This is the history of the world's largest social network service, Facebook.

Facemash[link]

Mark Zuckerberg created Facebook in his Harvard dorm room.

Facemash, the Facebook’s predecessor, opened on October 28, 2003.^[1] Initially, the website was invented by a Harvard student, Mark Zuckerberg, and three of his classmates – Eduardo Saverin, Chris Hughes and Dustin Moskovitz. Zuckerberg wrote the software for the Facemash website when he was in his second year of college. The website was set up as a type of “hot or not” game for Harvard students. The website allowed visitors to compare two student pictures side-by-side and let them choose who was “hot” and who was “not”.

That night, Zuckerberg wrote the following blog entries:^[2][3][4]

I'm a little intoxicated, not gonna lie. So what if it's not even 10 pm and it's a Tuesday night? What? The Kirkland dormitory facebook is open on my desktop and some of these people have pretty horrendous facebook pics. I almost want to put some of these faces next to pictures of farm animals and have people vote on which is more attractive.

—9:48 pm

Yea, it's on. I'm not exactly sure how the farm animals are going to fit into this whole thing (you can't really ever be sure with farm animals...), but I like the idea of comparing two people together.

—11:09 pm

Let the hacking begin.

—12:58 am

According to The Harvard Crimson, Facemash "used photos compiled from the online facebooks of nine Houses, placing two next to each other at a time and asking users to choose the 'hotter' person". To accomplish this, Mark Zuckerberg hacked into Harvard’s security network and copied the student ID images used by dormitories and used them to populate his Facemash website.

Harvard at that time did not have a student directory with photos and basic information, and with the initial site generated 450 visitors and 22,000 photo-views in its first four hours online.^[5] That the initial site mirrored people’s physical community—with their real identities—represented the key aspects of what later became Facebook.^[6]

"Perhaps Harvard will squelch it for legal reasons without realizing its value as a venture that could possibly be expanded to other schools (maybe even ones with good-looking people...)," Zuckerberg wrote in his personal blog. "But one thing is certain, and it’s that I’m a jerk for making this site. Oh well. Someone had to do it eventually..."^[7] The site was quickly forwarded to several campus group list-servers. However, the website was shut down by Harvard executives a few days after it opened. Mark Zuckerberg faced charges of violating copyrights, breach of security, and violating individual privacy for stealing the student pictures that he used to populate the website. He later faced expulsion from Harvard University for his actions. However, all the charges were eventually dropped.^[8]

Zuckerberg expanded on this initial project that semester by creating a social study tool ahead of an art history final. He uploaded 500 Augustan images to a website, with one image per page along with a comment section.^[6] He opened the site up to his classmates and people started sharing their notes. "The professor said it had the best grades of any final he’d ever given. This was my first social hack. With Facebook, I wanted to make something that would make Harvard more open," Zuckerberg said in a TechCrunch interview.

On October 25, 2010, entrepreneur and banker Rahul Jain auctioned off FaceMash.com to an unknown buyer for $30,201.^[9][10]

thefacebook.com[link]

In January 2004, Mark Zuckerberg began writing the code for a new website, known as 'thefacebook'. He said in an article in The Harvard Crimson that he was inspired to make Facebook from the incident of Facemash: "It is clear that the technology needed to create a centralized Website is readily available ... the benefits are many."^[2] On February 4, 2004, Zuckerberg launched "Thefacebook", originally located at thefacebook.com.^[11] He told The Crimson, "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 as I can do it better than they can, and I can do it in a week."^[12] Zuckerberg also stated his intention to create a universal website that can contact people around the university. According to his roommate, Dustin Moskovitz, "When Mark finished the site, he told a couple of friends ... then one of them suggested putting it on the Kirkland House online mailing list, which was ... three hundred people." Moskovitz continued to say that, “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."^[13]

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.^[14]

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 have ever entered an incorrect password into TheFacebook.com. In the cases in which they had failed to login, Mark 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 and was settled after.^[14] The three later filed a lawsuit against Zuckerberg, later settling.^[15]

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.^[16] Eduardo Saverin (business aspects), Dustin Moskovitz (programmer), Andrew McCollum (graphic artist), and Chris Hughes soon joined Zuckerberg to help promote the website. In March 2004, Facebook expanded to Stanford, Columbia, and Yale.^[17] This expansion continued when it opened to all Ivy League and Boston-area schools. It gradually reached most universities in Canada and the United States.^[18][19][20] Facebook was incorporated in the summer of 2004, and the entrepreneur Sean Parker, who had been informally advising Zuckerberg, became the company's president.^[21] In June 2004, Facebook moved its base of operations to Palo Alto, California.^[17] The company dropped ‘The’ from its name after purchasing the domain name facebook.com in 2005 for $200,000.^[22]

Facebook[link]

On October 1, 2005, Facebook expanded to twenty-one universities in the United Kingdom, the Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM) system in Mexico (around thirty campuses throughout the country at the time), the University of Puerto Rico and Interamerican University of Puerto Rico network in Puerto Rico, and the University of the Virgin Islands network in the U.S. Virgin Islands. Facebook launched a high school version in September 2005, which Zuckerberg called the next logical step.^[32] At that time, high school networks required an invitation to join.^[33] Facebook later expanded membership eligibility to employees of several companies, including Apple Inc. and Microsoft.^[34] On December 11, 2005, universities in Australia and New Zealand were added to the Facebook network, bringing its size to 2,000+ colleges and 25,000 + high schools throughout the United States, Canada, Mexico, the United Kingdom, Australia, New Zealand, and Ireland. Facebook was then opened on September 26, 2006 to everyone ages 13 and older with a valid e-mail address.^[35][36] In October 2008, Facebook announced that it would set up its international headquarters in Dublin, Ireland.^[37]

In 2010, Facebook began to invite users to become beta testers after passing a question-and-answer-based selection process,^[38] and a set of Facebook Engineering Puzzles where users would solve computational problems which gave them an opportunity to be hired by Facebook.^[39]

As of February 2011, Facebook had become the largest online photo host, being cited by Facebook application and online photo aggregator Pixable as expecting to have 100 billion photos by summer 2011.^[40] As of October 2011, over 350 million users accessed Facebook through their mobile phones, accounting for 33% of all Facebook traffic.^[41]

On March 12, 2012, Yahoo! filed suit in a U.S. federal court against Facebook weeks before the scheduled Facebook initial public offering. In its court filing, Yahoo said that Facebook had infringed on ten of its patents covering advertising, privacy controls and social networking. Yahoo had threatened to sue Facebook a month before the filing, insisting that the social network license its patents. A spokesperson for Facebook issued a statement saying "We're disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation".^[42] The lawsuit claims that Yahoo's patents cover basic social networking ideas such as customizing website users' experiences to their needs, adding that the patents cover ways of targeting ads to individual users.^[43]

Financials[link]

Facebook's former headquarters in downtown Palo Alto, California

Facebook received its first investment of US$500,000 in June 2004 from PayPal co-founder Peter Thiel, in exchange for 7% of the company.^[44] This was followed a year later by $12.7 million in venture capital from Accel Partners, and then $27.5 million more from Greylock Partners.^[44][45] A leaked cash flow statement showed that during the 2005 fiscal year, Facebook had a net loss of $3.63 million.^[46]

With the sale of social networking website, MySpace, to News Corp on July 19, 2005, rumors surfaced about the possible sale of Facebook to a larger media company.^[47] Zuckerberg had already stated that he did not want to sell the company, and denied rumors to the contrary.^[48] 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.^[49]

In September 2006, serious talks between Facebook and Yahoo! took place concerning acquisition of Facebook, with prices reaching as high as $1 billion.^[50][51] 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.^[52]

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."^[53] In September 2007, Microsoft approached Facebook, proposing an investment in return for a 5% stake in the company, offering an estimated $300–500 million.^[54] That month, other companies, including Google, expressed interest in buying a portion of Facebook.^[55]

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.^[56] 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.^[57] In November 2007, Hong Kong billionaire Li Ka-shing invested $60 million in Facebook.^[58]

Entrance to Facebook's Former headquarters in the Stanford Research Park, Palo Alto, California. In January 2012 the company moved to a new campus in Menlo Park, California.

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.^[57] 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."^[59]

In August 2009, Facebook acquired social media real-time news aggregator FriendFeed,^[60] a startup created by Gmail's first engineer Paul Buchheit.^[61][62][63] In September 2009, Facebook stated that it had turned cash flow positive for the first time.^[64] In February 2010, Facebook acquired Malaysian contact-importing startup Octazen Solutions.^[65] On April 2, 2010, Facebook announced acquisition of photo-sharing service called Divvyshot for an undisclosed amount.^[66] In June 2010, an online marketplace for trading private Facebook stock reflected a valuation of $11.5 billion.^[67]

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.^[68] Facebook also reported that 56% of its advertising revenue comes from the U.S 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.^[69]

IPO[link]

Facebook filed for an initial public offering (IPO) on February 1, 2012.^[70] 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.^[71] After the IPO, Zuckerberg will retain a 22% ownership share in Facebook and will own 57% of the voting shares.^[72]

Underwriters valued the shares at $38 each, pricing the company at $104 billion, the largest valuation to date for a newly public company.^[73] On May 16, one day before the IPO, Facebook announced that it would sell 25% more shares than originally planned due to high demand.^[74] 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.).^[75][76] 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.^[75][76] 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".^[75] 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".^[77]

Trading in the stock, which began on May 18, was delayed that day due to technical problems with the NASDAQ exchange.^[78] The stock struggled to stay above the IPO price for most of the day, forcing underwriters to buy back shares to support the price.^[79] At closing bell, shares were valued at $38.23,^[80] 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.^[81] The stock nonetheless set a new record for trading volume of an IPO.^[82] On 25 May 2012, the stock ended its first full week of trading at $31.91, a 16.5% decline.^[83]

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 subpeonaed Morgan Stanley over the same issue.^[84] 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.^[85] Bloomberg estimated that retail investors may have lost approximately $630 million on Facebook stock since its debut. ^[86]

Notes[link]

References[link]

Eduardo Saverin
Born	(1982-03-13) March 13, 1982 (age 30) São Paulo, Brazil
Residence	Singapore
Citizenship	Brazil[1][2]
Alma mater	Harvard University (B.S., Economics, 2006)
Known for	Co-founder of Facebook
Net worth	US $2 billion (March 2012)[3]

Eduardo Luiz Saverin^[4][5] (born March 13, 1982;^[6] Portuguese: [eduˈaɾdu ˈsaveɾĩ] or [saveˈɾĩˑ]) is a Brazilian internet entrepreneur and investor.^[7] Saverin is one of four co-founders of Facebook, along with Mark Zuckerberg, Dustin Moskovitz, and Chris Hughes.^[8] As of 2012, he owns less than 5% of Facebook's shares and has a net worth of $2 billion, according to Forbes. He has also invested in early-stage startups such as Qwiki^[9] and Jumio.^[10]

Personal life[link]

Eduardo Saverin was born in São Paulo, Brazil, to a wealthy Jewish Brazilian family,^{[11][12][13][14]} and was raised in Rio de Janeiro, Brazil and Miami, Florida. Eduardo's father was a Brazilian industrialist working in export, clothing, shipping, and real estate.^[15]

By 1993, Saverin's father had become wealthy, and in 1993 it was discovered that his son Eduardo´s name had been placed on a list of kidnapping victims by gangs specializing in kidnapping for ransom. As a result, the family moved to Miami to find a safer place to live. Saverin attended Gulliver Preparatory School in Miami, and went on to Harvard University, where he was a member of the Phoenix S.K. Club as well as president of the Harvard Investment Association. While an undergraduate at Harvard, Saverin took advantage of Brazil's lax insider trading regulations and made $300,000 via strategic investments in the oil industry.^[16][15][17] In 2006, Saverin graduated magna cum laude from Harvard University with a bachelor's degree in economics. He is a member of the Alpha Epsilon Pi Fraternity (Eta Psi chapter of Harvard University).

Saverin has lived in Singapore since 2009.^[18][19] In September 2011, he renounced his U.S. citizenship; the citizenship change may reduce the capital gains taxes Saverin pays after the Facebook IPO, although his taxes may increase initially.^[7][20] Saverin's renunciation of U.S. citizenship may result in his not being permitted to enter the U.S. in the future if the Ex-Patriot Act, which was proposed in response to Saverin's anouncement, becomes law.^[21][22]

Facebook[link]

During his junior year at Harvard University, Saverin met fellow Harvard undergraduate, sophomore Mark Zuckerberg. Noting the lack of a dedicated social networking website for Harvard students, the two worked together to launch The Facebook in 2004. As co-founder, Saverin held the role of chief financial officer and business manager.^[23] As Facebook rapidly expanded to universities across the US, internal conflicts and differences of opinion between Saverin and Zuckerberg regarding Facebook's direction resulted in Saverin's diminished involvement and influence in Facebook. The conflict peaked when Saverin's shares were diluted from the original 34.4%.

A lawsuit filed by Saverin against Facebook was settled out of court. Though terms of the settlement were not disclosed, the company affirmed Saverin's title as co-founder of Facebook. Saverin signed a non-disclosure contract after the settlement.^[24]

As of 2010, Saverin has liquidated at least $250 million worth of Facebook stock to later-stage investors such as Digital Sky Technologies ^[25][26], as well as via secondary exchanges like SharesPost.^[27]

Depictions in media[link]

In the 2010 film The Social Network, which depicts the relationship between Saverin and Mark Zuckerberg from the creation of Facebook to Saverin taking legal action against Zuckerberg, Saverin is played by actor Andrew Garfield. Garfield's portrayal of Saverin was met with critical acclaim and received nominations for the Golden Globe Award for Best Supporting Actor - Motion Picture, BAFTA Award for Best Actor in a Supporting Role,^[28] and the Broadcast Film Critics Association Award for Best Supporting Actor.

References[link]

Further reading[link]

• Saverin, Eduardo, "Facebook Co-Founder Speaks Publicly: What I Learned From Watching 'The Social Network'", CNBC, Friday, 15 Oct 2010.

External links[link]

• Eduardo Saverin on Facebook
• Profile at Forbes
• Works by or about Eduardo Saverin in libraries (WorldCat catalog)