The Social Network of

Facebook
FACEBOOK, THE WORLD’S LARGEST SOCIAL NETWORK, announced in July
2010 that it had 500 million users around the world. The company has grown at a mete-
oric pace, doubling in size since 2009 and pushing international competitors aside. Its
policies, more than those of any other company, are helping to define standards for pri-
vacy in the Internet age.

T
HE COMPANY, FOUNDED IN 2004 by a
Harvard sophomore, Mark Zuckerberg, began
life catering first to Harvard students and then
to all high school and college students. It has
since evolved into a broadly popular online
destination used by both teenagers and adults
of all ages. In country after country, Facebook
is cementing itself as the leader and often displacing other
social networks, much as it outflanked MySpace in the United
States.
But it has also come to be seen as one of the new titans of the
Internet, challenging even Google with a vision of a web tied
together through personal relationships and recommenda-
tions, rather than by search algorithms. In a major expansion,
Facebook has spread itself across other websites by offering
members the chance to “Like’’ something -- share it with their
network -- without leaving the web page they’re on.
 Facebook
new features or “social applications” on In addition to channeling all e-mails,
Facebook, from games to new music text messages and chats through a sin- Disputed Origins
and photo sharing tools, which had the gle point, Facebook Messages will offer

effect of further turbo-charging activity
on the site.
Facebook Messages is a bold move by
Facebook to expand from a social net-
work into a full-fledged communica-
users what Mr. Zuckerberg called a
“social in-box” that will prioritize mes-
sages from friends and close acquaint-
ances, potentially saving time. The
company faces a number of challenges,
F
acebook’s rise has been marked
by strings of controversies.
Three other Harvard students
maintain that they came up
with the original idea and that Mr.

I
N NOVEMBER 2010, MR.
Zuckerberg introduced Facebook
Messages, a new unified messag-
ing system that allows people to
communicate with one another on the
Web and on mobile phones regardless
of whether they are using e-mail, text
messages or online chat services.
In January, 2011, Facebook raised $500
million from Goldman Sachs and a
Russian investor in a deal that values
the company at $50 billion -- more
than companies like eBay, Yahoo and
Time Warner. The stake by Goldman
Sachs, considered one of Wall Street’s
savviest investors, signals the increas-
ing might of Facebook, which has
already been bearing down on giants
like Google.
Mr. Zuckerberg had sought to keep
close control over the company, spurn
ing a $1 billion offer from Yahoo in
2006 and playing down the idea of a
stock offering. But in the wake of the
Goldman investment, Facebook said
that it will begin reporting its financial
results by April 2012, setting the stage Like other social networks, Facebook
for a likely IPO. allows its users to create a profile page
The company, based in Palo Alto, Calif., and forge online links with friends and
earned $355 million on $1.2 billion in acquaintances. It has distinguished itself
revenue during the first nine months of from rivals, partly by imposing a spartan
2010, according to a document prepared design ethos and limiting how users can
by Goldman for potential investors. That change the appearance of their profile
is up from $220 million in earnings on pages. That has cut down on visual clut-
$770 million in sales in 2009. ter and threats like spam, which plague
rivals. It has decisively outstripped other
Facebook Messages networks that preceded it, like MySpace
and Friendster, becoming what many
is a bold move by analysts see as the “default platform’’
Facebook to expand of a new age of information organized
from a social net- around personal relationships.
work into a full Facebook built its lead not only
through savvy design but rapid deploy-
fledged communica- ment of features that allowed the con-
tions system. It could tent created by users to multiply the
help the company site’s appeal. In May 2007, Facebook
unveiled an initiative called Facebook
chip away even more Platform, inviting third-party software tions system. It could help the company however, like managing spam, getting Zuckerberg, whom they had hired to
at Internet portals makers to create programs for the ser- chip away even more at Internet portals users to change ingrained habits and write code for the site, stole the idea to
like Google, Yahoo, vice and to make money on advertis-
ing alongside them. The announcement
like Google, Yahoo, MSN and AOL,
which have used e-mail as one of their
persuading some to entrust their confi-
dential e-mail to a company whose pri-
create Facebook. Facebook has denied
the allegations. A long-running lawsuit
MSN and AOL stimulated the creation of hundreds of main draws with consumers. vacy practices have often drawn scrutiny. is pending. Another Harvard classmate,

22 Rolling Stone www.rollingstone.com February 13, 2011 February 13, 2011 Rolling Stone www.rollingstone.com 23
 Facebook
Aaron Greenspan, claims that he cre-
ated the underlying architecture for
both companies, but has declined to
enter the legal battle.
A movie about Facebook’s tumultu-
ous origins, “The Social Network,”
offers up what A.O. Scott called “a
creation story for the digital age and
something of a morality tale, one
driven by desire, marked by triumph,
tainted by betrayal and inspired by
the new gospel: the geek shall inherit
24 Rolling Stone www.rollingstone.com
the earth.”
Facebook has strenuously, and Mr.
Zuckerberg more quietly, asserted that
the portrayal of the company’s found-
ing is fiction. And Mr. Zuckerberg
disputed the characterization of him
in the film, though in a New Yorker
magazine profile, he acknowledged
having indulged in a bit of sophomoric
arrogance.
Privacy Concerns
T
he back and forth between
Facebook and its users over
privacy is gaining importance
as the company’s growth con-
tinues unabated. Facebook’s policies,
more than those of any other company,
are helping to define standards for pri-
vacy in the Internet age.
Bowing to pressure over privacy con-
cerns, the company in May 2010
unveiled a set of controls that he said
would help people understand what
they were sharing online, and with
whom.
Facebook’s biggest mistake, Mr. Zuck-
erman said, had been in failing to
notice that as Facebook added new
features and its privacy controls grew
increasingly complicated, those con-
trols became effectively unusable for
many people.
In October 2010, Facebook acknowl-
edged that some applications on
its site, including the popular game
FarmVille, had improperly shared
identifying information about users,
and in some cases their friends, with
advertisers and Web tracking compa-
nies. The company said it was talking
to application developers about how
they handled personal information,
February 13, 2011
and was looking at ways to prevent
this from happening again.
The Goldman Deal
I
n January 2011, Facebook raised
$500 million from Goldman
Sachs and a Russian investor in a
transaction that values the com-
pany at $50 billion.
As part of its deal with Facebook, Gold-
man is expected to raise as much as $1.5
billion from investors for Facebook.
The new money will give Facebook more
firepower to steal away valuable employ-
ees, develop new products and possibly
pursue acquisitions — all without being
a publicly traded company. The invest-
ment may also allow earlier shareholders,
including Facebook employees, to cash
out at least some of their stakes.
The new investment came as the Secu-
February 13, 2011
rities and Exchange Commission has investment criteria. The $450 mil-
begun an inquiry into the increasingly lion investment values the Web com-
hot private market for shares in Internet pany at $50 billion. After Goldman’s
companies, including Facebook, Twit- deal, some industry experts cautioned
ter, the gaming site Zynga and LinkedIn, that Facebook’s growth would need
an online professional networking site. to accelerate rapidly over the next
Some experts suggest the inquiry is couple of years to justify such a steep
focused on whether certain companies price — a risk with many brand-
are improperly using the private market name technology upstarts.
to get around public disclosure require-
ments.
Before Goldman Sachs bought a stake
in Facebook and started offering shares
to wealthy clients, a powerful investment
group within the firm turned down the
chance to buy a piece of the social net-
working site.
The unit’s chief, Richard A. Friedman,
a longtime Goldman partner, decided
the Facebook deal was not suitable for
his clients, in part owing to the high
valuation and to a mismatch with his
Rolling Stone www.rollingstone.com 25