Case Study- Facebook

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CASE: E-220 DATE: 05/22/08

FACEBOOK
INTRODUCTION

In January 2008 Mark Zuckerberg was interviewed on 60 minutes to talk about Facebook and its phenomenal growth since it started as a project in the dorms of Harvard University in 2004. The interviewer could not help but comment on how young he was and wonder whether he was old enough to run a company that many think is the biggest thing since Google. The company had grown to over 60 million users and was expected to grow to 200 million by the end of the year, and Microsoft had recently invested $240MM at an implied valuation of $15 billion. Yet there remained doubts about Facebook. Beacon, Facebook’s latest attempt at boosting the company’s revenues, was received with much criticism for violating users’ privacy, and Zuckerberg had to apologize to his users. A few months after Facebook launched its application platform F8, Google had launched its own social networking platform, OpenSocial. While F8 allowed application developers to benefit from Facebook’s growing user base, OpenSocial aimed at allowing these same application developers to access the users of many social networks, and most of the big social networking sites – MySpace, Bebo, Hi5, and others – had joined Open Social. Zuckerberg and his management team had accomplished a lot in four short years, but the challenges ahead were even greater than those they had overcome to date. Ziad Mokhtar and Gabriel Tavridis prepared this case under the supervision of Professor William P. Barnett, Thomas M. Siebel Professor of Business Leadership, Strategy and Organizations, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This case draws on material from an earlier version written by Mike Harkey. Copyright © 2008 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: cwo@gsb.stanford.edu or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business.

Facebook E-220

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THE BEGINNING Facebooks have been on college campuses for years. They were paper student directories distributed to students every fall. Typically they contained an inventory of basic information about each student: hometown, high school, major, extracurricular interests, and, naturally, a photograph, ranging from a formal high school graduation portrait to a snapshot at the prom to an action photo of the student engaging in a summer hobby of choice. Many college students had their facebooks committed to memory before the end of the first week of school. Facebooks can be a helpful resource for a student who is, say, attempting to learn the name of the person in astronomy class who has offered to start a study group, or for a student who wants to find someone who would also like to mountain bike. Of course, students might also identify a potential romantic partner in the college facebook. In all these ways, facebooks have helped students to connect with one another. So it was that Mark Zuckerberg, an undergraduate psychology major at Harvard University, could not understand why no one had thought to put his college’s facebook online: “During my sophomore year, I decided that Harvard needed a facebook. It didn’t have one, so I made it.” In January 2004, Harvard had facebooks for different residential houses, but students could only search those to which they belonged. Zuckerberg’s idea was to create a college-wide facebook online, where students could access others regardless of where they lived....
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