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What friends are for

Mark Zuckerberg has given his young company a sweeping mission. Facebook’s raison d’être, says its baby-faced chief executive, is “to give people the power to share, in order to make the world more open and connected”.

If that sounds like a self-conscious echo of the famously expansive mission statement of another young internet company, it is no coincidence. Google had the effrontery to claim that it would one day “organise the world’s information and make it universally accessible”. Mr Zuckerberg seems to suggest he has found a better way of doing it, with people rather than algorithms at the centre.

Until recently, it was easy to dismiss such ambitions as the hubristic musings of a young upstart. After all, Mr Zuckerberg founded the social networking site just five years ago in his Harvard dorm. Until 2006, only high school and college students could join. Facebook, which allows people to keep track of what friends say and do, was not even the largest such network; MySpace boasted more users.

Yet after a year of rapid growth that has seen it eclipse MySpace and join the ranks of the world’s most visited websites – it now gets more page hits a day than Yahoo – Facebook has reached a critical point. The tantalising prospect for Mr Zuckerberg is that his creation is evolving from somewhere teens spend their idle hours into one of the internet’s dominant platforms, a place that hundreds of millions of people turn to as their starting point and main focus of activity as they move around the internet.

“By now we feel like it’s a really universal thing,” says Mr Zuckerberg, perched on a couch in the company’s new offices in Palo Alto, California. Facebook, he explains, is no longer just a time waster for the young but a valuable communications tool for everyone from grandparents in Scotland to small business owners in Slovenia. “Over time we can keep on growing and spread to almost anyone.”

The challenges presented by this vast ambition, however, are daunting. Facebook expects to take in about $500m (£305m, €357m) in revenues this year but it will spend more than that as it races to build its global presence. Even by its own projections, revenues may not exceed costs until the end of next year.

Nor has it shown that it can unlock the huge money-making potential presented by turning itself into a focus of so much internet activity. As the biggest social network, Facebook has a trove of personal data about its 225m or so active users and a unique view into the social connections that underpin much of the communication and interaction on the web. Traditional forms of web advertising, though, do not sit well alongside much of this highly personal information and Facebook has yet to devise a method that takes advantage of the role it plays in its users’ online lives.

Also, as Facebook seeks to broaden its reach across the web, it seems that unexpected new ways of interacting online can still emerge almost overnight. The sudden rise of Twitter, the micro-blogging service, proves internet users are still willing to change their habits with surprising speed. It raises the question of whether Facebook, like the social networks it eclipsed, could soon be passé.

Mr Zuckerberg admits that Twitter caught Facebook unawares, though he plays down its significance. “When Twitter were first starting to go through their big growth, I looked at them and thought that there were some things that they were doing pretty well and would make sense for people to want to do on Facebook,” he says. “But as we started exploring some of those things, it really struck me how different the services were.”

That overlooks, however, the two ultimate compliments Facebook paid Twitter, first trying to buy it and then, when its $500m bid was rejected, mimicking some of Twitter’s design and functionality. On Wednesday, Facebook made another move to counter Twitter, announcing that it would begin encouraging some users to share much more of their information, including status updates, with everyone on the web.

Even as he reacts to new threats, Mr Zuckerberg is intent on extending his company’s reach and deepening its connections with its members. In this, at least, he has shown some remarkable results. Facebook’s user numbers are growing quickly – more than half have signed up in the past year. It is available in 50 languages and in just about every country in the world. Perhaps most importantly, Facebook users seem to be addicted. The site, it turns out, is “sticky”. More than 100m users log on to the site at least once a day.

Some sketch out an even grander ambition for the future. The company’s newest board member, Netscape founder Marc Andreessen, says that in the short term Facebook is “going for 500m, maybe 1bn” users. But potentially it could reach everyone who is online. “We’ll cap out at some point at the number of people who have electricity,” he says.

Reach alone is not enough, though, as Mr Andreessen knows. Netscape was the leading browser as the internet age dawned, only to be eclipsed by Microsoft’s Internet Explorer and eventually sold to AOL, a web portal that also slid into irrelevance. Far more important will be whether Facebook can turn itself into a central tool for how its users conduct their online lives – and whether it can give businesses a new and valuable way to reach these users.

Mr Zuckerberg’s bet is that the internet is becoming a more social place and that the “social graph” his company maintains – the map of connections that links users through family, social or business networks – will turn out to be one of the main ways that people organise their online lives.

Other sites are seeking to emulate social networks, adding features that allow users to build profiles, connect with other users and share content. Twitter and another similar service, FriendFeed, offer competing social graphs. Google, too, has a team working on social products. Industry insiders dub this the “social web”.

“Social networking features and your friends will be everywhere you go,” says Jeremiah Owyang, an analyst for Forrester Research who recently wrote a report on the social web. “It will change the way people interact online.”

According to its advocates, this social web could act as a more personal filter for navigating the public web. Instead of logging on to Google News and learning what an algorithm has determined to be the top news items, one can browse the links to news articles posted by friends. This influence is already apparent. In recent months, Facebook has begun driving an increasing amount of traffic to prominent sites around the web. Links on Facebook are responsible for 19 per cent of hits to Huffington Post, the popular Washington blog. They are also the number one driver of traffic to the Perez Hilton gossip site.

Certainly, those seeking to profit from Facebook are convinced of its prospects. “If you asked a 20-year-old today to give up Google or Facebook, they would give up Google,” maintains Mark Pincus, chief executive of Zynga, which makes applications that run on Facebook, and the founder of Tribe Networks, an early social network. “The social web is more personal and is more relevant to you.”

Yet Google has unlocked much of the potential of the internet through a more mechanistic approach. Unlike Facebook, it has also found a way to turn this into a massively profitable business. Moreover, it is not clear that people want to abandon the web as we know it in favour of a web based on recommendations from friends.

Nonetheless, Facebook is betting on the social web and is trying to consolidate its early advantage. The plan has several elements. Part of it is designed to get users to spend more of their time and carry out more of their web activities on Facebook’s own site.

In 2007 it launched the Facebook Platform, where third-party companies can launch and operate applications, such as games and quizzes played together by groups of friends. Today the Platform hosts upwards of 52,000 applications, some of which have more than 10m users.

A newer part of the plan is to embed Facebook in the wider fabric of the web. Through Facebook Connect, launched last year, users can now access more than 10,000 external sites using their Facebook log-ins as a kind of internet passport. Indeed, Mr Zuckerberg sees a day in the near future when there is more Facebook-related activity on other sites than on Facebook.com. “That’s a lot of the future,” he says. “A really interoperable graph of people’s identity that they can bring with them to other places.”

Facebook’s ambitions are bringing it up against some of the most powerful companies on the web. “There are a lot of people who are jockeying to own the space where people identify themselves,” says Chris Messina, a social web advocate who is on the board of the OpenID Foundation, which is sponsoring its own universal log-in. “Everyone wants to have their own ‘connect’ service.” OpenID backers include AOL, Google, MySpace and Yahoo, which are collaborating on a set of open standards. Facebook is working on its own.

This closed approach could lose it the early lead in connecting the social web, says Kevin Marks, who ran some of Google’s social projects until he left last month: “In the long run the open stuff always wins out, because it’s resistant to corporate changes.”

Yet even those aligned with competitors acknowledge that Facebook has a daunting lead. “Of all the players out there they seem to have the right momentum and the right people,” says OpenID’s Mr Messina. “If Facebook gets it right, they will have a great deal of influence over how the social web shapes up.”

THE UPSTART GROWS UP

Mark Zuckerberg is wearing a tie. This may not seem like a surprising wardrobe choice for the chief executive of a fast-growing global company. But in Silicon Valley, where jeans and open-necked shirt are de rigueur, Mr Zuckerberg’s neckwear stands out.

Until recently, he was most often seen in sandals and a T-shirt. But Facebook, and its 25-year-old boss, are growing up. Mr Zuckerberg says wearing the tie is a way to send a signal to his (nearly all tieless) 900 employees that this is a critical year for Facebook’s development.

“When the economy is in a bad position, that’s the best time to build a company,” he says. “So I said, this is a really serious year so I’m going to wear a tie. Whenever you see this tie, think serious.”

What does serious mean for a company with a growing base of more than 225m active users, annual revenues set to top $500m (£305m, €357m) and a fresh investment of $200m that valued the company at a whopping $10bn?

Mr Zuckerberg is deliberately unspecific but hints that, as the company matures, it is poised to focus more sharply on increasing its profits. “If we double down, then we can really grow our revenue and grow our user base and come out of the year in a really awesome position,” he says.

There are other indications that, beneath his boyish veneer, Mr Zuckerberg is thinking seriously about his company – and is growing up just as fast as Facebook. On his small, anonymous desk, there are two laptops and one book. Its title: How The Mighty Fall: And Why Some Companies Never Give In.

FACEBOOK’S FUTURE

Four big challenges for a site both social and global MoneyIt may be on track to bring in more than $500m (£305m, €360m) in revenues this year but Facebook is projected to spend more. And it is not promising to break even in cash-flow terms before the end of next year. A recent $200m investment from Digital Sky Technologies, the Russian company, resolved immediate concerns about the social network over-extending itself, but it has yet to prove it can build a significant business on top of its avid base of users.

Competition Other companies are racing to build their own services to bring social experiences to the web. As Twitter has shown, they can grow fast with the right formula. Some of the biggest web companies are now aligned against Facebook. A consortium including MySpace and Google has backed a service that allows users to carry their identities around the web with a single login.

Regulation Facebook is building one of the biggest databases of personal data on the web. It has so far steered clear of battles with regulators but as it expands around the globe that may change. An advisory board to the European Commission last month proposed stricter privacy settings for all social networks to ensure private information is not abused.

Execution Managing its own headlong growth, and adapting and expanding its service without alienating existing users, are Facebook’s most direct challenges. In February it upset people when it quietly updated its terms of service, inserting language some saw as an attempt to take ownership of users’ content. This was a painful reminder of a previous privacy row. In 2007 the company introduced a service that shared data about users’ activity on outside sites with their Facebook friends. There was outrage and the network phased out the service. These episodes may have upset them but, for now at least, users are not going anywhere.

Источник: Financial Times

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