Facebook Inc. is an American multinational corporation headquartered in Menlo Park, California. It maintains a vast social network, providing access to professional and user-supplied content, audio/video connectivity, gaming, mobile applications and advertising platforms.
History
Thefacebook.com was founded and launched in February 2004 by Mark Zuckerberg and cofounders Dustin Moskovitz, Chris Hughes and Eduardo Saverin. On September 20, 2005, the prefix "the" was dropped from "thefacebook.com," becoming simply "facebook.com."
Initially incorporated in the state of Florida as an LLC, Facebook remained a private company from 2004 until its initial public offering (IPO) May 18, 2012. Facebook's IPO was the largest for a technology company in history, and the third largest of all time.
IPO
The IPO proved to be controversial, as a programming "glitch" at the NASDAQ exchange hampered trading at the market's open. Facebook eventually filed suit against the NASDAQ amid a Securities and Exchange Commission investigation concerning the NASDAQ's handling of the offering. Roughly 18 months after initially going public, Facebook (NASDAQ: FB) joined the Dow Jones S&P 500 index on Dec. 20, 2013.
Often credited with bringing social media to the forefront of popular global culture, Facebook boasts an average of over one billion daily users. It dominates the social media industry, accounting for 43.9% of the total number of daily visits to social media websites.
In early 2016, Facebook was ranked the fourth-most-valuable company in terms of market capitalisation in the world, with a value if US$328 billion. It ranks behind only Apple (AAPL), Google (GOOG) and Microsoft (MSFT) in terms of market capitalisation. CEO and founder Mark Zuckerberg's net worth ranks him the sixth-wealthiest person in the world. Facebook employs 12,691 full-time employees, with regional offices throughout the U.S. and around the globe.
Facebook realised substantial financial growth for the year ending December 2015: total revenue of US$17.93 billion, an increase of 44% over 2014; income from operations US$6.23 billion; net income US$3.69 billion. Investors favoured a diluted earnings per share (EPS) valuation of US$1.29.
In addition to robust revenue growth, Facebook saw the appreciation of its brand valuation. According to Interbrand rankings, Facebook is currently ranked as the 23rd-most-valuable brand in the world, with an estimated worth of US$22,029 million.
Facebook (FB): Company History
The Beginnings
Since its launch in February 2004, Facebook has often been referred to as a "game changer" or a "phenomenon." The structure of what was originally thefacebook.com was very different from present-day facebook.com. Initially, thefacebook.com was a private social networking website with membership offered specifically to students attending Harvard. As popularity and membership grew at Harvard, accessibility to thefacebook.com was soon expanded to Stanford and Yale.
Upon the launch of thefacebook.com, controversy quickly surrounded founder (and then-Harvard undergraduate) Mark Zuckerberg. A week after the initial launch in February 2004, seniors Divya Narenda, Cameron Winklevoss and Tyler Winklevoss accused Zuckerberg of committing theft of the idea for thefacebook.com. At the time, the consensus was that the accusations against Zuckerberg were likely nothing more than sour grapes. However, as thefacebook.com grew in size and the potential for monetisation of the website became very real, the accusations evolved into lawsuits against Zuckerberg alleging the "theft and fraud" of intellectual property. Legal proceedings concerning Zuckerberg and thefacebook.com lasted until 2007, at which time both parties agreed on a monetary settlement.
Aside from the controversy, the rapid growth and potential value of the social networking site was immediately apparent to Zuckerberg. Merely months after thefacebook.com was first launched, Zuckerberg partnered with two fellow Harvard students, Dustin Moskovitz and Chris Hughes, with the idea of taking the platform to the next level. Major changes were made in July 2004, specifically to thefacebook.com's name and base of operations. First, "thefacebook.com" became "facebook.com." Second, the company was moved to Palo Alto, California from Cambridge, Massachusetts.
Intermediate Years
Once the move to California was completed, Facebook began to rapidly gain members. As of December 1, 2004, 10 months after its initial launch, Facebook had gained one million active users. In an attempt to capitalise on seemingly large demand, Zuckerberg and his partners began adding colleges, high schools and international organisations to the growing Facebook framework.
On December 1, 2005, facebook.com's membership grew to six million users. The trend of exponential user growth would continue until 2012, at which time a staggering one billion people would be active on Facebook. More recent estimates (dated January 27, 2016) mark Facebook membership at 1.59 billion active users.
In concert with Facebook's membership growth, the monetisation of the website and profitability of the young company became a market force all its own. From 2005 to 2012, when Facebook existed as an exclusively private company, the revenue streams were substantial. In the two years preceding Facebook becoming a publicly traded company, total revenue came in at US$606 million for 2010 and US$3.7 billion for 2011. The large revenue streams made Facebook a prime candidate for public listing on the NASDAQ exchange.
From Private To Public
Throughout its history, one of the prominent debates regarding the value of Facebook has been centered on potentially monetising Facebook's core business of connectivity. Economists, investment bankers, politicians and even traders have pondered the potential worth of Facebook stock. Is it possible to monetise connectivity? Is the staggering growth realised in the years since Facebook's launch sustainable? Can an unconventional business model succeed in the long run? The open market provided answers to these questions beginning with Facebook's initial public offering (IPO) on May 18, 2012.
Facebook's IPO was the third largest in history, and by far the largest of all companies in the technology sector. With the titanic goal of US$5 billion to be raised during the IPO, Facebook stock was initially valued at US$38 per share, thus generating a projected company value of US$104 billion. However, much like the controversy surrounding Zuckerberg and the founding of Facebook, controversy hindered the IPO's launch on the NASDAQ exchange.
On May 18, 2012, shortly before the launch of the Facebook IPO, technical "glitches" at the NASDAQ exchange took center stage. The open of trading for Facebook stock was delayed for 30 minutes, throwing the matching of buy/sell orders within the order queue into chaos. Some traders saw their market and limit orders proactively filled, while other retail traders were unable to cancel orders or to flatten mysteriously active positions. The "glitch" at the NASDAQ exchange was attributed to the exchange-based software being overwhelmed by the tremendous flood of orders concerning Facebook stock. An estimated 82 million shares of Facebook changed hands in the first 30 seconds of active trading. After experiencing an initial rise to nearly US$45 per share, the stock closed at US$38.23, near the opening price of US$38. Falling dramatically short of expectations, IPO day for Facebook was deemed the biggest IPO flop ever.
The fallout from the Facebook IPO debacle was substantial. Investor confidence in Facebook's valuation was shaken, and in the coming months, the stock bottomed in the high teens. Investors filed class-action lawsuits against Facebook and lead underwriter JP Morgan for the "selective disclosure" of altered revenue projections before the IPO. Even the NASDAQ itself was a party to litigation, and in 2015 ended up compensating retail investors US$26.5 million for the software glitch that affected trading on the morning of May 18, 2012.
Since the bundled IPO, the growth in Facebook's stock value has mirrored its growth in active users. Stock price has risen from a post-IPO low value of US$18 per share in August 2012, to topping the US$100 per share level in October 2015. FB stock continues to trade north of the US$100 level in the first quarter of 2016 with a high of US$116.99 per share.
Corporate Culture
Over the course of its history, Facebook has existed as an unconventional end brought about through innovative means. The street address of Facebook headquarters (1 Hacker Way, Menlo Park, California) is itself is an homage to the "hacker" mentality of creating new possibilities out of old realities. In the words of its leadership: "Facebook is defined by our hacker culture and environment that rewards creative problem solving and rapid decision making." The "hacker" culture is seen by Facebook leadership to be a crucial part of achieving the stated corporate mission of "making the world more open and connected."
At its core, Facebook corporate culture is based on the ability to innovate and maximise creativity. The majority of production there exists in the form of computer code, thus there is no physical evidence that any creativity has been expressed or work completed. In an attempt to visualise the tangible creativity taking place at a given Facebook installation, the company has promoted the constant display of new art or artistic expression in its "artist in residency program." According to Facebook, the fresh pieces of "artistic expression" represent a spirit of innovation that is an integral part of the corporate mission.
Facebook's corporate slogan sums up its desire for creativity and innovation among its employees. Posted visibly upon the walls of Facebook campuses, the slogan "this journey is 1% finished" is meant to inspire growth through innovation. The slogan is very instructive in regards to the desired culture at Facebook: innovation is king, and the need for new frontiers and horizons is paramount to the continued growth and development of new core businesses.
Employee perks at Facebook are also representative of the value management places upon the people who make Facebook run. Generous paid parental leave packages, gifted ad credits, extensive paid vacation and gourmet meals are some of the incentives offered in an attempt to encourage employee motivation and retention in the competitive technology sector. For the year end 2015, Facebook employed 12,691 full-time employees, grown every year since the company's inception in 2004.
Facebook Products
The ability to instantly interact with an individual's chosen network of associates was the basis for, and key element of, Facebook"s business model. However, as it has evolved into the multinational global entity that it is today, other avenues of revenue greatly contribute to Facebook's bottom line.
Social Networking Platform
In 2005, Facebook went from existing as a text-only message board to being a graphic-driven interface. This was accomplished through enabling users to upload personal photos. Immediately upon the introduction of unlimited user photo uploads, Facebook became the tenth-most-frequented website on the internet.
As time has moved forward, and technology has evolved, Facebook has managed to flourish atop the social media industry. The introduction of cutting-edge communication innovations has increased functionality of the facebook.com platform. A few examples include the introduction of live chat functionality in 2008, video calling in 2011 and fully integrated voice over protocol via the Messenger app in 2013.
As mobile applications have come to the forefront of online connectivity, Facebook has adapted to the changing desires of its users by releasing a series of mobile applications. When taken in total, Facebook is social media's leader in providing connectivity options to their customer base.
Advertising Options
In conjunction with providing users a technologically advanced media connectivity platform, Facebook's primary revenue generator is the sale of advertising options geared towards businesses. Advertising products range from the free creation of a business Facebook page, to web applications and specialised advertising options.
Specialised advertising is extremely popular among web-based advertising campaigns. Facebook enables the client to refine the advertising audience through custom options. Target audiences can be built through selecting pertinent customer characteristics and demographics within the Facebook "ad builder." Costs can be managed through the establishment of budgets and different pricing options, all made readily available on the Facebook website or mobile application.
The advertising sales portion of Facebook Inc. produces the majority of its overall revenue. Facebook advertising revenue topped US$16 billion in 2015, representing nearly 65% of the total ad revenue for the entire social networking sector. Economic titans such as Ford, Wal-Mart and McDonalds have recognised the ability of Facebook to reach potential customers and have invested hefty sums in advertising on both the website and mobile application.
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