Facebook Overview and History
Facebook began life as FaceMash, a website started by Mark Zuckerberg while he was attending Harvard that purported to rate the physical attractiveness of his fellow students. While some might find this a rather dubious endeavor, there’s no question that the site took off; according to Fast Company, it attracted 450 visitors and 22,000 photo views in the first four hours it was online.
Eventually, FaceMash was sold, and Zuckerberg turned to a new project called TheFacebook. Launched in 2004, TheFacebook was intended to help connect people on campus. One of Zuckerberg’s friends suggested that he share the site with an online mailing list of several hundred people, and as a result, at least 1,200 people registered on TheFacebook within a day. Within a month, more than half of Harvard undergraduates had joined.
With the help of some business partners, TheFacebook eventually expanded to other campuses, including Stanford, Columbia, and Yale. Eventually, the majority of US and Canadian universities could access it. In 2004, Facebook Inc. was formed.
Here are some other notable developments:
- In 2005, the company expanded to 21 universities in the UK, Australia, New Zealand, and other countries and also launched a version for high school students.
- Facebook had 6 million users by the end of 2005, and in September 2006, it became available to everyone aged 13 or older who had a valid email address.
- Zuckerberg started marketing Facebook to companies around the same time, pitching the platform as a way to advertise to and attract customers.
- CEO Cheryl Sandburg started with the company in March 2008 and was instrumental in Facebook’s decision to make money primarily through targeted advertising.
- Facebook established its international headquarters in Dublin, Ireland, in October 2008.
- In September 2009, Facebook announced it had made its first net profit.
- The company had become the world’s largest online photo host by February 2011, and by October of that year, more than 350 million users were accessing the site on mobile phones.
- By early 2012, Facebook said its profits had grown by 65% to $1 billion in 2011 due to its skyrocketing advertising revenue.
- Yahoo sued Facebook for infringement of patents related to ad targeting, privacy controls, and related issues in March 2012.
- Facebook filed for an initial public offering in February 2012, claiming 845 million active monthly users.
- Facebook live launched in August 2015.
- Facebook Marketplace launched in the US, UK, Australia, and New Zealand in October 2016.
Since then, Facebook has made a number of changes to its platform in an effort to combat spam, misinformation, clickbait, and other unwelcome content and invasions of users’ privacy. However, critics say these efforts have been insufficient, and controversy continues to swirl around the company.
For example, the U.S. Federal Trade Commission announced an investigation into allegations that the British political consulting firm Cambridge Analytica used personal information from Facebook profiles to profile voters. Zuckerberg was called to testify on Capitol Hill regarding the matter, and the FTC ultimately imposed a $5 billion fine and sweeping new privacy restrictions on the company.
Facebook Business Model
Targeted advertising currently accounts for about 98% of Facebook’s revenue. Most of its services are free to users, who in turn provide a rich trove of data for advertisers. Ads appear on Facebook and other platforms it owns, including Instagram, Messenger, and WhatsApp.
Companies target ads based on a variety of factors such as age, gender, behaviors, interests, and location. Ad prices are set through an auction system and depend in part on performance, including click-through rates and impressions.
Facebook has arguably been able to use targeted advertising better than any other social media platform because of the extensive nature of the information that its users provide. This includes everything from what they had for breakfast that morning to vacation plans to medical issues.
All of this data is fair game for advertisers, who have leveraged it to show ads that can be almost uncanny in how exquisitely they are tailored to specific users. For this reason, Zuckerberg has said Facebook doesn’t “sell” users’ data to third parties because that would essentially entail handing over the company’s most valuable asset.
However, whether Facebook actually sells users’ data or simply allows advertisers to target ads with it is seen by privacy advocates as a distinction without a difference. Not only do Facebook’s apps suck up copious amounts of data itself, but the company has also persuaded millions of business partners to install tracking software on their own apps and websites as well. This means that anything you do on those partners’ websites – buy groceries, read political commentary, research a vacation destination, watch a TV show, etc. – is ultimately fed to Facebook, which tries to match up those activities with your account and adjust your ads and news feed accordingly.
In large part because Facebook has become ubiquitous and nearly inescapable, last year, the FTC filed another lawsuit against the company accusing it of anticompetitive behavior. The lawsuit is still pending, and experts say it’s far from certain who will prevail.
That said, targeted advertising and usage tracking also allow Facebook to present a unique value proposition for the general public. Not only can users keep in touch with family and friends, but they can also view news feeds specifically tailored to their tastes in a way that would be impossible without targeted advertising. This includes seeing ads that users are much more likely to be interested in, as well as the opportunity to engage with companies that fit their lifestyles.
Unfortunately for Facebook, Apple recently made generating revenue through targeted ads more difficult. During his interview on the Startup Savant podcast, Alex Song, founder of Proxima, noted that iOS 14.5 now requires Apple device users to affirmatively allow applications – including Facebook’s iOS app – to track their behavior. Previously, such tracking was automatically allowed unless users opted out.
According to Alex, 80% of people opt out of being tracked, which makes it much harder for Facebook and other companies to specifically target ads. It also makes it less clear how effectively their advertising dollars are being spent.
Facebook Marketing Strategies
According to Noah Kagan, a writer for Fast Company who once worked at Facebook, the company has adopted several strategies to market itself.
It Focuses on Expanding Internationally
In 2013, Facebook realized that fewer than 20% of its monthly active users were from the US or Canada. It thus worked to expand its international presence by using the local language in every country where it was available. Today, the vast majority of the company’s growth is outside of North America.
It Doesn’t Try to Be All Things to All People
Every successful company needs to find its target audience and cater to their interests, and Facebook is no exception. Zuckerberg did this early by targeting his first product, TheFacebook, specifically to college students. Once they were hooked on the service and provided it with a sound financial footing, he could focus on expanding to other demographic groups.
It Focuses on Design
Like Apple’s founder Steve Jobs, Zuckerberg reportedly was and is extremely interested in perfecting the design of Facebook. This shows in everything from the easy-to-use interface to the addictive nature of users’ scrolling news feeds.
It Helps Users Discover Trending Content
Like some other social media platforms, notably Twitter, Facebook makes it easy to find content that’s likely to be of interest to many users. It does this through Trending Topics, which tracks the topics and stories that users are discussing the most.
It Identifies and Maximizes What Works
Facebook found that importing users’ address books and then sending people in those address books marketing emails was a great way to recruit new users. As a result, it added address book importing to its sign-up process and even purchased a company that specializes in that activity.
In addition, Facebook asks new users for their personal email addresses and sends them emails several times a day or week. Users can turn off these emails in their settings, but many probably never bother.
Although Facebook’s marketing efforts have been extremely successful overall, cracks are starting to show. For example, a Pew Research Center study found that only 32% of teens say they use Facebook, down from 71% in 2014–2015. YouTube, TikTok, Instagram and Snapchat are much more popular among people in that age group. This is a major reason why Facebook purchased Instagram in 2012.
What’s Next for Facebook
Facebook’s most significant plans for the future involve developing hardware and software for the “metaverse,” a digital platform that combines social media like Facebook with virtual reality (VR), augmented reality (AR), and other internet-based technologies.
In this shared virtual environment, people will be able to interact through avatars, use cryptocurrencies to purchase things, play online games, use AR to enhance the real world with overlaid visual and other sensory input, and visit entirely digital realms in three-dimensional VR spaces. Users will need sophisticated glasses or headsets connected to relatively powerful computers running specialized software.
Last year, Zuckerberg rebranded Facebook as Meta and announced that the company would go all-in on developing a metaverse that it owned and controlled. To that end, Meta has been working through its Reality Labs division to develop both AR and VR products that will allow its users to interact in the metaverse.
For example, the company’s Oculus VR headsets are already on sale, along with related apps and games. Reality Labs is also developing:
- A video-calling service dubbed Meta Portal
- Additional gaming, fitness, remote work, educational, and other apps for its Quest 2 VR headsets
- More sophisticated (and expensive) VR headsets and glasses like the Meta Quest Pro
- A glove that provides haptic feedback so users can “feel” virtual objects while wearing VR headgear
A longer-term goal is to develop even more immersive headsets that pass the “visual Turing test” (i.e., display images and other content that are indistinguishable from reality). This is a test that Meta says no VR technology can currently pass due to a number of technical limitations like resolution and distortion.
Despite the challenges ahead, Facebook said in its third quarter 2021 earnings report that it plans to spend some $10 billion on developing technologies to expand the metaverse and make it accessible to more users. “We are dedicating significant resources toward our augmented and virtual reality products and services, which are an important part of our work to develop the next generation of online social experiences,” it said.
Zuckerberg clearly believes that the metaverse is not only its future but the future of the entire internet. It’s "going to be a big focus [of Facebook's], and I think that this is just going to be a big part of the next chapter for the way that the Internet evolves," he told The Verge just before the company’s name officially changed.
Zuckerberg summed it up best during his keynote presentation at Facebook’s Connect conference in October 2021, Hypebeast reported. “As we move beyond what’s possible today, beyond the constraints of screens, beyond the limits of distance and physics, and towards a future where everyone can be present with each other, create new opportunities and experience new things,” he said. “It is a future that is beyond any one company and that will be made by all of us.”