Success Story of Facebook Founder and CEO, Mark Zuckerberg
The Rising of Facebook
About ten months before the Zuckerberg’s FaceMash epic, one of the students of Harvard – Divya Narendra – had already spoken with the idea of creating a social network exclusively for Harvard students, many of whom were suffering from emotional stiffness. And not have ‘aliens’ engaged into the network, Narendra suggested using Harvard email address as the main username.
Divya Narendra’s partners were twins Tyler and Cameron Winklevoss. The father of the Winklevoss twins, Howard Winklevoss, is a successful financial consultant and put in his sons a lot of efforts and money – so the problem with the initial capital for the future network could be solved easily.
In conversation with Mark, Narendra said that the project would be called Harvard Connection (later renamed to ConnectU), and its members would post on the Internet their photos, personal information, and useful links. The tasks of Mark Zuckerberg included programming of the site and creating a special source code, which would allow the system to work as quickly as possible.
After a private meeting with Narendra and the Winklevoss twins, Zuckerberg agreed to join in the work, but the potential of his new partners he estimated skeptically. While working on Harvard Connection, he got a fantastic idea for his own social network.
On February 04, 2004, he registered the domain name TheFacebook.com, now known throughout the world as Facebook.com. However, it functioned only within Harvard.
After Zuckerberg and his partner Eduardo Saverin realized that there were already 4,000 users registered on Facebook, they came to the conclusion that they needed services of new programmers. One of them was a Mark’s neighbor, Darren Moskowitz, who further opened the Facebook service to students at Columbia University, Stanford, and Yale.
Around the same time after the IPO, Zuckerberg owned 503.6 million shares. And now Zuckerberg controls nearly 60% of the company’s votes, 35% – Eduardo Saverin, and 5% went to the newcomer Moskowitz. Another friend of Mark, Chris Hughes, was assigned as the Press Attache of Facebook.
Some time later, the registration was opened to all students. The main condition was the availability of an email address in .edu zone, which also indicated a person’s belonging to the education sector.
It must be said that at first this tactic worked out nicely. The project attracted audience attention of sufficient quality. When a user was trying to sign up he had to fill out a detailed profile, and in addition to the email address in .edu zone it was requested to add a real profile picture. If people used avatars instead of real pictures their profiles were deleted.
Soon, Facebook went beyond the education sector, becoming more and more popular. Mark Zuckerberg started looking for investors. The first investments Mark received from one of the founders of PayPal, Peter Thiel, who is well known throughout Silicon Valley. Peter Thiel allocated $500,000, and that amount was sufficient for immediate Facebook purposes. The project began to evolve rapidly. In less than a year after it was founded more than 1 million people joined the social network. For further development of Facebook, they needed more investments. Accel Partners invested in Facebook $12.7 million and then Greylock Partners added to this amount $27.5 million.
By 2005, Facebook became accessible for all educational institutions and universities in the USA. Zuckerberg still believed that his project is a social network for students, but the interest of users to Facebook grew exponentially. Then it was decided to make a registration accessible to the public. And after this, a Facebook ‘epidemic’ started.
The main thing that immediately attracted users in Facebook is that friends who meet in real life now could communicate with each other online. It was something new.
The Facebook audience grew rapidly, but the monetization of the project still remained unclear. Everyone expected that the main instrument should be context advertising. The fact is that every Facebook user fills sufficiently detailed profile, which can be used to show relevant advertisements. Obviously, that would open up enough options to advertisers, who may be of interest to their audience. But Facebook continued to grow its audience. When they got over 50 million users, large companies began to offer Zuckerberg to sell them the project. So, one time even Yahoo! offered $900 million dollars for Facebook. Impressive sum, but it absolutely did not satisfy Mark. Facebook biography and Mark Zuckerberg success story is quite intriguing, isn’t it?
The Facebook project launch was accompanied by series of scandals. Six days later after launching the site, senior students brothers Cameron and Tyler Winklevoss and Divya Narendra accused Mark Zuckerberg of stealing their idea. They claimed that in 2003 hired Zuckerberg to make him complete the establishment of the social network HarvardConnection.com. According to their testimonies, Zuckerberg did not provide them the results of his work but used the original source code to create Facebook.
In the same year, Narendra and the Winklevoss twins launched their own network renamed to ConnectU. And they continued to attack on Mark Zuckerberg, complaining Harvard administration and The Harvard Crimson newspaper. Initially, Zuckerberg urged journalists not to publish the investigation: he showed them what supposedly he did for HarvardConnection, and explained that those developments did not have any relation to Facebook. But very inappropriately, another Harvard student – John Thomson – in personal conversations started saying that Zuckerberg stole one of his ideas for Facebook. The newspaper decided to publish the article, and it offended Mark Zuckerberg very much.
Newspaper clip from The Harvard Crimson article published on May 28, 2004
Zuckerberg took revenge on The Harvard Crimson. According to Silicon Alley Insider, in 2004, he breaks the mailboxes of two journalists from The Harvard Crimson, using the newly launched Facebook. He found users who were involved in the newspaper and browsed their logs (i.e. history) of incorrectly entered passwords in Facebook. Zuckerberg’s expectations were met: two employees of the newspaper absentmindedly tried to login Facebook with passwords from their mailboxes. Silicon Alley Insider wrote that Zuckerberg got lucky: he had a chance to read the correspondence about him between the editorial office and HarvardConnection.
The Winklevoss twins and Narendra filed a lawsuit against Mark Zuckerberg, but the court rejected their claim. They were persistent and filed another lawsuit. This time, the court examined the code sources to understand whether they were actually stolen. But the truth was still not clear. The examination results were not announced. In 2009, Zuckerberg agreed to pay $45 million ($20 million in cash, and the remaining amount in Facebook shares) ConnectU as part of the court settlement. The case was closed. By that time ConnectU had less than 100,000 users, Facebook boasted about 150 million users.
The Winklevoss twins yet did not calm down and filed a petition in the U.S. Court of Appeals, but they were denied a retrial. According to their lawyer Jerome Falk, the appellate court refused to take a review of the case based only on the parties’ settlement agreement, which states that members of the trial after the signing of the document does not have the right to resume the trial. In counsel’s view, the decision was illegal, as Mark Zuckerberg in a proceeding in 2008 provided false information about the company’s value.
On May 17, 2011, Cameron and Tyler Winklevoss filed another lawsuit against the owner of Facebook Mark Zuckerberg to the U.S. Supreme Court. That was the latest attempt by the brothers to make the court reconsider the case.
Bill Gates’ Facebook Page
In 2007, a significant event happened to Facebook. Microsoft acquired 1.6% equity stake in Facebook for an impressive amount of $240 million dollars. On this basis, a number of analysts suggested that the total value of Facebook reached $15 billion. Quite good results for the company, whose income did not exceed $200 million a year. After the deal, Bill Gates created an account in Facebook. He used to spend several hours a day to communicate through Facebook with everyone, but after a time decided to close his account for some time, because there were too many people willing to chat with him. Physically, he was not able to chat with all of them. However, Gates provided a major PR campaign for Facebook worldwide. This is particularly important for Microsoft, given that it had an exclusive advertising agreement with the social network until 2011.
How Facebook Makes Money
In 2013, the turnover of Facebook, Inc. reached $7.87 billion and net income – $1.5 billion. The growth rates are also impressive: three years turnover has increased six-fold.
The basic earnings of Facebook come from contextual ads on the pages of the social network. Growing number of users and the time they spend on the site is converted into advertising revenues. 85% percent of cash-flow that went through the company last year was earned through contextual advertising.
The most of the rest 15% are deductions from purchases made through the Facebook payment system. These are mostly not real, but virtual goods. For example seeds, fruits and vegetables, purchased by fans of the popular game Farmville developed by Zynga.
Despite the apparent frivolity, virtual goods is a serious business, and the Facebook report confirms that. The company estimated that in 2010 the global market turnover for virtual goods reached $7 billion, and by 2014, it rose to $15 billion.
At the beginning of January 2013, Facebook Inc. started testing the service of paid private messaging. Facebook charges $1.00 for a private message that you can send to the users who are not in your friend list. And the message goes directly to their Inbox folder, instead of Other one. But Facebook went further and realized that some users are worth more than a $1. If you want to send a message to Facebook CEO Mark Zuckerberg and get into his inbox, you might have to pay $100 for this exclusive option. This is another very simple way to generate additional revenue.
Acquisition of Instagram, Oculus Rift, and WhatsApp
Mark Zuckerberg is a great strategist, and he keeps acquiring companies that continue their operation as independent entities under Facebook’s umbrella.
In April 2012, acquired mobile photo sharing app Instagram for $1 billion in cash and stock. Initially, it was an iOS application developed by Mike Krieger and Kevin Systrom. Now the Instagram application is available on Android OS as well.
In March 2014, Facebook closed the acquisition of Oculus Rift for $2 billion. Oculus Rift is a virtual reality hardware engineered by Oculus VR Company headed by Palmer Freeman Luckey. Facebook paid $400 million in cash plus 23.1m Facebook shares, with a further $300 million in incentives if it hits certain milestones in the future.
In October 2014, Mark Zuckerberg completed the purchase of WhatsApp for $22 billion. Facebook paid $4.59 billion in cash and 177,760,669 shares in the company. WhatsApp is an instant messaging application founded by Jan Koum and Brian Acton in 2009.
Mark Zuckerberg: TIME’s 2010 Person of the Year
In January 2010, TIME magazine named Facebook founder, CEO and 26-year old billionaire Mark Zuckerberg the Person of the Year 2010.
Lady Gaga, James Cameron and founder of WikiLeaks, Julian Assange, were struggling for this title that year. However, TIME magazine chose his hero. ‘The social network created by Mark connected almost every tenth person on the planet’, – Richard Stengel, TIME editor-in-chief explained their choice. According to him, ‘Today, Facebook is the third largest country in the world that knows about its citizens as much as no government on planet does.’
Mark Zuckerberg named TIMES’s person of the year 2010
According to TIME, in the past year, no one else had such great impact on the world than the current winner. Mark’s popularity is so high that in 2010 David Fincher shot a movie ‘The Social Network’ in which the main role of the Facebook founder was brilliantly played by Jesse Eisenberg. Previously, TIME’s ‘persons of the year’ became the United States presidents Bill Clinton and Barack Obama.
In 2010, Forbes magazine admitted Mark Zuckerberg as the youngest billionaire in its list to the state of $4 billion.
In the rating of the 400 richest people in the United States, published by Forbes magazine in 2015, Zuckerberg took 7th place with a net worth of $40.3 billion.
Mark Zuckerberg’s Lifestyle
Currently, Zuckerberg lives in the Palo Alto in a $7 million estate that features 5 bedrooms a saltwater pool, and over 5,000 square feet of property.
On May 19, 2012, Mark Zuckerberg married his longtime girlfriend Priscilla Chan in Palo Alto, California and finally they happily live together.
On December 01, 2015, Mark Zuckerberg and Dr. Priscilla Chan announced the birth of their daughter, Maxima Chan Zuckerberg, and wrote a letter to her with the supportive words and mentoring notes. “Max, we love you and feel a great responsibility to leave the world a better place for you and all children,” Zuckerberg and Chan wrote in the letter to their daughter.
The young couple also pledged to donate 99% of their Facebook shares – worth about $45 billion – through the Chan Zuckerberg Initiative within their lifetime to promote human potential, equality, and the world development.
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