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Business Impact

Facebook

Name: Facebook

Runs the world’s largest social-networking website, with more than 350 million active users. Facebook can host third-party applications and delivers targeted advertising. It is currently working to integrate its service into many different platforms, including gaming consoles and Internet-enabled television.

URL: www.facebook.com
Location: Palo Alto, CA
Telephone: (650) 543-4800
Year Founded: 2004
Number of Employees: Over 900

This story is part of our January/February 2010 Issue
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Executive Leadership:

CEO: Mark Zuckerberg

Bio: Zuckerberg dropped out of Harvard’s computer science program to found Facebook.

Vice President of Technical Operations: Jonathan Heiliger

Bio: Prior to Facebook, he led the engineering team at Walmart.com before becoming a technology to several early-stage companies.

Board Members and Advisors

Marc Andreessen

Jim Breyer

Don Graham

Paul Madera, observer

David Sze, observer

Peter Thiel

Funding:

$500,000 was raised in summer 2004 from Peter Theil. A second round of funding in April 2005 generated $12.7 million from Accel Partners. A third round in 2006 led by Greylock Partners raised $27.5 million including contributions from Meritech Capital Parnters, Accel Partners, and Peter Theil.

Technology:

Facebook runs the world’s largest social networking site, with over 350 million users, Growing from a platform designed to support an online equivalent of a student directory, Facebook can host third party applications, and deliver targeted advertising. The company is continuously trying to improve the platform, both in terms of introducing new features and improving its efficiency to control server and other infrastructure costs as the user base grows.

Facebook is taking steps in other areas as well, including integration with other technologies. For instance, most of the gaming consoles (Xbox, etc) will all have offer Facebook integration as a standard offering, which will allow players to connect with friends while exploring game environments, or watching movies.

Market:

Facebook competes in a crowded social networking sector and makes the majority of its revenue on advertising-related sales. This includes typical CPM advertising as well as large-scale brand advertising using integrated creative campaigns and applications. Facebook has established market dominance in social networking in the U.S., and now must consider its next big market expansion strategy. This generally includes focusing on international markets, particularly where there are highly concentrated population areas. The most recent office opened was in Milan, but Facebook also counts Dublin, Sydney, and others among its recent international expansions. Facebook claims that international expansion drives most of its employee expansion as well, and it is thus inferred that they have slowed hiring in San Francisco but expanded hiring for its regional offices. This is likely an attempt to gain market share from some of the other social networks such as MySpace and Qzone, who dominate the market in China.

Strategy:

Facebook is now focused on increasing the efficiency of is platform and making is easier for third-party developers to deploy applications. It is also trying to decrease spam, and make sure the average user does not feel bombarded with things that are irrelevant to them. Finally Facebook is working to leverage is knowledge of how its users are interconnected to help advertiser better reach target customers: even if a user does not explicitly provide information that would identify them as part of a target audience, they may be identified as such due to active relationships with others in the audience.

Challenges and Next Steps:

The biggest challenge that Facebook will face in the next twelve months is cultural. How does a rapidly growing company organized like a start-up, but with the budget of a large multi-national corporation, and a run by a twenty-five year old founder continue to work? Zuckerberg is the first to cite, in public interviews, that Facebook is a “flat” organization and that he is very involved with the engineering team and has personal relationships with most of the engineers. It is this culture that helps them continue to recruit some of the world’s leading engineering talent and continue to roll out new features quickly and easily. As the company continues to grow, however, and acquires new companies (their second acquisition was FriendFeed earlier this year) the same culture that has allowed them to be quick and nimble might ultimately impair progress. This is a challenge we have seen time and again - with Google, Yahoo!, and even AOL a decade ago - growing companies needing to reform their organizational culture and management in order to cope with new sets of issues as they become Fortune 500 players.

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