From Inception to IPO: Facebook in 8 Years

For a solid chunk of the past decade, the tech world has become increasingly obsessed with social media and its inherent profit potential. As the granddaddy of social media platforms, Facebook has experienced quite a few changes on its path from a lowly startup to the biggest tech IPO in history. Derided by many at the beginning as a fad that would fizzle out as many of its competitors like Myspace and Friendster had, Facebook managed to defy convention and expectations time after time. In light of their recent record-breaking IPO, it’s instructive to take a look back at how Facebook got to where it is today.

A Dorm Room and a Dream

If you haven’t seen The Social Network or read one of the zillion or so fairytale-like accounts of Facebook’s rise to power, here’s a quick recap. In late 2003, a Harvard freshman coding prodigy by the name of Mark Zuckerberg launched Facemash, a Hot or Not clone for his fellow Ivy League classmates. Though Facemash was quickly kiboshed by campus authorities, Zuckerberg plowed ahead with ‘thefacebook.com’, a more refined social networking platform initially aimed at Harvard students that quickly spread to other colleges. By September 26, 2006, Facebook was officially open to anyone aged 13 and older with a pulse and an email address.

Personnel Changes

As Facebook continued to flourish and grow, the initial development lineup necessarily changed as well. Zuckerberg’s former partner and co-founder Eduardo Saverin left after a disagreement that essentially revolved around money and stock dilution. Other important founders like Dustin Moskovitz and Chris Hughes left to pursue their own projects over the years. Facebook also added some high-powered talent in the form of Sheryl Sandberg, a former Google staffer who became the burgeoning social media giant’s COO. More and more Silicon Valley engineers defected from their old positions at places like Google and Microsoft to hop on the Facebook bandwagon. By the spring of 2012, Facebook’s workforce had grown to nearly 3,600 employees.

Redefining Social Media

As rival Myspace faded into the background, Facebook attracted users in droves and breached the 500 million registered member mark in mid-2010. Zuckerberg and his cohorts kept the hit parade rolling during the heavy growth phase by introducing a slew of innovative new features that encroached on the traditional wheelhouses of Google, Apple and Groupon. Notable feature rollouts over the years included Chat, Places, Marketplace, Timeline and Deals, to name just a few. Though not every new tool worked out in the end, the whiz kids at Facebook never stopped pushing the envelope of what’s possible with a unified social platform.

The Road to IPO

Like many a startup nowadays, Facebook’s initial financing came in the form of venture capital from private investors. Tech and finance visionaries like Peter Thiel and Sean Parker sank both money and time into the company early on. Even professional wraparound sunglasses model Bono invested in the promising young company via his Elevation Partners investment group. Though reluctant to take his brainchild public, Zuckerberg eventually had to acknowledge the fact that Facebook had matured and outgrown the rapidly expanding startup model. Speculation concerning a potential Facebook IPO had circulated for years, and it was only a matter of time before all the pieces of the stock puzzle fell into place.

On Friday, May 18th, 2012, Facebook officially became listed on the New York Stock Exchange under the ticker symbol FB. Initially priced at $38.00 per share and underwritten by Morgan Stanley along with a group of major investment banks, the stock’s first day saw a brief high of $42.99 despite some selling by key shareholders. Unlike LinkedIn, Zynga and Groupon, Facebook’s lack of significant movement (either way) upon its debut signified that the $104 billion valuation was more or less appropriate. Predictions that Facebook’s stock would immediately soar past $50 per share turned out to be wrong, though the IPO still managed to raise $16 billion in fresh capital.

What’s Next

Though the IPO itself was somewhat of a flop in terms of the expected stock price bounce, the important thing to remember is that Facebook managed to raise an immense amount of cash. While Facebook already accrues profits in excess of $1 billion per year, the war chest created by the IPO should go a long way in helping the company to expand in the near future. With that money, they can focus on near-term goals such as increasing ad revenue, branching out into mobile and maintaining their competitive edge. More importantly, the ability of longtime Facebook employees to profit from their stock options should help to retain talented engineers at a time when the company needs them most.

The Last Word

The future is somewhat uncertain for Facebook at this juncture, despite their recent success, publicly traded company status and overall momentum. As Warren Buffett might say, they’ve got a “thin moat” surrounding their business model that could eventually be breached by a competitor. Regardless, Facebook is starting to act like a real company, making acquisitions such as the $1.2 billion dollar buyout of Instagram and improving their ad monetization efforts. Whatever happens next, there’s no question that Facebook has altered the online landscape forever and left its mark on the history of tech in the 21st century.

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Madalin Tudose

I`m a web developer. I build HTML Templates and WordPress Themes which are eventually released on ThemeForest under the DeliciousThemes brand.