History of Facebook
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The history of Facebook traces its growth from a college networking site to a global social networking service. It was launched as TheFacebook in 2004, and renamed Facebook in 2005.
Founded by Mark Zuckerberg and his college roommates Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes at Harvard University, it was initially limited to Harvard students. It expanded to other colleges in the Boston area, the Ivy League, and gradually most universities in the United States and Canada, corporations, and by 2006 to everyone with a valid email address along with an age requirement of being 13 or older. Facebook introduced key features like the News Feed in 2006, which became central to user engagement. By 2007, Facebook surpassed MySpace in global traffic and became the world's most popular social media platform. The company focused on generating revenue through targeted advertising based on user data, a model that drove its rapid financial growth. In 2012, Facebook went public with one of the largest IPOs in tech history. Acquisitions played a significant role in Facebook's dominance. In 2012, it purchased Instagram, followed by WhatsApp and Oculus VR in 2014, extending its influence beyond social networking into messaging and virtual reality. These moves helped Facebook maintain its position as a leader in the tech industry.
Despite its success, Facebook has faced significant controversies. Privacy concerns surfaced early, including criticism of its data collection practices. The Facebook–Cambridge Analytica data scandal in 2018 revealed misuse of user data to influence elections, sparking global outcry and leading to regulatory fines and hearings. Facebook has been accused of enabling the spread of misinformation and hate speech and influencing political outcomes, prompting debates about content moderation and social media's role in society. The platform has frequently updated its algorithms to balance user experience with engagement-driven revenue, but these changes have sometimes drawn criticism for amplifying divisive content. Facebook's role in global events, including its use in organizing movements like the Arab Spring and, controversially, its impact on events like the Rohingya genocide in Myanmar, highlights its dual nature as a tool for empowerment and harm.
In 2021, Facebook rebranded as Meta, reflecting its shift toward building the "metaverse" and focusing on virtual reality and augmented reality technologies. Facebook continues to shape digital communication, commerce, and culture worldwide, with billions of users making it a key organisation in the 21st century.
TheFacebook
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A "facebook" is a student directory featuring photos and basic information. In 2004, there were no universal online facebooks at Harvard, with only paper sheets distributed and private online directories. Zuckerberg told the Crimson that "Everyone's been talking a lot about a universal face book within Harvard. ... I think it's kind of silly that it would take the University a couple of years to get around to it. I can do it better than they can, and I can do it in a week." In January 2004, Zuckerberg began writing a code for a new website, known as "TheFacebook", with the inspiration coming from an editorial in the Crimson about Facemash, stating that "It is clear that the technology needed to create a centralized Website is readily available ... the benefits are many." Zuckerberg met with Harvard student Eduardo Saverin, and each of them agreed to invest $1,000 in the site. On February 4, 2004, Zuckerberg launched it under the name of "TheFacebook", originally located at thefacebook.com.
Zuckerberg intended to create a website that could connect people around the university. Upon finishing the site, Zuckerberg told a couple of friends, one of whom suggested sharing it on the Kirkland House online mailing list, which included several hundred people. According to his roommate, Dustin Moskovitz, "By the end of the night, we were ... actively watching the registration process. Within twenty-four hours, we had somewhere between twelve hundred and fifteen hundred registrants."
Just six days after the launch of the site, three Harvard University seniors, Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra, accused Zuckerberg of intentionally misleading them into believing that he would help them build a social network called HarvardConnection.com, but instead using their idea to build a competing product. The three complained to the Crimson, and the newspaper began an investigation. Zuckerberg knew about the investigation so he used TheFacebook.com to find members in the site who identified themselves as members of the Crimson. He examined a history of failed logins to see if any of the Crimson members had ever entered an incorrect password into TheFacebook.com. In the cases in which they had failed to log in, Zuckerberg tried to use them to access the Crimson members' Harvard email accounts, and he was successful in accessing two of them. In the end, three Crimson members filed a lawsuit against Zuckerberg which was later settled.
Membership was initially restricted to students of Harvard University. Within the first month, more than half the undergraduate population at Harvard was registered on the service. Zuckerberg was joined in the promotion of the site by Saverin (business aspects), Dustin Moskovitz (programmer), Andrew McCollum (graphic artist), and Chris Hughes. In March 2004, Facebook expanded to Stanford, Columbia, and Yale. This expansion continued when it opened to all Ivy League and Boston-area schools. It gradually reached most universities in the United States and Canada. Facebook was incorporated in the summer of 2004, and the entrepreneur Sean Parker, who had been informally advising Zuckerberg, became the company's president. In June 2004, Facebook moved its base of operations to Palo Alto, California.
| Date | Users (in millions) | ±% p.m. |
|---|---|---|
| 2004-02-04 | 0 | — |
| 2004-04-04 | 0.07 | — |
| 2004-07-04 | 0.1 | — |
| 2004-10-04 | 1.5 | — |
| 2008-08-26 | 100 | — |
| 2009-04-08 | 200 | +9.83% |
| 2009-09-15 | 300 | +8.02% |
| 2010-01-05 | 400 | +8.13% |
| 2010-07-21 | 500 | +3.51% |
| 2011-01-05 | 600 | +3.36% |
| 2011-05-30 | 700 | +3.29% |
| 2011-09-22 | 800 | +3.60% |
| 2012-04-24 | 900 | +1.68% |
| 2012-09-14 | 1,000 | +2.27% |
| 2013-03-31 | 1,110 | +1.62% |
| 2013-12-31 | 1,230 | +1.14% |
| 2014-12-31 | 1,390 | +1.02% |
| 2015-12-31 | 1,590 | +1.13% |
| 2016-12-31 | 1,860 | +1.31% |
The company dropped 'The' from its name after purchasing the domain name facebook.com in 2005 for $200,000 ($321,997 in 2024 dollars). The domain had belonged to AboutFace Corporation.
In May 2005, Accel Partners invested $13 million ($20.4 million in 2024 dollars) in Facebook, and Jim Breyer added $1 million ($1.61 million in 2024 dollars) of his own money. A high-school version of the site launched in September 2005. Eligibility expanded to include employees of several companies, including Apple Inc. and Microsoft.
2006–2012: Public access, Microsoft alliance, and rapid growth
In May 2006, Facebook hired its first intern, Julie Zhuo. After a month, Zhuo was hired as a full-time engineer. On September 26, 2006, Facebook opened to everyone at least 13 years old with a valid email address. By late 2007, Facebook had 100,000 pages on which companies promoted themselves. Organization pages began rolling out in May 2009. On October 24, 2007, Microsoft announced that it had purchased a 1.6% share of Facebook for $240 million ($364 million in 2024 dollars), giving Facebook a total implied value of around $15 billion ($22.7 billion in 2024 dollars). Microsoft's purchase included rights to place international advertisements.
In May 2007, at the first f8 developers conference, Facebook announced the launch of the Facebook Developer Platform, providing a framework for software developers to create applications that interact with core Facebook features. By the second annual f8 developers conference on July 23, 2008, the number of applications on the platform had grown to 33,000, and the number of registered developers had exceeded 400,000.
The website won awards such as placement into the "Top 100 Classic Websites" by PC Magazine in 2007, and winning the "People's Voice Award" from the Webby Awards in 2008. In early 2008, Facebook became EBITDA profitable, but was not cash flow positive yet.
On July 20, 2008, Facebook introduced "Facebook Beta", a significant redesign of its user interface on selected networks. The Mini-Feed and Wall were consolidated, profiles were separated into tabbed sections, and an effort was made to create a cleaner look. Facebook began migrating users to the new version in September 2008. In July 2008, Facebook sued StudiVZ, a German social network that was alleged to be visually and functionally similar to Facebook.
In October 2008, Facebook announced that its international headquarters would locate in Dublin, Ireland. A January 2009 Compete.com study ranked Facebook the most used social networking service by worldwide monthly active users. China blocked Facebook in 2009 following the Ürümqi riots.
In 2009, Yuri Milner's DST (which later split into DST Global and Mail.ru Group), alongside Uzbek Russian metals magnate Alisher Usmanov, invested $200 million in Facebook when it was valued at $10 billion. A separate stake was also acquired by Usmanov's USM Holdings on another occasion. According to the New York Times in 2013, "Mr. Usmanov and other Russian investors at one point owned nearly 10 percent of Facebook, though precise details of their ownership stakes are difficult to assess." It was later revealed in 2017 by the Paradise Papers that lending by Russian state-backed VTB Bank and Gazprom's investment vehicle partially financed these 2009 investments, although Milner was reportedly unaware at the time.
In May 2009, Zuckerberg said of the $200 million Russian investment, "This investment is purely buffer for us. It is not something we needed to get to cash flow positive." In September 2009, Facebook became cash flow positive ahead of schedule after closing a roughly $200 million gap in operating profitability.
In 2010, Facebook won the Crunchie "Best Overall Startup Or Product" award for the third year in a row.
The company announced 500 million users in July 2010. Half of the site's membership used Facebook daily, for an average of 34 minutes, while 150 million users accessed the site from mobile devices. A company representative called the milestone a "quiet revolution". In October 2010 groups were introduced. In November 2010, based on SecondMarket Inc. (an exchange for privately held companies' shares), Facebook's value was $41 billion ($59.1 billion in 2024 dollars). The company had slightly surpassed eBay to become the third largest American web company after Google and Amazon.com.
On November 15, 2010, Facebook announced it had acquired the domain name fb.com from the American Farm Bureau Federation for an undisclosed amount. On January 11, 2011, the Farm Bureau disclosed $8.5 million ($11.9 million in 2024 dollars) in "domain sales income", making the acquisition of FB.com one of the ten highest domain sales in history.
In February 2011, Facebook announced plans to move its headquarters to the former Sun Microsystems campus in Menlo Park, California. In March 2011, it was reported that Facebook was removing about 20,000 profiles daily for violations such as spam, graphic content and underage use, as part of its efforts to boost cyber security. Statistics showed that Facebook reached one trillion page views in the month of June 2011, making it the most visited website tracked by DoubleClick. According to a Nielsen study, Facebook had in 2011 become the second-most accessed website in the U.S. behind Google.
2012–2013: IPO, lawsuits, and one billion active users
In March 2012, Facebook announced App Center, a store selling applications that operate via the website. The store was to be available on iPhones, Android devices, and for mobile web users.
Facebook's initial public offering came on May 17, 2012, at a share price of US$38 ($52.00 in 2024 dollars). The company was valued at $104 billion ($142 billion in 2024 dollars), the largest valuation to that date. The IPO raised $16 billion ($21.9 billion in 2024 dollars), the third-largest in U.S. history, after Visa Inc. in 2008 and AT&T Wireless in 2000. Based on its 2012 income of $5 billion ($6.85 billion in 2024 dollars), Facebook joined the Fortune 500 list for the first time in May 2013, ranked 462. The shares set a first-day record for trading volume of an IPO (460 million shares). The IPO was controversial given the immediate price declines that followed, and was the subject of lawsuits, while SEC and FINRA both launched investigations.
Zuckerberg announced at the start of October 2012 that Facebook had one billion monthly active users, including 600 million mobile users, 219 billion photo uploads and 140 billion friend connections.
On October 1, 2012, Zuckerberg visited Russian Prime Minister Dmitry Medvedev in Moscow to stimulate social media innovation in Russia and to boost Facebook's position in the Russian market.
2013–2014: Site developments, A4AI, and 10th anniversary
On January 15, 2013, Facebook announced Facebook Graph Search, which provides users with a "precise answer", rather than a link to an answer by leveraging data present on its site. Facebook emphasized that the feature would be "privacy-aware", returning results only from content already shared with the user. On April 3, 2013, Facebook unveiled Facebook Home, a user-interface layer for Android devices offering greater integration with the site. HTC announced HTC First, a phone with Home pre-loaded.
On April 15, 2013, Facebook announced an alliance across 19 states with the National Association of Attorneys General, to provide teenagers and parents with information on tools to manage social networking profiles. On April 19 Facebook modified its logo to remove the faint blue line at the bottom of the "F" icon. The letter F moved closer to the edge of the box.
Following a campaign by 100 advocacy groups, Facebook agreed to update its policy on hate speech. The campaign highlighted content promoting domestic violence and sexual violence against women and led 15 advertisers to withdraw, including Nissan UK, House of Burlesque, and Nationwide UK. The company initially stated, "while it may be vulgar and offensive, distasteful content on its own does not violate our policies". It took action on May 29.
On June 12, Facebook announced that it was introducing clickable hashtags to help users follow trending discussions, or search what others are talking about on a topic. San Mateo County, California, became the top wage-earning county in the country after the fourth quarter of 2012 because of Facebook. The Bureau of Labor Statistics reported that the average salary was 107% higher than the previous year, at $168,000 a year ($230,096 in 2024 dollars), more than 50% higher than the next-highest county, New York County (better known as Manhattan), at roughly $110,000 a year ($150,658 in 2024 dollars).
Facebook joined Alliance for Affordable Internet (A4AI) in October, as it launched. The A4AI is a coalition of public and private organizations that includes Google, Intel and Microsoft. Led by Sir Tim Berners-Lee, the A4AI seeks to make Internet access more affordable to ease access in the developing world.
The company celebrated its 10th anniversary during the week of February 3, 2014. In January 2014, over one billion users connected via a mobile device. As of June, mobile accounted for 62% of advertising revenue, an increase of 21% from the previous year. By September Facebook's market capitalization had exceeded $200 billion ($266 billion in 2024 dollars).
Zuckerberg participated in a Q&A session at Tsinghua University in Beijing, China, on October 23, where he attempted to converse in Mandarin. Zuckerberg hosted visiting Chinese politician Lu Wei, known as the "Internet czar" for his influence in China's online policy, on December 8.
2015–2020: Algorithm revision; fake news
As of 2015[update], Facebook's algorithm was revised in an attempt to filter out false or misleading content, such as fake news stories and hoaxes. It relied on users who flag a story accordingly. Facebook maintained that satirical content should not be intercepted. The algorithm was accused of maintaining a "filter bubble", where material the user disagrees with and posts with few likes would be deprioritized. In November, Facebook extended paternity leave from 4 weeks to 4 months.
On April 12, 2016, Zuckerberg outlined his 10-year vision, which rested on three main pillars: artificial intelligence, increased global connectivity, and virtual and augmented reality. In July, a US$1 billion suit was filed against the company alleging that it permitted Hamas to use it to perform assaults that cost the lives of four people. Facebook released its blueprints of Surround 360 camera on GitHub under an open-source license. In September, it won an Emmy for its animated short "Henry". In October, Facebook announced a fee-based communications tool called Workplace that aims to "connect everyone" at work. Users can create profiles, see updates from co-workers on their news feed, stream live videos and participate in secure group chats.
Following the 2016 U.S. presidential election, Facebook announced that it would combat fake news by using fact checkers from sites like FactCheck.org and Associated Press (AP), making reporting hoaxes easier through crowdsourcing, and disrupting financial incentives for abusers.
On January 17, 2017, Facebook COO Sheryl Sandberg planned to open Station F, a startup incubator campus in Paris, France. On a six-month cycle, Facebook committed to work with ten to 15 data-driven startups there. On April 18, Facebook announced the beta launch of
Facebook Spaces at its annual F8 developer conference. Facebook Spaces is a virtual reality version of Facebook for Oculus VR goggles. In a virtual and shared space, users can access a curated selection of 360-degree photos and videos using their avatar, with the support of the controller. Users can access their own photos and videos, along with media shared on their newsfeed. In September, Facebook announced it would spend up to US$1 billion on original shows for its Facebook Watch platform. On October 16, it acquired the anonymous compliment app tbh, announcing its intention to leave the app independent.In October 2017, Facebook expanded its work with Definers Public Affairs, a PR firm that had originally been hired to monitor press coverage of the company to address concerns primarily regarding Russian meddling, then mishandling of user data by Cambridge Analytica, hate speech on Facebook, and calls for regulation. Company spokesman Tim Miller stated that a goal for tech firms should be to "have positive content pushed out about your company and negative content that's being pushed out about your competitor". Definers claimed that George Soros was the force behind what appeared to be a broad anti-Facebook movement, and created other negative media, along with America Rising, that was picked up by larger media organisations like Breitbart News. Facebook cut ties with the agency in late 2018, following public outcry over their association. Posts originating from the Facebook page of Breitbart News, a media organization previously affiliated with Cambridge Analytica, were among the most widely shared political content on Facebook.
In May 2018 at F8, the company announced it would offer its own dating service. Shares in competitor Match Group fell by 22%. Facebook Dating includes privacy features and friends are unable to view their friends' dating profile. In July, Facebook was charged £500,000 by UK watchdogs for failing to respond to data erasure requests. On July 18, Facebook established a subsidiary named Lianshu Science & Technology in Hangzhou City, China, with $30 million ($37.6 million in 2024 dollars) of capital. All its shares are held by Facebook Hong. Approval of the registration of the subsidiary was then withdrawn, due to a disagreement between officials in Zhejiang province and the Cyberspace Administration of China. On July 26, Facebook became the first company to lose over $100 billion ($125 billion in 2024 dollars) worth of market capitalization in one day, dropping from nearly $630 billion to $510 billion after disappointing sales reports. On July 31, Facebook said that the company had deleted 17 accounts related to the 2018 U.S. midterm elections. On September 19, Facebook announced that, for news distribution outside the United States, it would work with U.S. funded democracy promotion organizations, International Republican Institute and the National Democratic Institute, which are loosely affiliated with the Republican and Democratic parties. Through the Digital Forensic Research Lab Facebook partners with the Atlantic Council, a NATO-affiliated think tank. In November, Facebook launched smart displays branded Portal and Portal Plus (Portal+). They support Amazon's Alexa (intelligent personal assistant service). The devices include video chat function with Facebook Messenger.
In August 2018, a lawsuit was filed in Oakland, California claiming that Facebook created fake accounts to inflate its user data and appeal to advertisers in the process.
In January 2019, the 10-year challenge was started asking users to post a photograph of themselves from 10 years ago (2009) and a more recent photo.
Criticized for its role in vaccine hesitancy, Facebook announced in March 2019 that it would provide users with "authoritative information" on the topic of vaccines. A study published in the journal Vaccine of advertisements posted in the three months prior to that found that 54% of the anti-vaccine advertisements on Facebook were placed by just two organisations funded by well-known anti-vaccination activists. The Children's Health Defense / World Mercury Project chaired by Robert F. Kennedy Jr. and Stop Mandatory Vaccination, run by campaigner Larry Cook, posted 54% of the advertisements. The ads often linked to commercial products, such as natural remedies and books.
On March 14, the Huffington Post reported that Facebook's PR agency had paid someone to tweak Facebook COO Sheryl Sandberg's Wikipedia page, as well as adding a page for the global head of PR, Caryn Marooney.
In March 2019, the perpetrator of the Christchurch mosque shootings in New Zealand used Facebook to stream live footage of the attack as it unfolded. Facebook took 29 minutes to detect the livestreamed video, which was eight minutes longer than it took police to arrest the gunman. About 1.3m copies of the video were blocked from Facebook but 300,000 copies were published and shared. Facebook has promised changes to its platform; spokesman Simon Dilner told Radio New Zealand that it could have done a better job. Several companies, including the ANZ and ASB banks, have stopped advertising on Facebook after the company was widely condemned by the public. Following the attack, Facebook began blocking white nationalist, white supremacist, and white separatist content, saying that they could not be meaningfully separated. Previously, Facebook had only blocked overtly supremacist content. The older policy had been condemned by civil rights groups, who described these movements as functionally indistinct. Further bans were made in mid-April 2019, banning several British far-right organizations and associated individuals from Facebook, and also banning praise or support for them.
NTJ's member Moulavi Zahran Hashim, a radical Islamist imam believed to be the mastermind behind the 2019 Sri Lanka Easter bombings, preached on a pro-ISIL Facebook account, known as "Al-Ghuraba" media.
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On May 2, 2019, at F8, the company announced its new vision with the tagline "the future is private". A redesign of the website and mobile app was introduced, dubbed as "FB5". The event also featured plans for improving groups, a dating platform, end-to-end encryption on its platforms, and allowing users on Messenger to communicate directly with WhatsApp and Instagram users.
On July 31, 2019, Facebook announced a partnership with University of California, San Francisco to build a non-invasive, wearable device that lets people type by simply imagining themselves talking.
On August 13, 2019, it was revealed that Facebook had enlisted hundreds of contractors to create and obtain transcripts of the audio messages of users. This was especially common of Facebook Messenger, where the contractors frequently listened to and transcribed voice messages of users. After this was first reported on by Bloomberg News, Facebook released a statement confirming the report to be true, but also stated that the monitoring program was now suspended.
On September 5, 2019, Facebook launched Facebook Dating in the United States. This new application allows users to integrate their Instagram posts in their dating profile.
Facebook News, which features selected stories from news organizations, was launched on October 25. Facebook's decision to include far-right website Breitbart News as a "trusted source" was negatively received.
On November 17, 2019, the banking data for 29,000 Facebook employees was stolen from a payroll worker's car. The data was stored on unencrypted hard drives and included bank account numbers, employee names, the last four digits of their social security numbers, salaries, bonuses, and equity details. The company did not realize the hard drives were missing until November 20. Facebook confirmed that the drives contained employee information on November 29. Employees were not notified of the break-in until December 13, 2019.
On March 10, 2020, Facebook appointed two new directors Tracey Travis and Nancy Killefer to their board of members.
In June 2020, several major companies including Adidas, Aviva, Coca-Cola, Ford, HP, InterContinental Hotels Group, Mars, Starbucks, Target, and Unilever, announced they would pause adverts on Facebook for July in support of the Stop Hate For Profit campaign which claimed the company was not doing enough to remove hateful content. The BBC noted that this was unlikely to affect the company as most of Facebook's advertising revenue comes from small- to medium-sized businesses.
On August 14, 2020, Facebook started integrating the direct messaging service of Instagram with its own Messenger for both iOS and Android devices. After the update, an update screen is said to pop up on Instagram's mobile app with the following message, "There's a New Way to Message on Instagram" with a list of additional features. As part of the update, the regular DM icon on the top right corner of Instagram will be replaced by the Facebook Messenger logo.
On September 15, 2020, Facebook launched a climate science information centre to promote authoritative voices on climate change and provide access of "factual and up-to-date" information on climate science. It featured facts, figures and data from organizations, including the Intergovernmental Panel on Climate Change (IPCC), Met Office, UN Environment Programme (UNEP), National Oceanic and Atmospheric Administration (NOAA) and World Meteorological Organization (WMO), with relevant news posts.
After the 2020 U.S. presidential election, Facebook temporarily increased the weight of ecosystem quality in its news feed algorithm.
2020–present: FTC lawsuit, corporate re-branding, shut down of facial recognition technology, ease of policy
In January 2021, as part of a redesign, Facebook removed likes from its public pages used by famous people and brands.
Facebook was sued by the Federal Trade Commission as well as a coalition of several states for illegal monopolization and antitrust. The FTC and states sought the courts to force Facebook to sell its subsidiaries WhatsApp and Instagram. The suits were dismissed by a federal judge on June 28, 2021, who stated that there was not enough evidence brought in the suit to determine Facebook to be a monopoly at this point, though allowed the FTC to amend its case to include additional evidence. In its amended filings in August 2021, the FTC asserted that Facebook had been a monopoly in the area of personal social networks since 2011, distinguishing Facebook's activities from social media services like TikTok that broadcast content without necessarily limiting that message to intended recipients.
In response to the proposed bill in the Australian Parliament for a News Media Bargaining Code, on February 17, 2021, Facebook blocked Australian users from sharing or viewing news content on its platform, as well as pages of some government, community, union, charity, political, and emergency services. The Australian government strongly criticised the move, saying it demonstrated the "immense market power of these digital social giants". On February 22, Facebook said it reached an agreement with the Australian government that would see news returning to Australian users in the coming days. As part of this agreement, Facebook and Google can avoid the News Media Bargaining Code adopted on February 25 if they "reach a commercial bargain with a news business outside the Code". Facebook has been accused of removing and shadow banning content that spoke either in favor of protesting Indian farmers or against Narendra Modi's government. India-based employees of Facebook are at risk of arrest. On February 27, 2021, Facebook announced Facebook BARS app for rappers. On June 29, 2021, Facebook announced Bulletin, a platform for independent writers. Unlike competitors such as Substack, Facebook would not take a cut of subscription fees of writers using that platform upon its launch, like Malcolm Gladwell and Mitch Albom. According to The Washington Post technology writer Will Oremus, the move was criticized by those who viewed it as a tactic intended by Facebook to force those competitors out of business.
In October 2021, owner Facebook, Inc. changed its company name to Meta Platforms, Inc., or simply "Meta", as it shifts its focus to building the "metaverse". This change does not affect the name of the Facebook social networking service itself, instead being similar to the creation of Alphabet as Google's parent company in 2015.
In November 2021, Facebook stated it would stop targeting ads based on data related to health, race, ethnicity, political beliefs, religion and sexual orientation. The change will occur in January and will affect all apps owned by Meta Platforms.
In February 2022, Facebook's daily active users dropped for the first time in its 18-year history. According to Facebook's parent Meta, DAUs dropped to 1.929 billion in the three months ending in December, down from 1.930 billion the previous quarter. Furthermore, the company warned that revenue growth would slow due to competition from TikTok and YouTube, as well as advertisers cutting back on spending.
On March 10, 2022, following Russia's invasion of Ukraine, Facebook announced that it would temporarily ease rules against violent speech in some cases when targeted at "Russian invaders", though it would still not tolerate credible threats against Russian civilians. Russia then banned all Meta services, including Instagram.
In September 2022, Jonathan Vanian, a Technology Reporter for CNBC, wrote a piece on CNBC.com about the recent struggles Facebook was experiencing, writing, "Users are jumping ship and advertisers are reducing their spending, leaving Meta poised to report its second straight drop in quarterly revenue." He also cited poor leadership decisions devoting resources to the metaverse, writing, "CEO Mark Zuckerberg spends much of his time proselytizing the metaverse, which may be the company's future but accounts for virtually none of its near-term revenue and is costing billions of dollars a year to build." He also detailed accounts from analysts predicting a "death spiral" for Facebook stock as users leave, ad impressions increase, and the company chases revenue.
October 4, 2021, global service outage
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On October 4, 2021, Facebook had its worst outage since 2008. The outage was global in scope, and took down all Facebook properties, including Instagram and WhatsApp, from approximately 15:39 UTC to 22:05 UTC, and affected roughly three billion users. Security experts identified the problem as a BGP withdrawal of all of the IP routes to their Domain Name (DNS) servers which were all self-hosted at the time. The outage also affected all internal communications systems used by Facebook employees, which disrupted restoration efforts.
The outage cut off Facebook's internal communications, preventing employees from sending or receiving external emails, accessing the corporate directory, and authenticating to some Google Docs and Zoom services. The outage had a major impact on people in the developing world, who depend on Facebook's "Free Basics" program, affecting communication, business and humanitarian work.
Facebook's chief technology officer, Mike Schroepfer, wrote an apology after the downtime had extended to several hours, saying, "Teams are working as fast as possible to debug and restore as fast as possible."
Shutdown of facial recognition
On November 2, 2021, Facebook announced it would shut down its facial recognition technology and delete the data on over a billion users. Meta later announced plans to implement the technology as well as other biometric systems in its future products, such as the metaverse.
The shutdown of the technology will reportedly also stop Facebook's automated alt text system, used to transcribe media on the platform for visually impaired users.
In February 2023, Meta CEO Mark Zuckerberg announced that Meta would start selling blue "verified" badges on Instagram and Facebook.
Financials
Initial funding
Facebook was initially incorporated as a Florida LLC. For the first few months after its launch in February 2004, the costs for the website operations for thefacebook.com were paid for by Mark Zuckerberg and Eduardo Saverin, who had taken equity stakes in the company. The website also ran a few advertisements to meet its operating costs.
First angel investment
In the summer of 2004, venture capitalist Peter Thiel made a $500,001 angel investment in the social network Facebook for 10.2% of the company and joined Facebook's board. This was the first outside investment in Facebook.
In his book The Facebook Effect, David Kirkpatrick outlines the story of how Thiel came to make his investment: former Napster and Plaxo employee Sean Parker, who at the time had assumed the title of "President" of Facebook, was seeking investors for Facebook. Parker approached Reid Hoffman, the CEO of work-based social network LinkedIn. Hoffman liked Facebook but declined to be the lead investor because of the potential for conflict of interest with his duties as LinkedIn CEO. He redirected Parker to Peter Thiel, whom he knew from their PayPal days (both Hoffman and Thiel are considered members of the PayPal Mafia). Thiel met Parker and Mark Zuckerberg, the Harvard college student who had founded Facebook and controlled it. Thiel and Zuckerberg got along well and Thiel agreed to lead Facebook's seed round with $500,000 for 10.2% of the company. Hoffman and Mark Pincus also participated in the round, along with Maurice Werdegar who led the investment on behalf of Western Technology Investment. The investment was originally in the form of a convertible note, to be converted to equity if Facebook reached 1.5 million users by the end of 2004. Although Facebook narrowly missed the target, Thiel allowed the loan to be converted to equity anyway. Thiel said of his investment:
Accel investment (Series A)
In April 2005, Accel Partners agreed to make a $12.7 million venture capital investment in a deal that valued Facebook at $98 million. Accel joined Facebook's board, and the board was expanded to five seats, with Zuckerberg, Thiel, and Accel's Jim Breyer in three of the seats, and the other two seats currently being empty but with Zuckerberg free to nominate anybody to those seats.
Greylock investment (Series B)
In April 2006, Facebook closed its Series B funding round. This included $27.5 million from a number of venture capitalists, including Greylock Partners and Meritech Capital, plus additional investments from Peter Thiel and Accel Partners. The valuation for this round was about $500 million.
A leaked cash flow statement showed that during the 2005 fiscal year, Facebook had a net gain of $5.66 million.
Sales negotiations
With the sale of social networking website MySpace to News Corp on July 19, 2005, rumours surfaced about the possible sale of Facebook to a larger media company. Zuckerberg had already stated that he did not want to sell the company, and denied rumors to the contrary. On March 28, 2006, BusinessWeek reported that a potential acquisition of Facebook was under negotiation. Facebook reportedly declined an offer of $750 million from an unknown bidder, and it was rumored the asking price rose as high as $2 billion.
In September 2006, serious talks between Facebook and Yahoo! took place concerning acquisition of Facebook, with prices reaching as high as $1 billion. Thiel, by then a board member of Facebook, indicated that Facebook's internal valuation was around $8 billion based on their projected revenues of $1 billion by 2015, comparable to Viacom's MTV brand, a company with a shared target demographic audience.
On July 17, 2007, Zuckerberg said that selling Facebook was unlikely because he wanted to keep it independent, saying "We're not really looking to sell the company ... We're not looking to IPO anytime soon. It's just not the core focus of the company." In September 2007, Microsoft approached Facebook, proposing an investment in return for a 5% stake in the company, offering an estimated $300–500 million. That month, other companies, including Google, expressed interest in buying a portion of Facebook.
Microsoft investment (Series C)
On October 24, 2007, Microsoft announced that it had purchased a 1.6% share of Facebook for $240 million, giving Facebook a total implied value of around $15 billion. However, Microsoft bought preferred stock that carried special rights, such as "liquidation preferences" that meant Microsoft would get paid before common stockholders if the company were sold. Microsoft's purchase also included the right to place international ads on Facebook. In November 2007, Hong Kong billionaire Li Ka-shing invested $60 million in Facebook.
DST investment
In 2009, Yuri Milner's DST (which later split into DST Global and Mail.ru Group), alongside Uzbek Russian metals magnate Alisher Usmanov, invested $200 million in Facebook when it was valued at $10 billion. A separate stake was also acquired by Usmanov's USM Holdings on another occasion. According to the New York Times in 2013, "Mr. Usmanov and other Russian investors at one point owned nearly 10 percent of Facebook, though precise details of their ownership stakes are difficult to assess." It was later revealed in 2017 by the Paradise Papers that lending by Russian state-backed VTB Bank and Gazprom's investment vehicle partially financed these 2009 investments, although Milner was reportedly unaware at the time.
Switch to profitability
In August 2008, BusinessWeek reported that private sales by employees, as well as purchases by venture capital firms, were being done at share prices that put the company's total valuation at between $3.75 billion and $5 billion. In October 2008, Zuckerberg said "I don't think social networks can be monetized in the same way that search did ... In three years from now we have to figure out what the optimum model is. But that is not our primary focus today."
Facebook hired Sheryl Sandberg as its chief operating officer in March 2008. Sandberg is reported to have held a number of brainstorming sessions with Facebook employees on their long-term monetization strategy, which led to the conclusion that advertising would be the main source of monetization. Under Sandberg's leadership, Facebook made a number of changes to its advertising model with the aim of achieving profitability. In September 2009, Facebook stated that it had turned cash flow positive for the first time.
In early 2012, Facebook disclosed that its profits had jumped 65% to $1 billion in the previous year when its revenue, which is mainly from advertising, had jumped almost 90% to $3.71 billion. Facebook also reported that 56% of its advertising revenue comes from the United States alone, and that 12% of its revenue comes from Zynga, the social network game development company. Payments and other fees were $557 million up from $106 million the previous year.
Acquisitions
In August 2009, Facebook acquired social media real-time news aggregator FriendFeed, a startup created by Gmail's first engineer Paul Buchheit.
In February 2010, Facebook acquired Malaysian contact-importing startup Octazen Solutions. On April 2, 2010, Facebook announced acquisition of a photo-sharing service called Divvyshot for an undisclosed amount. In June 2010, an online marketplace for trading private Facebook stock reflected a valuation of $11.5 billion.
On April 12, 2012, Facebook acquired photo sharing service Instagram for approximately $1 billion in cash and stock.
On March 8, 2013, Facebook announced that they acquired the team from Storylane, but not the product itself. On October 13, 2013, Facebook acquired Onavo, an Israeli analytics company, for approximately $120 million.
On February 19, 2014, Facebook announced its acquisition of WhatsApp, a smartphone instant messaging application for $19 billion in a mix of stock and cash. The acquisition is the most ever paid for a venture-capital backed startup.
On March 25, 2014, Facebook announced they had acquired virtual reality startup Oculus VR for $2 billion in cash and stock.
Initial public offering
Facebook filed for an initial public offering (IPO) on February 1, 2012. The preliminary prospectus stated that the company was seeking to raise $5 billion. The document announced that the company had 845 million active monthly users and its website featured 2.7 billion daily likes and comments. After the IPO, Zuckerberg retains a 22% ownership share in Facebook and owns 57% of the voting shares.
Underwriters valued the shares at $38 each, pricing the company at $104 billion, the largest valuation to date for a newly public company. On May 16, one day before the IPO, Facebook announced that it would sell 25% more shares than originally planned due to high demand. The IPO raised $16 billion, making it the third largest in U.S. history (just ahead of AT&T Wireless and behind only General Motors and Visa Inc.). The stock price left the company with a higher market capitalization than all but a few U.S. corporations – surpassing heavyweights such as Amazon.com, McDonald's, Disney, and Kraft Foods – and made Zuckerberg's stock worth $19 billion. The New York Times stated that the offering overcame questions about Facebook's difficulties in attracting advertisers to transform the company into a "must-own stock". Jimmy Lee of JPMorgan Chase described it as "the next great blue-chip". Writers at TechCrunch, on the other hand, expressed skepticism, stating, "That's a big multiple to live up to, and [Facebook] will likely need to add bold new revenue streams to justify the mammoth valuation".
Trading in the stock, which began on May 18, was delayed that day due to technical problems with the NASDAQ exchange. The stock struggled to stay above the IPO price for most of the day, forcing underwriters to buy back shares to support the price. At closing bell, shares were valued at $38.23, only $0.23 above the IPO price and down $3.82 from the opening bell value. The opening was widely described by the financial press as a disappointment. The stock nonetheless set a new record for trading volume of an IPO. On May 25, 2012, the stock ended its first full week of trading at $31.91, a 16.5% decline.
On 22 May, regulators from Wall Street's Financial Industry Regulatory Authority announced that they had begun to investigate whether banks underwriting Facebook had improperly shared information only with select clients, rather than the general public. Massachusetts Secretary of State William Galvin subpoenaed Morgan Stanley over the same issue. The allegations sparked "fury" among some investors and led to the immediate filing of several lawsuits, one of them a class action suit claiming more than $2.5 billion in losses due to the IPO. Bloomberg estimated that retail investors may have lost approximately $630 million on Facebook stock since its debut.