwithstanding , Facebook continued to rapidly grow its organization. By the end of 2010, there were 2,174 Facebook employees listed on the career networking site LinkedIn. One in five also listed Google as a former employer. xxvi Key hires from Google included former Google VP Sheryl Sandberg, who became Facebook‟s COO in 2009 , and former Google public relations chief Elliot Schrage, who became head of Facebook‟s public relations in 2008. As a response to the f low of its employees to Facebook and other hot startups, Google announced in November 2010 that it would give a 10 percen t raise to all employee s. The Wall Street Journal reported: The pay hike comes as Google ramps up its battle with competitors, especia lly neighboring Facebook Inc., in a fight to secure talented staff… Over the past year 5 See http://www.beaconclasssettlement.com for full details. Facebook in 2011 E -406 p. 10 several former Google executives who helped run the company's advertising business, as well as Google product managers and engineers involved in Chrome and Android softw are projects, joined Facebook. xxvii Facebook‟s growing developer team launch ed a range of new features including :  “Like” button (February 2009): A small “Like” button was added to each item that appeared on News Feed or on users‟ profile pages. Users could c lick that button to indicate a simple endorsement of the item “liked,” and could also add a comment below. xxviii  “Usernames” (June 2009): Users could register for a web address to their profile within Facebook.com containing a username of choice. Instead of bei ng a numbered profile whose page was accessible by going to http://www.facebook.com/profile.php?id=20439234879, users could choose a name and instead be accessible via http://www.facebook.com/ JohnDoe .  “Messages” (November 2010): “Messages” was an integrate d communications platform that combined text messaging, instant messaging, emails, and regular Facebook messages. It reportedly took 15 months to develop. xxix Each new feature tacitly invited speculation about Facebook‟s strategic intent in creating and rele asing it . For example, when “Messages” launched, many wondered if it would ultimately be an “e -mail killer.” When “Usernames” launched, observers speculated that Facebook would soon supplant or replace independent business websites. However, when Facebook announced “Open Graph ” in April 2010 , pundits immediately hailed it as “a clear effort to make Facebook the centerpiece of any individual‟s Web experience.” xxx Launched with 30 external site partners, Open Graph was essentially a revamped Beacon. It allowed users to “Like” external content, such as a news article on CNN.com , and that activity would be treated just as a “Like” was within the Facebook site, i.e. published to users‟ walls and News Feeds . Users‟ friends would also see on the article itself on th e ex ternal site that the user had “L iked” it . Open Graph spanned news articles to e -commerce sites, movie and music sites, sports teams, and more. Cruci ally, Open Graph allowed users to individually opt in to each external site and allow activity on it to be announced back to Facebook. Analysts concluded that as a result of Open Graph: Facebook can essentiall y build a database of anyone‟s “L ikes ” that ranges across all categories. Most importantly, because of Facebook‟s focus on authenticity, the suggesti ons generated by Facebook‟s database are much more likely to be usef ul to a user (and advertisers). xxxi Potential implementations of Open Graph data included:  Suggestions to o ther products and services that a user might also like by using the user‟s “Likes” and comparing them to other users‟ “Likes” and creating a proprietary algorithm much like Pandora did to generate song suggestions to its listeners .  Recommendations of Facebook Pages to a user based on “Likes” from friends . Facebook in 2011 E -406 p. 11  In addition, pointed out one an alyst, Facebook could determine from patterns of News Feeds and “Likes” who among a user‟s friends was most influential to that user and others in the relevant network . A dvertisers could use that information to specifically target a campaign targeted towar d those users .xxxii Open Graph immediately took off as sites throughout the web implemented the “Like” button.

After falling to $9 billion following the market crash of October 2008, Facebook rose to an implied valuation of $35 billion in November 2010, when Accel sold 17 percent of its stake for $516 million. 2011: AN AMBITIOUS OUTLOOK By January 2011, Facebook comprised some 600 million users around the world xxxiii (Exhibit 4: Average User Facts and Figures ). It attained a valuation of $50 b illion in a $500 milli on investment from Goldman Sachs and Russian investment group Digital Sky Technologies . Amid Facebook‟s rapid growth in services and features, it became difficult to describe the business, and where its value came from. According to Wikipedia: Facebook i s a social networking service and website launched in February 2004, operated and priv ately owned by Facebook, Inc. Users may create a personal profile, add other users as friends, and exchange messages, including automatic notifications when they update t heir profile. Additionally, users may join common interest user groups, organized by workplace, school or col lege, or other characteristics. The name of the service stems from the colloquial name for the book given to students at the start of the academic year by university administrations in the United States to help students get to know each other better. Facebook allows anyone who declares themselves to be at least 13 years old to become a registered user of the website … According to Social Media Today, in April 2010 an estimated 41.6% of the U.S. popula tion had a Facebook account. xxxiv While Wikipedia‟s description was basically right, many felt that Facebook was more than a social network. One mobile application company cited the variety and range of excha nges that occurred on the site and th rough its mobile access points , and took to calling it a “communication platform.” xxxv Facebook COO Sheryl Sandberg went as far as to position her employer as a “core” of commercial and social activity. “We think every ind ustry in going to be rebuilt around social engagement, ” she declared in an interview .xxxvi Indeed, the Wall Street Journal reported that by February 2011, Facebook‟s Open Graph included “s ome 2.5 million websites ” that had incorporated the “Like” button into their product and media content. xxxvii Dan Rose, Facebook‟s vice president of partnerships and platform marketing, agreed and hinted at the high potential of future growth: “The foundation of a platform is one where people want to Facebook in 2011 E -406 p. 12 build on top because there is equal value exchange.” xxxviii He affirmed his intent to find new industries and businesses as partners to engage in this “value exchange.” Applications One industry that was profoundly disrupted by Facebook was gaming, which dominated the list of most popular applications in Facebook. Less than a year following the launch of the F8 platform, Slide and RockYou! had become the leading app lication developers, occupying six of the top ten app slots. xxxix They created then -popular apps like Super Wall and Top Friends, which had extended standard functionality on Facebook and had been installed by 28 million and 26 million users, respectively. By the end of 2007, there were more than 10,000 Facebook applications . B y mid -2009, Venture Beat declared that Facebook‟s platfo rm developers were on track to “see $500 million in revenue” that year , mostly through the sale of virtual goods like poker chips and accoutrement for other social games. xl In 2011 , there were more than 550,000 actively used applications offered on the Fac ebook Platform. T he top ten list was dominated by game apps, particularly those by game developer Zynga, which had raised over $500 million from Google, Kleiner Perkins Caufield & Byers, and others since it started in 2007 .xli Zynga commanded a higher valuat ion than Electronic Arts, the offline game company that had produced Madden NFL and The Sims, among other dominant hits. As analysts noted, “As of January 14, 2011,…of the ten most -popular Facebook applications by Monthly Active Users, seven are games; of which Zynga developed six.” xlii The popularity of gaming apps had the potential to further shift the demographic mix of the Facebook user base , about half of whom were aged 25 and under (see Exhibit 5). Industry surveys revealed : [W]omen in their 50s were t he most common demographic for social games, [with] the three most common age groups [being] people in their 50s (22%), 30s (21%), and 40s (20%). The number of gamers 60 and older (16%) is almost three times greater than the number of gamers 21 years old o r younger (6%). xliii While much of the developer energy around Facebook apps was centered around gaming, Sandberg thought that Facebook would have a similar impact as a platform for other businesses:

“[Like gaming,] news, health, finance, shopping and commerc e – we think similarly, all of these things will be rebuilt by companies that work with us to put social at the core.” xliv Such grand proclamations triggered media predictions that “Facebook is likely to tread on more toes as it builds out [its] platform.” xlv The question was: How did Facebook intend to penetrate new industries, and on whose toes would it inevitably tread? Online marketing proved to be an early battleground. Online Marketing Facebook in 2011 E -406 p. 13 In February 2011, The Wall Street Journal reported : In just two yea rs, Facebook‟s share of online display ads has surged to 13.6 percent from 2.9 percent of the U.S. market, which reached $8.88 billion in 2010. Facebook‟s growth comes at the expense of companies such as Yahoo and AOL Inc., and the site is also likely taki ng ad money away from traditional media like newspapers and TV. Yahoo has stopped trying to compete directly with the social network and instead integrates Facebook features into its sites, hoping to halt a slide in the time its users spend on Yahoo each month. Myspace, which like Yahoo has struck some partnerships with Facebook, declined to comment… Jeff Levick, the president of AOL advertising, said he viewed the rise of Facebook as „complementary‟ because the companies are „running two very, very differ ent businesses.‟ …Facebook likely had revenue of $1.9 billion to $2 billion [in 2010], mostly in advertising. xlvi Unlike traditional web -based advertisements, a ds shown to a user in Facebook could be accompanied by a social endorsement by a friend of the use r if that friend had previously clicked a button labeled “Become a Fan.” Similar to the “Like” button, this endorsement was carried on News Feeds and noted in homepage ads. A white paper by Facebook and Nielsen demonstrated the power of these new, social ads. It stated that without a soci al endorsement, ad recall for an ad within the Facebook homepage was 10 percent and purchase intent, just 2 percent. By contrast, homepage ads that referenced user friends who had become fans of or “liked” a company or pro duct drove recall to 16 percent and quadrupled purchase intent . And when users saw their friends‟ “L ikes” or fan -dom appear in News Feeds, ad recall rose to a whopping 33 percent, while purchase intent jumped to 15 percent. xlvii Besides an increase in adverti sing effectiveness, a benefit of Facebook as an advertising vehicle was the range of tools Facebook made available to advertisers: xlviii  Ways to offer free samples to customers, something ketchup maker Heinz has used.  The ability to attract the attention of sm artphone users making local check -ins. Clothing retailer The Gap gave away 10,000 pairs of jeans to the first 10,000 customers to use the Facebook local check -in service . Mazda sold 100 cars with a 20 -percent -off offer at five U.K. auto dealerships.  The ab ility to build e -commerce sites into Facebook pages. Max Factor didn‟t want to lose visitors to its Facebook page to another site when customers were ready to buy something, s o a partnership with Amazon let customers buy products without leaving.  „Reach bl ock‟ ads that change as many as five times in a 24 -hour period to send a sequence of ad messages to Facebook users.  Surveys that let companies try to engage customers in company decisions. VitaminWater used voting, among other mecha nisms, to generate 1.3 m illion connections with possible customers during its “find a new flavor” marketing campaign. Facebook in 2011 E -406 p. 14  Applications built atop Facebook‟s interface let companies create custom -made interactive programs. Local advertisers in Facebook could use two new products just for them: “Places ,” which competed directly with the start -up foursquare, allowed users to share with Facebook friends their location when they were at businesses or other public places. “Places” enabled Facebook to introduce “Deals,” which competed with group coupon giant Groupon, offering users discounts and other promotions based on their locations .xlix In May 2011, news outlets reported that Facebook had captured nearly a third of the U.S. online display advertising market in Q1 of 2011. It was followed by Yahoo! with about a tenth of the market, and Microsoft with just under a twentieth. AOL and Google had smaller shares. l Payment Processing via Facebook Credits Facebook planned its foray into payments with the launch of its proprietary currency, which it called “Credits.” Starting in June 2011 , Facebook mandated the use of “Credits” to process transactions that took place within its applications, including games like those offered by Zynga. li Facebook would assess a 30 percent fee on each transaction , a rate previously set by Apple for in-application transactions that took place within its platform. lii According to analysts, the logic behind “Credits” was that: [I]t is much easier for a consumer to purchase a large balance in virtual currency and make ma ny small purchases using the virtual currency than to make multiple small purchases using a traditional method of payment, like a credit card.

Essentially, virtual currencies reduce the purchasing friction between the consumer and the application.” liii They projected that “Credits” would be a big source of revenue: Facebook credits will likely become a lucrative business for Facebook, and there is potential over the longer term to move the service off Facebook, such as e - commerce payments (like PayPal), or e ven real -world payments via mobile devices (lik e a credit card, except near -field -communication via mobile phone is the method in which account information is transmitted to a retailer). liv The promise of “Credits” as a revenue driver led the Wall Street Jo urnal to speculate that: Facebook could later extend its Credits system to other areas of commerce, including physical goods, potentially making it a competitor to PayPal and Amazon.com Inc… PayPal President Scott Thompson plays down any rivalry with Face book… „Payments is really, really hard to do,‟ he said. lv Facebook in 2011 E -406 p. 15 RISKS Many celebrated the social networking giant‟s prowess across industries and foresaw sempiternal dominance for Facebook. “ It‟ s basically Facebook‟s to lose,” said Zynga CEO Mark Pincus .lvi Others cautioned against such exuberance . The Economist warned : Not so long ago, exactly the same thing might have been said of MySpace. The site was riding high when News Corp bought it for $580 million in 2005. But a few years later it was going downhill. Som e see this as a sign that large social networks are destined to disintegrate when they become too big. lvii While nobody knew for certain what Facebook‟s ultimate path would be, there were a t least six known risks to Facebook ‟s future growth : Privacy and Sec urity A Pew survey revealed that 60 percent of users restricted access to their Facebook profiles, some very tightly to a small group of friends. Facebook clearly had an interest in protecting users and potential users, making them feel safe to use the si te as intended, i.e. to share information about themselves. However, said the Economist , this posed a risk to Facebook‟s revenue potential : In order to attract users, sites need to offer ways for members to restrict the information about themselves that g ets shared with a wider public. Without effective controls people would be reluctant to sign up. But if a site allows members to keep too much of their information private, there will be less traffic that can be turned into profit through advertising and v arious other means, so the network‟s business will suffer. lviii To what extent and in what ways could Facebook push its users to be more open? Were its users essentially a captive audience, or was there a point at which they would disengage or even quit, as o ne user did , publis hing his reasons to his syndicated blog (see Exhibit 6 : “Top Ten Reasons You Should Quit Facebook”): I often hear people talking about Facebook as though they were some sort of monopoly or public trust. Well, they aren't. They owe us no thing. They can do whatever they want, within the bounds of the laws. (And keep in mind, even those criteria are pretty murky when it comes to social networking.) But that doesn't mean we have to actually put up with them. Furthermore, their long -term succ ess is by no means guaranteed - have we all forgot ten MySpace? Oh, right, we have … Facebook isn't the only game in town. I don't like their application nor how they do business . I've made my choice to use other providers. And so can you. At the time of wri ting, the post had 850,000 page views. A closely related issue to user privacy was personal and corporate security . Security b reaches leading to the compromise of profile data was a widespread concern as more people accessed Facebook in 2011 E -406 p. 16 secure sites on unsecured publ ic airwaves. In addition, experts warned of the unintentional disclosure of private and organizational information about corporations. For example: By analyzing LinkedIn profiles and monitoring the information feeds from Facebook and Twitter accounts, [se curity firm] Cyberoam uncover ed things such as the companies‟ hierarchy, decision makers, employee morale, intellectual property, and financial health, all of which could be useful to competitors. Of the companies examined, 40 percent disclosed confidentia l information. lix Mobile Facebook was most often accessed through its full site, through computers with full -sized screens. However, a growing trend was to use it on the go, through mobile phones and smart phones with small screens and site limited functio nality. Accessing social -networking sites, particularly Facebook, was among the fastest - growing activities over the past year among cell phone users, comScore said… Nearly 58 millio n people n the Unites States wen t onto a social -networking site using a ce ll phone at least once in December, up 56 percent from the same time in 2009, comScore said in its 2010 Mobile Year in Review. Most of that growth was led by Facebook, which reached 90 percent of U.S. social media users and grew more than 120 percent over the past year. lx This trend posed a challenge to Facebook‟s ability to collect revenue, as advertisements were difficult to place on Facebook‟s mobile application without compromising the user experience.

Was a paid Facebook mobile app the solution? Or wou ld new ways of monetizing the user – for example location -based technologies available on mobile phones – provide opportunities for other efforts that too k the place of traditional ads? Or would mobile networks eventually supplant the Facebook network? As one press report projected: [The] next big wave of social networking will revolve around mobile phones and the places that people take them to. A new crop of networking firms has already sprung up to capitalize on the opportunities offered by mobile phon es. That opens up the prospect of even broader changes in the social -networking landscape. lxi Forced IPO Another risk pertained to Facebook‟s ability to stay a private company. I ts growing number of private owners could trigger a United States Securities a nd Exchange Commission (SEC) rule that required private companies with 500 or more owners or ownership entities to abide by the accounting and disclosure practices required of public companies by the Sarbanes -Oxley Act of 2002 . Already, there was an SEC pr obe underway following Goldman Sachs and Digital Sky Technologies‟ $500 million investment in January 2011 .lxii Facebook in 2011 E -406 p. 17 The Economist noted: “Faced with such obligations, most firms seek a public listing. This rule was one of the reasons that Google ultimately decid ed to go public in 2004.” lxiii Would Facebook need to have an initial public offering (IPO) in the near future? Organization While it remained a popular recruiter , Facebook itself had lost some of its own key hires. It suffered a natural loss of traction wit h some young employees as they grew out of late adolescence or decided to pursue other interests (sometimes both). However, the reasons for employee departures were diverse, as online tech magazine Gigaom noted: Many Facebook employees started at the comp any just out of college and have grown up together. [Some] left college to join . Others are getting engaged and married (sometimes to each other) and starting to have kids. They‟re far removed from the early days of Facebook Proms and a company -sponsored T ahoe party cabin. One frustration of early employees is that they‟ve had limited upward mo bility as Facebook has matured … Another factor in the recent exodus could be that Facebook offered employees the ability to cash out up to $1 million worth of stock o ptions with the help of investor Digital Sky Technologies, in part to alleviate pressure toward an IPO. lxiv International User Growth As Facebook gained dominance in the domestic U.S. market, it needed more international users to keep growing its user base, much as it had turned to high schools to add to its maturing collegiate user growth rate in 2005. 6 Facebook had initially relied solely on some 300,000 users who volunteered their time to build out versions of the site in other languages. lxv By 2008, Facebo ok maintain ed a small but growing team of post -MBA country marketing managers whose role it was to drum up interest in and signups to Facebook in whatever ways possible . This was an easier pursuit in countries where social networking had not caught on the way it had in the United States. In others with a dominant player or regulatory pressure , growth was more challenging :  In Spain, Tuenti 7 held a dominant position since 2006 and was positioned in much the same way that Facebook was in the United States.  Facebook started a Chinese -language site in 2008. The following year, Facebook was deemed noncompliant to censorship rules by the Chinese government for Internet -based media companies. It was blocked by the so -called “Great Firewall of China,” resulting in 6 As of February 2011, MySpace was put on sale by News Corp. After reaching a peak valuation of $12 billion in 2007, it was estimated to be worth $50 million to $200 million (Source: Reuters) . It was unclear how many active users MySpace had, although some estimates put the figure at about 43 million, or virtually unchanged from 2007 . 7 Tuenti was co-founded by a team that included Stanford GSB MBA Adeyemi de Ajao (‟10). Facebook in 2011 E -406 p. 18 a dramatic decline in its user base: one million to 14,000. Renren , started in 2005, role to prominence and planned a U.S. IPO in 2011. It had 160 million users. lxvi  In 2010, Facebook met a similar fat e in Vietnam as it had in China. lxvii Still, Facebook showed promise , even in countries that had a dominant incumbent. In India, for example, Facebook overtook Google‟s Orkut in July 2010 and strove to capture the country‟s 1.14 billion people lxviii (see top ten international Facebook markets in Exhibit 4 ). Certainly Fa cebook showed no sign s of shying away from a good growth challenge. It was rumored that Facebook entered new countries in order of advertising market size rather than based on the presence or absence of a dominant incumbent. Some including the Go ogle head of display ads estimated the size of the global display ad market in 2011 to be north of $20 billion. lxix The Weight of Expectation A final risk was the weight of expectation. By February, share sales taking place on secondary exchanges like SecondMarket placed Facebook ‟s implied valuation at $84 billion from the $50 billion valuation of Goldman and Digital Sky Technologies deal. “This marketplace is like the early days of the „junk‟ -bond market,” remarked one analyst. lxx Online venture capital journal Ventur eBeat allowed that Facebook enjoyed a high valuation but wondered whether the valuation would be borne out over time: Using historical numbers and comparing them to as „like‟ or similar companies the valuations are very rich. But their growth rates are as high as the expectations. While lofty valuations leave them little room to underexecute, some of them will exceed these expectations. (Remember the naysayers who said Google‟s valuation was too high at the IPO?) Nothing is certain and hopping on yesterday ‟s trend or today‟s overpriced t rend is dangerous. lxxi Were investors to Facebook simply risk -hungry, or did they know something that the public market did not? Facebook in 2011 E -406 p. 19 Exhibit 1: Sample Facebook Profile (2004) Source: Mike Harkey and William P. Barnett. “Faceb ook,” Stanford GSB Case E -220 . May 3, 2006. 17. Facebook in 2011 E -406 p. 20 Exhibit 2: Sample News Feed and Mini Feed Source: Ziad Mokhtar, G. Tavridis, and W. P. Barnett. “Facebook,” Stanford GSB Case E -220 . May 22, 2008 (Revised). 20. Facebook in 2011 E -406 p. 21 Exhibit 3: Facebook Valuation (September 2 004 -January 2011) Source: Alexia Tsotsis. “The Rise of Facebook‟s Valuation from 2004 -2011,” TechCrunch (accessed March 31, 2011). January 10, 2011. Facebook in 2011 E -406 p. 22 Exhibit 4: Facebook.com Figu res and Facts  Facebook generates 770 billion page views per month  More than 30 billion pieces of content are shared each day  200 million people access Facebook via a mobile device each day  Users than access Facebook on mobile devices are twice as active o n Facebook compared to non -mobile users  Average user o has 130 friends on the site o sends 8 friend requests per month o spends an average 15 hours and 33 minutes on Facebook per month o visits the site 40 times per month o spends an 23 minutes (23:20 to be precise) on each visit o is connected to 80 community pages, groups and events o creates 90 pieces of content each month  Countries with the most Facebook users as of May 2011: 1. United States 154,828,140 2. Indonesia 36,479,400 3. United Kingdom 29,781,920 4. Turkey 28,309,920 5. India 25,028,420 6. Mexico 23,757,820 7. Philippines 23,209,840 8. France 21,909,300 9. Italy 19,180,900 10. Germany 18,264,560 Source: facebook. com, pingdom.com via http://socialmediatoday.com/kenburbary/276356/facebook -demographics - revisited -2011 -statistics (accessed April 22, 2011). Also, http://www.checkfacebook.com/ (accessed May 4, 2011). Facebook in 2011 E -406 p. 23 Exhibit 5 : Facebook Users by Gender and Age Sou rce: Ken Burbary. “Facebook Demographics Revisited – 2011 Statistics,” SocialMediaToday (accessed March 31, 2011). March 7, 2011. Facebook in 2011 E -406 p. 24 Exhibit 6: “Top Ten Reasons Y ou Should Quit Facebook” 10. Facebook's Terms Of Service are completely one -sided Let's start with the basics. Facebook's Terms Of Service state that not only do they own your data (section 2.1), but if you don't keep it up to date and accurate (section 4.6), they can terminate your account (section 14). You could argue that the terms are just protecting Facebook's interests, and are not in practice enforced, but in the context of their other activities, this defense is pretty weak. As you'll see, there's no reason to give them the benefit of the doubt. Essentially, they see their customers as unpaid employees for crowd -sourcing ad -targeting data. 9. Facebook's CEO has a documented history of unethical behavior From the very beginning of Facebook's exist ence, there are questions about Zuckerberg's ethics. According to BusinessInsider.com, he used Facebook user data to guess email passwords and read personal email in order to discredit his rivals. These allegations, albeit unproven and somewhat dated, none theless raise troubling questions about the ethics of the CEO of the world's largest social network. They're particularly compelling given that Facebook chose to fork over $65M to settle a related lawsuit alleging that Zuckerberg had actually stolen the id ea for Facebook. 8. Facebook has flat out declared war on privacy Founder and CEO of Facebook, in defense of Facebook's privacy changes last January: "People have really gotten comfortable not only sharing more information and different kinds, but more o penly and with more people. That social norm is just something that has evolved over time." More recently, in introducing the Open Graph API: "...

the default is now social." Essentially, this means Facebook not only wants to know everything about you, and own that data, but to make it available to everybody. Which would not, by itself, necessarily be unethical, except that ... 7. Facebook is pulling a classic bait -and -switch At the same time that they're telling developers how to access your data with ne w APIs, they are relatively quiet about explaining the implications of that to members. What this amounts to is a bait -and -switch. Facebook gets you to share information that you might not otherwise share, and then they make it publicly available. Since th ey are in the business of monetizing information about you for advertising purposes, this amounts to tricking their users into giving advertisers information about themselves. This is why Facebook is so much worse than Twitter in this regard:

Twitter has m ade only the simplest (and thus, more credible) privacy claims and their customers know up front that all their tweets are public. It's also why the FTC is getting involved, and people are suing them (and winning). 6. Facebook is a bully When Pete Warden demonstrated just how this bait -and -switch works (by crawling all the data that Facebook's privacy settings changes had inadvertently made public) they sued him. Keep in mind, this happened just before they announced the Open Graph API and stated that the "default is now social." So why sue an independent software developer and fledgling entrepreneur for making data publicly available when you're actually already planning to do that yourself? Their real agenda is pretty clear: they don't want their members hip to know how much data is really available. It's one thing to talk to developers about how great all this sharing is going to be; quite another to actually see what that means in the form of files anyone can download and load into MatLab. 5. Even your private data is shared with applications At this point, all your data is shared with applications that you install. Which means now you're not only trusting Facebook, but the application developers, too, many of whom are too small to worry much about keep ing your data secure. And some of whom might be even more ethically challenged than Facebook. In practice, what this means is that all your data - all of it - must be effectively considered public, unless you simply never use any Facebook Facebook in 2011 E -406 p. 25 applications at a ll. Coupled with the OpenGraph API, you are no longer trusting Facebook, but the Facebook ecosystem. 4. Facebook is not technically competent enough to be trusted Even if we weren't talking about ethical issues here, I can't trust Facebook's technical co mpetence to make sure my data isn't hijacked. For example, their recent introduction of their "Like" button makes it rather easy for spammers to gain access to my feed and spam my social network. Or how about this gem for harvesting profile data? These are just the latest of a series of Keystone Kops mistakes, such as accidentally making users' profiles completely public, or the cross -site scripting hole that took them over two weeks to fix. They either don't care too much about your privacy or don't really have very good engineers, or perhaps both. 3. Facebook makes it incredibly difficult to truly delete your account It's one thing to make data public or even mislead users about doing so; but where I really draw the line is that, once you decide you've h ad enough, it's pretty tricky to really delete your account. They make no promises about deleting your data and every application you've used may keep it as well. On top of that, account deletion is incredibly (and intentionally) confusing. When you go to your account settings, you're given an option to deactivate your account, which turns out not to be the same thing as deleting it. Deactivating means you can still be tagged in photos and be spammed by Facebook (you actually have to opt out of getting emai ls as part of the deactivation, an incredibly easy detail to overlook, since you think you're deleting your account). Finally, the moment you log back in, you're back like nothing ever happened! In fact, it's really not much different from not logging in f or awhile. To actually delete your account, you have to find a link buried in the on -line help (by "buried" I mean it takes five clicks to get there). Or you can just click here. Basically, Facebook is trying to trick their users into allowing them to keep their data even after they've "deleted" their account. 2. Facebook doesn't (really) support the Open Web The so -called Open Graph API is named so as to disguise its fundamentally closed nature. It's bad enough that the idea here is that we all pitch in a nd make it easier than ever to help Facebook collect more data about you. It's bad enough that most consumers will have no idea that this data is basically public. It's bad enough that they claim to own this data and are aiming to be the one source for acc essing it. But then they are disingenuous enough to call it "open," when, in fact, it is completely proprietary to Facebook. You can't use this feature unless you're on Facebook.

A truly open implementation would work with whichever social network we prefe r, and it would look something like OpenLike. Similarly, they implement just enough of OpenID to claim they support it, while aggressively promoting a proprietary alternative, Facebook Connect. 1. The Facebook application itself sucks Between the farms a nd the mafia wars and the "top news" (which always guesses wrong - is that configurable somehow?) and the myriad privacy settings and the annoying ads (with all that data about me, the best they can apparently do is promote dating sites, because, uh, I'm s ingle) and the thousands upon thousands of crappy applications, Facebook is almost completely useless to me at this point. Yes, I could probably customize it better, but the navigation is ridiculous, so I don't bother. (And, yet, somehow, I can't even chan ge colors or apply themes or do anything to make my page look personalized.) Let's not even get into how slowly your feed page loads. Basically, at this point, Facebook is more annoying than anything else. Facebook is clearly determined to add every featu re of every competing social network in an attempt to take over the Web (this is a never -ending quest that goes back to AOL and those damn CDs that were practically falling out of the sky). While Twitter isn't the most usable thing in the world, at least t hey've tried to stay focused and aren't trying to be everything to everyone. Source: Dan Yoder. “Top Ten Reasons You Should Quit Facebook,” Gizmodo < http://gizmodo.com/#!5530178/top -ten -reasons -you -should -quit -facebook > (accessed May 1, 2011). May 3, 201 0. Facebook in 2011 E -406 p. 26 i “The Social Network,” Chasing The Frog (accessed April 22, 2011). ii Ziad Mokhtar, G. Tavridis, and W. P. Barnett. “Faceboo k,” Stanford GSB Case E -220 . May 22, 2008 (Revised). 3. iii Ann Grimes, “Powerful Connections,” The Wall Street Journal. October 30, 2003. iv Gary Rivlin. “How Friendster Lost a Chance for a Jackpot,” New York Times (accessed December 10, 2009). October 15, 2006. v Matt Meyerhoff. “Intermix, Unit Attract Funding,” Los Angeles Business Journal . December 13, 2004. vi Hyon B. Shin. “School Enrollment – Social and Economic Characte ristics of Students,” U.S. Census Bureau. (accessed December 10, 2009). October 2003. vii Gary Rivlin. “Billion -Dollar Baby Dot -Coms? Uh -oh, Not Again,” New York Times (accessed May 4, 2011). September 2, 2005. viii “Facebook goes corporate,” CNET News. April 28, 2006. ix “Debunking the MySpace Myth of 100 million active users,” ForeverGeek < http://www.forevergeek.com/2006/09/debunking_the_myspace_myth_ of_100_million_users/ > (accessed April 25, 2011). September 27, 2006. x Yuki Noguchi. “In Teens‟ Web World, MySpace is So Last Year,” Washington Post < http://www.washingtonpost.com/wp -dyn/content/article/2006/10/28/AR2006102800803.html > (accessed May 4, 2011). October 26, 2006. xi Anthony Bruno. “Facebook is the (online) place,” Billboard . July 2, 2005. xii “Friendster Poised for an Exciting 2007,” Friendster Press Release . (accessed April 25, 2011). Jan uary 7, 2007. xiii “Twitter Raises Over $35 million in Series C,” Marketing Vox (accessed March 23, 2011). February 19, 2009. xiv “Bebo,” CrunchBase (accessed April 29, 2011). xv Om Malik. “Will Cyworld Stop MySpace Juggernaut?,” gigaom < http://gigaom.com/2006/04/16/will -cyworld - stop -myspace -juggernaut/ > (accessed April 22, 2011). April 16, 2006. xvi Taryn Filomio. “Facebook: One Year Later,” The Quin nipiac Chronicle (accessed May 4, 2011). December 7, 2005. xvii “Facebook Revolt: Not all Friends are Equal,” Business Week . September 6, 2006. xviii Brian Sullivan and J. Thaw. “Facebook Courted By Ya hoo!, Won‟t Sell, Director Says,” Bloomberg.com (accessed December 10, 2009).

December 16, 2006. xix Nick Gonzalez. “Facebook Stealing Googlers At An Alarming Rate,” TechCrunch < http://techc runch.com/2007/11/21/facebook -stealing -googlers -at-an-alarming -rate/ > (accessed May 2, 2011). November 21, 2007. xx Om Malik. “Facebook Launches Connect, Finally,” Gigaom (accessed December 1 0, 2009). December 4, 2008. xxi Wikipedia contributors. “Social network,” Wikipedia < http://en.wikipedia.org/wiki/Social_network#History_of_social_network_analysis > (accessed April 22, 2011). xxii Dan Farber. “Facebook‟s Zuckerberg Uncorks the Social Graph,” ZDNet < http://www.zdnet.com/blog/btl/facebooks -zuckerberg -uncorks -the -social -graph/5156 > (accessed April 24, 2011). xxiii Michael Arrington. “Facebook No Longer The Second Largest Social Network,” TechCrunch < http://techcrunch.com/2008/06/12/facebook -no -longe r-the -second -largest -social -network/ > (accessed May 4, 2011). 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