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The Facebook Effect by David Kirkpatrick

This article was inspired by David Kirkpatrick's The Facebook Effect . If you enjoy this article then consider purchasing or borrowing the book.

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Lessons from Facebook

“You can make a dollar off a user today, but if you can get them to invite 10 friends, then you’ll make $11.” - Dustin Moskovitz

“Thefacebook” was founded by Mark Zuckerburg, Dustin Moskovitz, Eduardo Saverin and Chris Hughes in February of 2004. Originally designed for as a social networking site for Harvard students, Thefacebook was named after the scrapbooks, called “facebooks,” used in Harvard’s “Houses.” With its success at Harvard, the new site spread rapidly through Ivy League schools and then throughout the U.S.’s colleges.

A financier offered to buy Thefacebook for $10 million within four months of the site’s launch date. Zuckerburg refused the offer. With over 100,000 users, Thefacebook was quickly growing, and its owners saw the potential in it. Working with Y2M, an ad sales company, their site began to develop even further.

When Saverin was removed from management because he “had not done work he’d said he’d do,” the angered business manager, though still an owner of a stake in the company, froze the site’s bank account. With his family’s help, Zuckerburg spent $85,000 to keep Thefacebook running, while he and Moskovitz dropped out of Harvard and moved to Palo Alto in Silicon Valley to further develop the company.

Meanwhile, three Harvard students filed suit against Zuckerburg, as Thefacebook was allegedly based on the trio’s different site called ConnectU. Settling with the students for an undisclosed amount, Zuckerburg dismissed their claims and moved on. While Zuckerburg and his friends maintained control of their company, they used Accel’s investment of $12.7 million to expand Thefacebook.

By September of 2005, the site was known as Facebook, and one month later, the site had 5 million members. Expanding beyond college, high school students picked up on Facebook. Today, three billion pictures are posted every month on this site, indicating that the photo hosting feature was a wise move on the developers’ part. While Microsoft and Google both wished to buy Facebook, Zuckerburg wouldn’t budge. Giving Microsoft a beneficial ad deal, Facebook Zuckerburg obtained a $240 million investment from the software giant.

While Facebook’s owners wholeheartedly believe in “openness,” privacy remains a concern for many of the site’s older users. Their strategy has worked; however, as a survey in 2009 indicated Facebook was the U.S.’s “10th-most-trusted company.” While the possibility of Facebook developing into a massive surveillance system hasn’t deterred its over 500 million users, Zuckerburg and his fellow owners have stated that they wish for the site to remain an ethical entity.

Facebook’s serves as a lesson to prospective entrepreneurs. While Zuckerburg and company could have sold the company for $10 million, Facebook currently over $1 billion. Believing in a product they knew had unlimited potential, the networking site’s owners overcame practically every challenge that could be thrown at a start-up, and their dedication and hard work has paid off.


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