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This document is authorized for use only by Shahliza Halim at Universiti Teknologi Malaysia until January 2015. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860.

CASE: E-468

DATE: 09/01/12

Arar Han (MBA ’09) and William P. Barnett wrote this case as the basis for class discussion rather than to illustrate

either effective or ineffective handling of an administrative situation. Historical details of Facebook are largely

drawn from Stanford GSB Case E-220, “Facebook,” revised May 22, 2008.

Copyright © 2012 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order

copies or request permission to reproduce 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].

FACEBOOK 2012

In 2012, Facebook would go public with a massive market capitalization. Worldwide, the social

network platform could boast a membership of about 1 billion people, many of whom engaged

the website several times a day. Facebook itself had become an icon representing a “social”

approach to internet usage and commerce. But perhaps the most interesting thing about

Facebook was not its size and reach, but the surprising, eventful journey that it had taken over its

first 8 years.

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 school’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.

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 that year, 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

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renting one server. 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 considering its

business potential.

Early Social Networking Sites

When Zuckerberg arrived at Facebook’s rented Palo Alto house in June 2004, there were various

other companies offering internet-based social networking services. Three were notable at the

time:

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 million 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-described “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 programmer 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 other social networking sites in that it grew from college to college,

using a dot-edu e-mail 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 expansion

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 students 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 anyone 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 could 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.

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Facebook Becomes a Business

By the end of the summer 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, cofounder of Napster and Plaxo, as president.

Received $500,000 in seed capital from prominent venture capitalist Peter Thiel.

Also by the summer of 2004, 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: INITIAL GROWTH AND CHALLENGES

Facebook hit 1 million users in December 2004. By May 2005, the site had 2.8 million users at

more than 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, which

invested $12.7 million in a deal valuing 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 audience,vi

with a penetration rate of over 80 percent at each of the colleges it served. But $100 million was

a surprising valuation for a company that had little revenue and served only college students.

Breyer himself said in an interview, “Certainly relative to many 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 2005, 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 high school set.

Although MySpace was already an established player, it took Facebook just seven months to

reach 1 million registered high school users.

In April 2006, Facebook started offering membership to those affiliated with a limited number of

corporations.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 e-mail

addresses. Later the same year, Facebook started expanding internationally (in English) by

offering memberships to schools like the Indian Institutes of Technology and select high schools

in Israel.

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Early 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 quarter 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 steady 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 social networking site in Brazil and had

launched in India, to promising results.

In addition to the growth of the big four social networking sites, up through 2006 the social

networking industry saw aggressive investment in technology applications:

Blogger was started 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 initial boom in social networking businesses was a worldwide phenomenon. Beyond Orkut

in Brazil and India, Facebook lookalike Bebo was founded in San Francisco in 2005 and was

gaining a strong position in the United Kingdom, Ireland, and New Zealand.xiv

“Chinese

Facebook” RenRen1 also launched in 2005. Some, like South Korea’s Cyworld, predated

Facebook, and had already achieved a penetration rate of 25 percent of the entire South Korean

market, population 50 million.xv

Initial Privacy Concerns

Limiting its user base to college-aged students with dot-edu email addresses 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, opening up membership to others outside of the

dot-edu network 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 newspapers claimed that prospective employers were using Facebook and other

social networks to screen job candidates.

1 RenRen was founded by Stanford GSB MBA Joe Chen (’99).

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High school students feared that college admissions 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 parents, 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 to 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 question of privacy at Facebook as akin to the same issue at

eBay in its early stages:

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 its 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 college 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.

Initial User Revolt

In September 2006, Facebook inadvertently challenged user expectations of privacy with the

launch 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 the site. Afterwards, the two features

harvested user activity on Facebook and added them to an RSS-like queue to the user’s friends.

News Feed was set as all users’ homepage after login.

User response to the new feeds was strongly 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-esque,

and a feature that has to go.

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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 more 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 searches from returning one’s profile or 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

thereafter, Yahoo! offered to buy a majority stake in Facebook 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―especially

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 already claimed YouTube CFO Gideon Yu, e-commerce product

lead Benjamin Ling and GDrive developer Justin Rosenstein. But ex-Googlers

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-Googlers 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 cream of the crop. The best Googlers are being actively recruited,

and many are leaving.

Powered by its growing team of talented developers, Facebook launched a number of new

features during this period. These included:

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Social Bookmarking (October 2006): allowed users 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 messages 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 status, 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 profiles contained information

like the company location, website, hours of operation, members, and the like.

Facebook Chat (April 2008): instant messenger for Facebook friends.

Mini Feed extension (April 2008): users could import updates from other web services 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-party websites using their

Facebook credentials and to access their profile information. When users activated features

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 the Social Graph

In addition to building new features, Facebook launched a platform2 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 applications: 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 of 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 networks” had been popularized in the mid-fifties by social

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 platform, 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

preinstalled with advanced telecommunications tools.

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scientists who used nodes and lines to graphically illustrate linkages among people.xxi

,3

Zuckerberg described Facebook as the largest social graph in the world.

On pace to hit 50 million users 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 sites and places outside of the network. These data constituted Facebook’s social graph, a

valuable asset for Facebook and a tremendous advantage over 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 did any other business. Moreover, it was voluntarily

given and highly reliable.

At the F8 conference, Facebook invited application developers to tap into its social graph. As

Zuckerberg described:

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 social

graph all by themselves. We are going to allow developers worldwide to do

completely 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 graph 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 million fund for Facebook application developers.

Called the fbFund 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

2007 and 2008 saw the addition of some notable investors in Facebook: 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 transactions all valuing Facebook

at $15 billion (Exhibit 1: Facebook Valuations Pre-IPO).

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, OpenSocial was also an application platform. Instead of prescribing 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,

Salesforce, LinkedIn, Plaxo, and Friendster all joined the OpenSocial platform. In March 2008,

MySpace and Yahoo! joined Google to jointly foster the development of OpenSocial.

3 This school of thought included the work of sociologist Duncan J. Watts, who studied the theoretical structure of

social networks in his 1999 book Small Worlds (Princeton University Press). 4 In its second year, fbFund offered investments instead of grants. It was quietly discontinued in 2010.

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Microsoft pointed to Facebook’s enormous advertising potential to justify its $240 million

investment. 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

Another addition in 2008 was Beacon, a feature in Facebook’s Social Ads platform that took

Social Bookmarking to a new level. Beacon enabled users to connect 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. Public reaction to Beacon was swift and powerfully negative.

Zuckerberg publicly 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

apologize for it…. We were excited about Beacon because we believe 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 and wall posts, with everyone on the Internet, even though the default

privacy level that those users had accepted previously was limited to “Your

Networks 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

5 See http://www.beaconclasssettlement.com for full details.

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2009-2010: CONTINUED GROWTH AND A SOARING VALUATION

Yet the ongoing concerns about privacy did not slow Facebook’s growth, and the company

expanded its organization to manage its increased size. 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 flow of its employees to Facebook and other hot start-ups, Google

announced in November 2010 that it would give a 10 percent raise to all employees. The Wall

Street Journal reported:

The pay hike comes as Google ramps up its battle with competitors, especially

neighboring Facebook Inc., in a fight to secure talented staff…. Over the past year

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 software projects, joined Facebook.xxvii

Facebook’s growing developer team launched 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 click 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 being 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 integrated communications platform that

combined text messaging, instant messaging, e-mails, 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

releasing 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 saw it as an attempt to position Facebook at the

center of each user’s internet presence.

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 the external site that the

user had “Liked” it. Open Graph spanned news articles to e-commerce sites, movie and music

sites, sports teams, and more. Crucially, Open Graph allowed users to individually opt in to each

external site and allow activity on it to be announced back to Facebook.

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Analysts concluded that as a result of Open Graph:

Facebook can essentially build a database of anyone’s “Likes” that ranges across

all categories. Most importantly, because of Facebook’s focus on authenticity, the

suggestions generated by Facebook’s database are much more likely to be useful

to a user (and advertisers).xxx

Potential implementations of Open Graph data included:

Suggestions about other products and services that a user might also like by using the user’s

“Likes” and comparing them to other users’ “Likes,” thus 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.

In addition, pointed out one analyst, 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. Advertisers could use that information to specifically target a campaign

targeted toward those users.xxxi

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 worldxxxii

(Exhibit 2:

Facebook’s Growth). It attained a valuation of $50 billion in a $500 million 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 in 2011:

Facebook is a social networking service and website launched in February 2004,

operated and privately owned by Facebook, Inc. Users may create a personal

profile, add other users as friends, and exchange messages, including automatic

notifications when they update their profile. Additionally, users may join common

interest user groups, organized by workplace, school or college, 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 percentage of the U.S. population had a Facebook account.xxxiii

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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 exchanges that

occurred on the site and through its mobile access points, and took to calling it a

“communication platform.”xxxiv

Facebook COO Sheryl Sandberg went as far as to position her

employer as a “core” of commercial and social activity. “We think every industry in going to be

rebuilt around social engagement,” she declared in an interview.xxxv

Indeed, the Wall Street Journal reported that by February 2011, Facebook’s Open Graph

included “some 2.5 million websites” that had incorporated the “Like” button into their product

and media content.xxxvi

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

build on top because there is equal value exchange.”xxxvii

He affirmed his intent to find new

industries and businesses as partners to engage in this “value exchange.”

Applications

One industry that was profoundly affected 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 application developers, occupying six of the top ten

app slots.xxxviii

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. By mid-2009, Venture

Beat declared that Facebook’s platform 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.xxxix

In 2011, there were more than 550,000 actively used applications offered on the Facebook

Platform. The 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.xl

Zynga commanded a higher valuation 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.”xli

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 3). Industry

surveys revealed:

[W]omen in their 50s were the most common demographic for social games,

[with] the three most common age groups [being] people in their 50s (22 percent),

30s (21 percent), and 40s (20 percent). The number of gamers 60 and older (16

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percent) is almost three times greater than the number of gamers 21 years old or

younger (6 percent).xlii

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 commerce―we think similarly, all of these

things will be rebuilt by companies that work with us to put social at the core.”xliii

Such grand proclamations triggered media predictions that “Facebook is likely to tread on more

toes as it builds out [its] platform.”xliv

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

In February 2011, the Wall Street Journal reported:

In just two years, 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 taking 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 different businesses.’…

Facebook likely had revenue of $1.9 billion to $2 billion [in 2010], mostly in

advertising.xlv

Unlike traditional web-based advertisements, ads shown to a user in Facebook could be

accompanied by a social endorsement by a friend of the user 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 social 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 product drove recall to 16 percent and

quadrupled purchase intent. And when users saw their friends’ “Likes” or fan-dom appear in

News Feeds, ad recall rose to a whopping 33 percent, while purchase intent jumped to 15

percent.xlvi

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Besides an increase in advertising effectiveness, a benefit of Facebook as an advertising vehicle

was the range of tools Facebook made available to advertisers:xlvii

Ways to offer free samples to customers, something ketchup maker Heinz has used.

The ability to attract the attention of smartphone 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 ability to build e-commerce sites into Facebook pages. Max Factor did not want to lose

visitors to its Facebook page to another site when customers were ready to buy something, so

a partnership with Amazon let customers buy products without leaving.

‘Reach block’ 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 mechanisms, to generate 1.3 million connections with possible

customers during its “find a new flavor” marketing campaign.

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.xlviii

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.xlix

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.l

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.li

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 many 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.”lii

They projected that “Credits” would be a big source of revenue:

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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 even real-world payments via mobile

devices (like a credit card, except near-field-communication via mobile phone is

the method in which account information is transmitted to a retailer).liii

The promise of “Credits” as a revenue driver led the Wall Street Journal 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 Facebook…. ‘Payments is really, really hard to do,’ he said.liv

2012 AND ONWARD

As it approached its IPO, 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.lv

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. Some see this as a sign that large social

networks are destined to disintegrate when they become too big.lvi

While nobody knew for certain what Facebook’s ultimate path would be, there were several key

concerns:

Privacy and Security

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 site 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 gets 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 various other means, so the

network’s business will suffer.lvii

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 one user did, publishing his reasons to his syndicated blog:

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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 nothing. 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 success

is by no means guaranteed―have we all forgotten 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 writing, the post had 850,000 page views.

A closely related issue to user privacy was personal and corporate security. Security breaches

leading to the compromise of profile data was a widespread concern as more people accessed

secure sites on unsecured public 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, [security firm] Cyberoam uncovered 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 confidential information.lviii

Organization

While it remained a popular recruiter, Facebook itself had lost some of its own key hires. It

suffered a natural loss of traction with 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 company 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 Tahoe party

cabin.

One frustration of early employees is that they’ve had limited upward mobility 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 options with the help of investor Digital Sky Technologies, in part to

alleviate pressure toward an IPO.lix

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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 functionality.

Accessing social-networking sites, particularly Facebook, was among the fastest-

growing activities over the past year among cell phone users, comScore said….

Nearly 58 million people in the United States went onto a social-networking site

using a cell 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 would new ways of monetizing the user―for

example location-based technologies available on mobile phones―provide opportunities for

other efforts that took 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 phones. That opens

up the prospect of even broader changes in the social-networking landscape.lxi

Global Growth

As Facebook gained dominance in the domestic U.S. market, it needed more international users

to keep growing its user base (see Exhibit 2).6 Facebook responded to this challenge in 2007,

with impressive results. This internationalization was especially difficult, however, in countries

with a dominant social network site or regulatory restrictions:

In Spain, Tuenti7 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

a dramatic decline in its user base: from 1 million to 14,000. Renren, started in 2005,

rose to prominence and planned a U.S. IPO in 2011. It had 160 million users.lxii

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 cofounded by a team that included Stanford GSB MBA Adeyemi de Ajao (’10).

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In 2010, Facebook met a similar fate in Vietnam as it had in China.lxiii

Still, Facebook showed impressive growth worldwide, sometimes 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.lxiv

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Exhibit 1

Facebook Pre-IPO Valuations (September 2004-January 2012)

DATE VALUATION INVESTORS

January 2012 $83.5 billion Value based on private secondary markets.

March 2011 T. Rowe Price invests $190.5 million through various funds for a stake less

than 1 percent.

March 2011 $65 billion General Atlantic purchases shares from former Facebook employees for a

0.1 percent stake, CBC reports.

February 2011 $52 billion Kleiner Perkins Caufield & Byers invest $38 million for a stake less than 1

percent, The Wall Street Journal reports.

January 2011 $50 billion Goldman Sachs and DST Global get a 1 percent stake for $500 million.

Goldman’s overseas clients also invested $1 billion.

June 2010 $23 billion Elevation Partners spends $120 million for shares in the secondary market

for 1.5 percent stake.

May 2009 $10 billion Digital Sky Technologies (later DST Global and Mail.ru) invests $200

million for 2 percent stake.

January 2008 European Founders Fund invests $15 million.

March 2008 $15 billion Li Ka-Shing invests a second $60 million for a total stake of 0.8 percent.

November 2007 Li Ka-Shing invests $60 million.

October 2007 $15 billion Microsoft pays $240 million for a 1.6 percent stake.

September 2006 $900 million Offer by Yahoo that was turned down.

June 2006 Interpublic buys a 0.5 percent stake for less than $5 million.

April 2006 $500 million Greylock Partners, including Meritech Capital Partners, the Founders Fund

and Accel invest $27.5 million for a 1.5 percent stake.

January 2006 $750 million Offer from Viacom that was rebuffed.

April 2005 $100 million Accel Partners pays $12.7 million for a 15 percent stake. Jim Breyer also

puts up $1 million of his own money.

February 2005 Maurice Werdegar of WTI Partners provides a second $300,000 credit line

and a $25,000 equity investment.

October 2004 Mr. Werdegar provides a $300,000 three-year credit line.

2004

Peter Thiel puts up $500,000 for a loan, later converted to a 10 percent stake

and eventually reduced to 3 percent. Mr. Thiel also brings in Reid Hoffman

and Mark Pincus.

Source: http://dealbook.nytimes.com/2012/02/01/tracking-facebooks-valuation/ (accessed July 27, 2012).

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Exhibit 3

Facebook Users Demographics in 2012

Source: http://mashable.com/2012/03/09/social-media-demographics/ (March 9, 2012).

http://mashable.com/2012/03/09/social-media-demographics/

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Endnotes

i “The Social Network,” Chasing the Frog <http://www.chasingthefrog.com/reelfaces/thesocialnetwork.php>

(accessed April 22, 2011). ii Ziad Mokhtar, G. Tavridis, and W. P. Barnett, “Facebook,” Stanford GSB Case E-220, May 22, 2008 (revised).

iii Ann Grimes, “Powerful Connections,” The Wall Street Journal, October 30, 2003.

iv Gary Rivlin, “How Friendster Lost a Chance for a Jackpot,” The New York Times, October 15, 2006,

<http://www.nytimes.com/2006/10/15/business/worldbusiness/15iht-friend.3160940.html> (December 10, 2009). v Matt Meyerhoff, “Intermix, Unit Attract Funding,” Los Angeles Business Journal, December 13, 2004.

vi Hyon B. Shin, “School Enrollment – Social and Economic Characteristics of Students,” U.S. Census Bureau,

October 2003, <http://www.census.gov/prod/2005pubs/p20-554.pdf> (December 10, 2009). vii

Gary Rivlin, “Billion-Dollar Baby Dot-Coms? Uh-Oh, Not Again,” The New York Times, September 2, 2005,

<http://www.nytimes.com/2005/09/02/technology/02venture.html> (accessed May 4, 2011). viii

“Facebook Goes Corporate,”CNET News, April 28, 2006. ix

“Debunking the MySpace Myth of 100 Million Active Users,” ForeverGeek, September 27, 2006

< http://www.forevergeek.com/2006/09/debunking_the_myspace_myth_of_100_million_users/> (April 25, 2011). x Yuki Noguchi, “In Teens’ Web World, MySpace Is So Last Year,” October 26, 2006, The Washington Post,

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/28/AR2006102800803.html (May 4, 2011).. xi

Anthony Bruno, “Facebook Is the (Online) Place,” Billboard, July 2, 2005. xii

“Friendster Poised for an Exciting 2007,” Friendster press release, January 7, 2007,

<http://www.friendster.com/info/presscenter.php?A=pr12> (accessed April 25, 2011). xiii

“Twitter Raises Over $35 Million in Series C,” Marketing Vox, February 19, 2009,

<http://www.marketingvox.com/twitter-raises-over-35m-in-series-c-043192/> (accessed March 23, 2011).. xiv

“Bebo,” CrunchBase , <http://www.crunchbase.com/company/bebo> (accessed April 29, 2011). xv

Om Malik, “Will Cyworld Stop MySpace Juggernaut?,” GigaOM, April 16, 2006<

http://gigaom.com/2006/04/16/will-cyworld-stop-myspace-juggernaut/> (accessed April 22, 2011). xvi

Taryn Filomio,.“Facebook: One Year Later,” The Quinnipiac Chronicle, December 7, 2005,

<http://www.quchronicle.com/2005/12/facebook-one-year-later/> (accessed May 4, 2011). xvii

“Facebook Revolt: Not All Friends Are Equal,” BusinessWeek. September 6, 2006. xviii

Brian Sullivan and J. Thaw, “Facebook Courted by Yahoo!, Won’t Sell, Director Says,” Bloomberg.com,

December 16, 2006,<http://www.bloomberg.com/apps/news?pid=20601204&sid=aqwoCAVu._za> (accessed

December 10, 2009).. xix

Nick Gonzalez, “Facebook Stealing Googlers at An Alarming Rate,” TechCrunch, November 21, 2007

< http://techcrunch.com/2007/11/21/facebook-stealing-googlers-at-an-alarming-rate/> (accessed May 2, 2011). xx

Om Malik. “Facebook Launches Connect, Finally,” GigaOM, December 4, 2008,

<http://gigaom.com/2008/12/04/facebook-launches-connect-finally/> (accessed December 10, 2009).. 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, May 24, 2007,

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, June 12, 2008,

http://techcrunch.com/2008/06/12/facebook-no-longer-the-second-largest-social-network/> (accessed May 4, 2011). xxiv

Michael Arrington, “Counterstrike: Murdoch, DeWolfe Announce MySpace Platform and New Privacy

Controls,” TechCrunch, October 17, 2007 <http://www.techcrunch.com/2007/10/17/counterstrike-murdoch-

dewolfe-announce-myspace-platform-and-new-privacy-controls> (accessed October 17, 2007). xxv

Mark Sigal, “Is Facebook a Brand You Can Trust?” O’Reilly Radar, December 15, 2009,

http://radar.oreilly.com/2009/12/is-facebook-a-brand-the-you-ca.html> (accessed May 1, 2011). xxvi

Clint Boulton, “Cloud Computing: Top 10 Google Employee Defections to Facebook,”, EWeek, November 22,

2010, http://www.eweek.com/c/a/Cloud-Computing/Top-10-Google-Employee-Defections-to-Facebook-425191/>

(accessed May 1, 2011). . xxvii

Amir Efrati and Scott Morrison, “Google to Give Staff 10% Raise,” The Wall Street Journal, November 10,

2010, http://online.wsj.com/article/SB10001424052748703523604575605273596157634.html (May 2, 2011). xxviii

Steven Musil, “Facebook Turns on Its ‘Like’ Button,” CNET News, February 9, 2009,

http://news.cnet.com/8301-1023_3-10160112-93.html> (accessed April 22, 2011).

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xxix

“Facebook Launches New Messaging System,” San Jose Mercury News, November 15, 2010. xxx

Ibid.

xxxi Schackart, June 2010.

xxxii Nicholas Carolson, “Facebook Has More Than 600 Million Users, Goldman Tells Clients,” Business Insider,

January 5, 2011, <http://www.businessinsider.com/facebook-has-more-than-600-million-users-goldman-tells-

clients-2011-1> (accessed March 31, 2011). xxxiii

Wikipedia contributors, “Facebook,” Wikipedia, < http://en.wikipedia.org/wiki/Facebook> (accessed March 31,

2011). xxxiv

Shayndi Raice, “Digital Media: Social Media, Phones Ally ‒ People Increasingly Use Devices to Access Their

Twitter and Facebook Accounts,” The Wall Street Journal, February 18, 2011. xxxv

Geoffrey A. Fowler, “Corporate News: Facebook Creates New ‘Frenemies’: The social-networking site’s

practices are disrupting the businesses of established companies like Yahoo and Google,” The Wall Street Journal,

February 16, 2011. xxxvi

Fowler, op. cit. xxxvii

Fowler, op. cit. xxxviii

Morgan Stanley, “Internet Trends,” March 18, 2008. xxxix

Eric Eldon, “Facebook Platform Developers Could See $500M in Revenue This Year,” Venture Beat, May 8,

2009, http://venturebeat.com/2009/05/08/facebook-platform-developers-could-see-500m-in-revenue-this-year/>

(accessed May 4, 2011). xl

Evelyn M. Rusli, “As Web Game Maker Negotiates, an I.P.O. Is Expected in 2012,” The New York Times,

February 18, 2011. xli

Ralph Schackart, “The Future in Digital Media,” William Blair & Company Equity Research, January 20, 2011. xlii

Schackart, loc. cit, p.14. xliii

Fowler, op. cit. xliv

Ibid. xlv

Ibid. xlvi

“Advertising Effectiveness: Understanding the Value of a Social Media Impression,” Nielsen and Facebook

White Paper, April 2010. xlvii

Stephen Shankland, “Will Facebook Replace Company Web Sites?” CNET News, http://news.cnet.com/8301-

30685_3-20038242-264.html> (accessed March 2, 2011). xlviii

Ralph Schackart,“2010 Digital Media and Internet Funding Trends,” William Blair & Company Equity

Research, February 18, 2011, p. 8. xlix

Mike Swift, “Facebook Shows Growth in Display Ads,” San Jose Mercury News, May 5, 2011

http://www.mercurynews.com/business/ci_18001513> (accessed May 5, 2011). l Schackart, op. cit.

li Clint Boulton, “Google One Pass to Challenge Apple Subscription Service,” eWeek, February 16, 2011,

http://www.eweek.com/c/a/Search-Engines/Google-One-Pass-to-Challenge-Apple-Subscription-Service-828461/>

(accessed April 29, 2011). lii

Schackart, January 2011, p. 25. liii

Ibid. liv

Fowler, op. cit. lv “Global Swap Shops,” The Economist, January 28, 2010.

lvi Ibid.

lvii “Privacy 2.0,” The Economist, January 28, 2010.

lviii James Temple, “New Technologies Bring New Threats; cloud computing, mobile devices, social sites are top

concerns,” The San Francisco Chronicle, February 17, 2011. lix

Liz Gannes, “The Early Facebook Employee Exodus,” GigaOM, August 16, 2010,

http://gigaom.com/2010/08/16/the-early-facebook-employee-exodus/> (accessed May 1, 2011). lx

Benny Evangelista and Ellen Lee, “Facebook Adds Civil Union to Its Choices for Relationship Status,” The San

Francisco Chronicle, February 20, 2011. lxi

The Economist, January 28, 2010. lxii

Alison Tudor, “Global Finance: China’s Renren.com Plans Foreign Listing,” The Wall Street Journal, February

22, 2011. lxiii

“Defriended,” The Economist, January 4, 2011,

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http://www.economist.com/blogs/asiaview/2011/01/facebook_vietnam> (accessed March 2, 2011). lxiv

Caitlin Fitzsimmons, “Facebook Overtakes Orkut in India,” All Facebook, August 25, 2010,

http://www.allfacebook.com/facebook-overtakes-orkut-2010-08> (accessed May 1, 2011).

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