Facebook Grows Up: Can It Stay Relevant?

At 19, Mark Zuckerberg came up with a new way for college kids to connect—and started an online revolution. Now 23, he's trying to build out his business without losing its cool.

By Steven Levy
Newsweek

Aug. 20-27, 2007 issue - On Tuesday, July 31, Shara Karasic's world came to a temporary halt. Facebook was down. She could not follow the fortunes and foibles of her friends. She could not see if any photos had been posted that were tagged as including her. She could not even know if anyone had "poked" her (which is not a sexual act, but just a little cozier way of saying "hey, you" online). Even though she had the entire Internet to entertain her and connect her, she felt the loss. "Over the course of those four hours," Karasic says, "I probably tried to get in five or more times."

This would not be surprising if Karasic were a college student. Facebook is as much a part of campus as finals, iPods and beer—the contemporary equivalent of jamming several people into a phone booth is squeezing one's entire social life onto a series of photo shows, news feeds, invitations, friend requests and status updates on the spare blue-and-white grid of a Facebook page. Nor would it be remarkable if she were in high school, where millions of Facebook users, feeling very much like their big brothers and sisters in college, log on as soon as they toss their books on the bed, forming outrageously named groups and moving their lunchroom cliques and locker-room gossip online. Shara Karasic, however, is 40 years old, a Santa Monica, Calif., working mother with a young son. Despite a suspicion that the site was only for college students, she signed on a year ago and found professional people like herself; she quickly got requests to be "friended" from two 40-year-old cousins. And on July 31, when she couldn't get in for a few hours, she realized something: "I'm addicted to Facebook."

Addictions like hers bring joy to the already bursting hearts of the geeky, soon-to-be-loaded executives of Facebook, the hottest tech start-up in Silicon Valley since Sergey and Larry made us feel lucky. Everyone knows that Facebook is the online hangout of just about every college student in the nation as well as the inevitable source of photos of nominees for the Supreme Court in 2038 cavorting in their underwear as youths. But the student population is only a beachhead in the vast ambitions of Facebook. Its people claim that more than half its 35 million active users are not college students, and that by the end of this year less than 30 percent of Facebook users will sport college IDs.

Anything goes in the spirited Facebook world. Just about everybody updates his or her status line with pithy, haiku-ish and often profane precision. For only a dollar you can send a friend a "gift"—an image of a cute item like a polka-dot thong, a champagne glass or sushi. Thousands of groups form daily: sufferers of cancer, conjunctivitis or bad taste. People who scale public buildings in Princeton. Supporters of every politician imaginable. Facebook last year took down the student-only sign and instituted an open-enrollment policy. The idea is that as more people do this—and invite their friends to join the fun—there will be a mass movement to access the world through the interests of, and interests in, the people you know personally. Karel Baloun, an engineer who worked at Facebook until last year, recalls vividly the baldly stated prediction of one of the company's cofounders: "In five years," he said, "we'll have everybody on the planet on Facebook."

That's far from a given: just because older people sign up, there's no evidence yet that it's ubiquitous in their lives the way Facebook is in the school world. Nonetheless, "Facebook has emerged as the 'it' service and company ... It represents the next logical progression," says former AOL CEO Steve Case (via the messaging system on Facebook, where Case has been digitally hanging out of late; he's even friended Bill Gates). Mark Zuckerberg, the 23-year-old Harvard dropout who started the site, is high tech's new prince. Having turned down a reported $1 billion offer from Yahoo last year—and enduring the taunts of bloggers who predicted that he'd rue the day—Zuckerberg in May took Facebook in a new direction: he opened up the Web site to thousands of developers, who can now unilaterally install applications designed to take advantage of Facebook's people connections. This, along with an astonishing growth rate of 3 percent a week, has triggered a Facebook mania in the Valley. Early investor Peter Thiel, who sits on Facebook's board, believes that a measly billion dollars for this 300-person company spread over three buildings in downtown Palo Alto, Calif., is a risible sum. Instead, he compares Facebook's current price tag to that of MTV, which he values at about seven or eight billion bucks. "Between the two, I'd want to own Facebook," he says. Not that it's for sale. Thiel and other Facebook folk are now talking about an IPO in perhaps two years that would almost certainly be the biggest public offering since Google.

Zuckerberg himself, whose baby-faced looks at 23 would lead any bartender in America to scrutinize his driver's license carefully before serving a mojito, eschews talk about money. It's all about building the company. Speaking with NEWSWEEK between bites of a tofu snack, he is much more interested in explaining why Facebook is (1) not a social-networking site but a "utility," a tool to facilitate the information flow between users and their compatriots, family members and professional connections; (2) not just for college students, and (3) a world-changing idea of unlimited potential. Every so often he drifts back to No. 2 again, just for good measure. But the nub of his vision revolves around a concept he calls the "social graph."

As he describes it, this is a mathematical construct that maps the real-life connections between every human on the planet. Each of us is a node radiating links to the people we know. "We don't own the social graph," he says. "The social graph is this thing that exists in the world, and it always has and it always will. It's really most natural for people to communicate through it, because it's with the people around you, friends and business connections or whatever. What [Facebook] needed to do was construct as accurate of a model as possible of the way the social graph looks in the world. So once Facebook knows who you care about, you can upload a photo album and we can send it to all those people automatically."

Zuckerberg believes that this is what makes Facebook so compelling: as your friends join Facebook, that part of the social graph—the part that matters to you—moves into the digital fast lane and you're getting more out of your connections than you ever could have imagined. (Of course, since your friends on the graph are connected to other people, you have the advantage of seeing their friends, and expanding your circle.) Unlike services like the giant MySpace—which at more than 70 million users still wins in raw numbers—Facebook is not a place where emerging stand-up comics, hip indie bands and soft-porn starlets try to break out by tagging thousands of people as virtual friends. Zuckerberg even says Facebook isn't intended as a venue to seek out new people, though certainly it's possible to locate promising strangers whose relationship status is "anything I can get." (Proof of concept is Aaron Byrd, who as a Texas-born Harvard senior searched through Facebook networks looking for women named Grace—hey, he likes the name—lighting on a pretty U of Georgia sophomore. First he friended her and then, reader, he married her.)

Still, the Facebook experience is built around people you know, and the center of the page is a News Feed where the stories largely consist of the activities, brief status reports, photo and video postings, and comments from those you have earmarked as friends. Facebook also places ads on the News Feed, so after learning that Sue is out of her relationship and Francis has posted a picture, you may get a "sponsored story" featuring the Geico cavemen. News Feed ads are "well targeted—people like the content," Zuckerberg says, unconvincingly. Facebook also takes in revenue, from banner ads sold by Microsoft, in a partnership that's contracted until 2011.

These were stakes undreamed of when Zuckerberg, a computer-savvy Harvard sophomore who grew up in Westchester County, N.Y., started a site called thefacebook.com in February 2004. The name refers to the yearbook-style booklets of photos and vital statistics that incoming freshmen receive at Harvard. (Late the previous year Zuckerberg had apparently agreed to do some of the computer coding for a different planned social-networking site. The founders of that site, ConnectU, are suing Zuckerberg, charging that the then sophomore intentionally stalled, then took the idea from them. Last month a Massachusetts judge indicated that ConnectU's case might be flimsy, asking the plaintiffs to come up with more evidence than "dorm-room chitchat.")

Zuckerberg's site was an instant success. "It was a pretty bare-bones, uploaded Harvard directory when I signed up on the first day—but it became an immediate distraction," says Olivia Ma, user No. 51, who knew Zuckerberg because he lived in her dorm. "Within a few weeks it seemed the whole school signed up." Indeed, two weeks after its release The Harvard Crimson reported the site had already attracted 4,300 students, faculty and alumni.
Zuckerberg had done some things very right. "In the Ivy League, where very few incoming freshmen know more than one or two people, the facebook is a really key piece of the social infrastructure," says Danah Boyd, a researcher at the UC Berkeley School of Information. "Zuckerberg made it interactive. It had a slight social stalking element, too. It was addictive, it was juicy—a great way to see what was going on." Another key feature: only those in the Harvard.edu Internet domain could get in. "The fact that you could only see people on your network was crucial," says Boyd. "It let you be in public, but only in the gaze of eyes you want to be public to."

Within days of its release at Harvard, students at other schools were clamoring for their own versions of the site, and by the end of March it was at Stanford, Columbia and Yale, on its way to capturing the entire college market. But even more extraordinary was the way people used it. Facebook, as it became after a name change, was permeating every aspect of campus social life. Students even came to use its messaging function instead of e-mail.

That spring, Zuckerberg quit school, and he and his partners moved to Silicon Valley, where they met with investor Peter Thiel. "Mark was clearly a brilliant engineer with a great vision for his product," explains Thiel, who kicked in $500,000. "Mark's plan had all the fundamental characteristics you would see in a Google or eBay in the early days of those companies," says Matt Cohler, an executive who sat in on the meeting and wound up working at Facebook himself.

Later Facebook received $12.7 million in venture-capital money from Accel Partners. (Zuckerberg took this in preference to an investment offer from Don Graham—chairman of NEWSWEEK's parent, The Washington Post Company—with whom he is friendly.) Accel's Jim Breyer recalls the 2005 dinner that clinched the deal: "I ordered a nice pinot noir and Mark ordered a Sprite, telling me he was underage." Breyer was impressed with Zuckerberg's youthful passion for his product, though he says the investment was controversial within his firm—some colleagues wondered whether social networking was a fad. (The early leader in the field, Friendster, had fizzled.)

Armed with cash (the most recent influx was $25 million in 2006), Facebook began its march beyond colleges, adding high schools in 2005 (no one under 13 is permitted to register) and then "work networks" within corporations in early 2006. By September of last year, anyone could register, and the site's numbers started climbing. That's when Terry Semel, who was then Yahoo's CEO, dangled a billion dollars in front of Zuckerberg—which he blithely ignored.
Zuckerberg's next big move was to fill Facebook with all sorts of applications people could use without leaving the site—programs that took advantage of Facebook's vast social networks.

"There are a ton of different ways that people can share information, and rather than trying to develop all those ourselves, we wanted to allow anyone worldwide to create any kind of application," says Zuckerberg. Thousands of developers, from big companies to kids in dorm rooms, instantly began creating applications that piggybacked on Facebook's infrastructure. The new applications could get instant viral distribution, since the News Feed blasts a report to friends every time someone installs a new app (in other words, free promotion). Developers could make money from Facebook-embedded apps by taking ads or selling things—without sharing a penny of the proceeds with Facebook.

For instance, one company took two weeks to create a Facebook version of iLike, a music-recommendation and band-tracking service, and within a month more than doubled its users. A 22-year-old college student stayed up all night to hack a free (though less polished) version of Facebook's $1 graphic "gifts"—and 5 million people downloaded his application.

What does Facebook get from this? If all goes well, much of what people do on the Internet will be accomplished within Facebook. Instead of eBay, you can buy in Facebook's marketplace. Instead of iTunes, there's iLike. In other words, Zuckerberg wants to keep you—student, graduate or graybeard—logged on to Facebook, organizing virtually everything you do via the social graph.

Though some are grumbling about this "walled garden" system's being overly cloistered—and others believe that adding all those applications muddies up Facebook's austere appearance—1 million people a week are flocking to Facebook. And the international push is only beginning. While the site is now available only in English, Zuckerberg says that versions in other languages will appear soon. (Facebook is already the top Web site in Canada, and the geographic network with the most Facebookers is London.)

Still, one big question dogs the company in its attempt to leverage the social graph in the same felicitous—and wildly profitable—way that Google found fame and riches through search. Can Facebook be as much a presence in the life of graduates and geezers as it is to college students? Zuckerberg can't see why not. "Adults still communicate with the people they're connected with."

At this point, though, much of the grammar of the site (as well as much of the first wave of applications) is still tilted toward student life. David Rodnitzky, 35, a San Francisco marketing executive, was having a fine time on Facebook until he installed a widget called "My Questions." Unbeknownst to him, it sent out a query to people on his friend list, specifically: "Do you kiss on the first date?" "Here I was, asking some of my company's venture capitalists, along with some of my guy friends, if they kiss on the first date," says Rodnitzky. "Probably not the best way to interact." Nor is it clear whether grown-ups embrace the new SuperPoke third-party application: instead of a mere poke you can bite, slap, bump, spank, lick, grope or head-butt friends, acquaintances and, uh, business colleagues.

Also, there's a question of whether older people want to interact with fewer or more people as they nestle into their family and work lives. For some, use drops off right after they grab their diplomas; Stephanie Shapiro, 21, a recent Dickinson College grad, has seen her Facebook time drop from up to two hours a day to less than an hour a week. "It's almost an afterthought," she says. It's often one of life's pleasures to lose touch gracefully with people you'd had quite enough of—with a lifetime of Facebook you will have to delete them cruelly if you want to get free. "The social graph will get incredibly meaningless," says Berkeley's Danah Boyd. "Do you really want to be speaking with everyone you ever met?"

Facebook must also deal with persistent privacy concerns. When the company first rolled out the News Feed, and any change on a user's page suddenly began scrolling on the screens of anyone who'd added him or her as a friend, the social graph went bonkers: more than 700,000 people joined a user group called "Students Against Facebook News Feed." The company acted quickly to install privacy controls to let people opt out of the information flow, and the crisis cooled, though Marc Rotenberg of the Electronic Privacy Information Center says that setting privacy preferences is still too complicated. The company says that plenty of protections are built in. "Facebook is about replicating the social restrictions of the offline world," says its chief privacy officer, Chris Kelly. The problem is that Facebook is on the Internet, and it's all too easy to circumvent those and dig up private stuff. This is all too clear from the experience of political offspring who seem engaged in perpetual competition to embarrass their parents.

Meanwhile, some in the college community—the company's most passionate users—are not happy that Facebook is welcoming swarms of people whose absence was previously appreciated: older people. "Facebook is becoming a different place as it attempts to mass-market itself," says Fred Stutzman, a University of North Carolina grad student who researches social networks. "Do I want to be friends with my uncle?" Robert Putnam, author of "Bowling Alone," a book about the disconnectedness of contemporary Americans, worries that the site is becoming less useful as it reaches a broader audience and adds applications. "Facebook was originally a classic 'alloy,' bonding the Internet and the real world," he says. But now he says it feels less rooted in real life.

Zuckerberg and his team feel certain that the Facebook idea will trump all these concerns. He's built a superhigh-IQ engineering team (after three years of living on Facebook, top grads desperately want to work there) who drift in late and stay much later at the cheerfully cluttered Palo Alto Facebook headquarters. "Absolutely yes," says Facebook's COO, Owen Van Natta, to the question of whether it will change the world of 30-, 40- and 50-year-olds the way it has on campus. He then amends the question to conform to the company's new unofficial, and weirdly defensive, motto: it's not just students. "Facebook did not change college life, but it changed the lives of the early adopters ... many of whom were in college. We're entering a phase where every single day we have more people over 25 entering Facebook than any other demographic. So, absolutely, yes."

Expect a lot of poking.

Tots getting Internet identity at birth

By ANICK JESDANUN, AP Internet Writer

Besides leaving the hospital with a birth certificate and a clean bill of health, baby Mila Belle Howells got something she won't likely use herself for several years: her very own Internet domain name.

Likewise newborn Bennett Pankow joined his four older siblings in getting his own Internet moniker. In fact, before naming his child, Mark Pankow checked to make sure "BennettPankow.com" hadn't already been claimed.

"One of the criteria was, if we liked the name, the domain had to be available," Pankow said. It was, and Pankow quickly grabbed Bennett's online identity.

A small but growing number of parents are getting domain names for their young kids, long before they can do more than peck aimlessly at a keyboard.

It's not known exactly how many, but the practice is no longer limited to parents in Web design or information technology.

They worry that the name of choice might not be available by the time their babies become teens or adults, just as someone claimed the ".com" for Britney Spears' 11-month-old son before she could.

The trend hints at the potential importance of domain names in establishing one's future digital identity.

Think of how much a typical teen's online life now revolves around Facebook or News Corp.'s MySpace. Imagine if one day the domain could take you directly to those social-networking profiles, blogs, photo albums and more.

"It is the starting point for your online identity," said Warren Adelman, president of registration company GoDaddy.com Inc., which sells basic domain name packages for about $9 a year. "We do believe the domain name is the foundation upon which all the other Internet services are based."

Hundreds of companies sell domain names with suffixes like ".com," ".org" and ".info," which individuals can then link to personal Web sites and e-mail accounts. Parents simply visit one of those companies' Web sites, search for the name they want and, if no one else has claimed it yet, buy it on the spot with a credit card.

There's no guarantee, though, that domain names will have as central a role in online identity.

After all, with search engines getting smarter, Internet users can simply type the name of a person into Google.

"Given the pace of change on the Internet, it strikes me as a pretty impressive leap of faith that we're going to use exactly the same system and the same tools ... 15 to 20 years from today," said Peter Grunwald, whose Grunwald Associates firm specializes in researching kids and technology.

Still, even if the effort is for naught, $9 a year is cheap compared with the cost of diapers and college tuition.

Besides providing an easy-to-remember Web address, the domain name makes possible e-mail addresses without awkward numbers — as in "JohnSmith24", because 23 other John Smiths had beaten your child to Google Inc.'s Gmail service.

Parents not ready to commit or knowledgeable enough on how to buy a domain, though, are at least trying their luck with Microsoft Corp.'s Hotmail or Gmail.

Melissa Coleman of Springfield, Mass., grabbed Hotmail addresses for her two kids. She said the kids' grandparents occasionally send e-greeting cards to those accounts, and she sends thank you notes for gifts in her child's voice.

"I think it's great that it's so loud and that it came with an actual WORKING MICROPHONE ... and I'm not sure what `annoying' means, but I'm sure it means that Mommy loves it too!!!!," read one message to Grandpa.

She said she logs in at least once every month to keep the accounts active and plans to save all messages for when her children get older.

Tony Howells, a business consultant in Salt Lake City, got a Gmail address along with the domain name for his daughter, believing people would enjoy seeing "an e-mail address pop up for an 8-month-old who is obviously not equipped to use it."

Although some parents have yet to use the domain names they've bought, others are sending visitors to baby photos, blogs and other personal sites. Domain name owners have a variety of options to have their personal sites hosted, typically for free or less than $10 a month. They include baby-geared services like TotSites.com and BabyHomePages.net.

Theresa Pinder initially received a domain name as a Christmas gift from her son's godparents and gives it out to friends and family who want updates.

"People are like, `Wow. He already has his own Web site,'" said Pinder, a physician assistant in Phoenix.

There are downsides to all this, though: An easy-to-remember domain also makes a child easier for strangers to find. Chances are one only needs to know a child's name and add ".com."

Pankow, a database administrator in Phoenix, said that was one concern keeping him from using the domains he bought for his five children, including a 9-year-old daughter.

"I'd want to research and try to figure out how easy it is to find out what school she goes to and where she lives" based on the Web site and domain name, Pankow said.

GoDaddy and many other registration companies offer proxy services that let domain name buyers register anonymously. Otherwise, the person's name, address and other contact information are publicly searchable.

Notwithstanding the privacy concerns, Adelman said domain names for kids have become more and more popular as parents start to get domains for their business or family and realize how difficult it is to find ".com" names not yet claimed.

But the numbers are still relatively low. Our Baby Homepage, which lets parents set up personal baby pages with photos and greetings, says only 10 percent of its customers have bought their own domains. A similar service, Baby's First Site, considered selling domains for parents but didn't get much interest.

Brian Vannoy, founder of TotSites, said parents might need more lessons on safety measures such as how to password-protect sites. But he believes the hurdles can be overcome once parents who are less-savvy about technology see the benefits.

"It's easy to remember," Vannoy said. "Everybody knows the new baby's name."