Continuing on the same theme as yesterday’s article on the winner-takes-all effect and the structure of network effects, today I dive deeper into the very early days of Facebook. By early, I mean the very week of Facebook’s launch on Harvard campus in Feb 2004. The early history of Facebook is interesting because when it launched Myspace and Friendster already had millions of engaged users.
Any explanation of the success of Facebook as a company that it is today will fall short. There are so many factors that explain Facebook’s current valuation of $500Bn that I’m not sure if a comprehensive account of that is even possible.
So I’ll focus just on 2004, the year Facebook was founded. Why am I taking this angle? Because I enjoy going through history and learning from it (see my earlier articles on lessons from Singapore’s founding and Netflix’s evolution). Specifically, I find early interviews by founders interesting because it’s reflective of how plans and predictions change over time. Studying business histories of both successful and unsuccessful companies is the great way to convince yourself that where the puck goes in social systems like business is anybody’s guess.
Facebook, MySpace and Friendster were all significantly different
Harvard’s student-run newspaper featured an article on Facebook within a couple of days of its launch on 4th Feb 2004. The article is titled Hundreds Register for New Facebook Website. I’m quoting from the original article.
(Zuckerburg said) “The nature of the site is that each user’s experience improves if they can get their friends to join it.”
What’s fascinating about this quote is that Mark Zuckerburg knew of network effects from day 1. He may have been lucky about many things, but he knew precisely what makes network effects so powerful.
Zuckerberg’s site allows people with Harvard e-mail addresses to upload their pictures and personal and academic information. Just as with the popular website Friendster, which Zuckerberg said was a model for his new website, members can search for people according to their interests and can create an online network of friends.
Zuckerberg said that the most innovative feature of the site is that people can search for other students in their classes so that they can branch out to form friendships and study groups.
This subtle difference, or call it a detail, in who could register and what information was collected from them during registration meant that Facebook was very different from other social networks. On Friendster or MySpace, you invited your “buddies” (basically whoever you knew) while on Facebook you could only invite people from your college. Similarly, Facebook collected college-related information such as class, house, hostel, clubs while other sites focused mostly on music, movies, books. What this meant was that a new student who made his profile on Facebook saw profiles and relevant information of people that he would see in real life every day in college. Moreover, since Facebook required you to use your real name, you knew that if Sara said she was single on Facebook, she was indeed single in real life, so you could ask her out. (On MySpace, you used handles and in Friendster, you had people of all sorts who you didn’t know in real life).
A user testimonial from the same article highlights the importance of this difference:
“If you’re in a class where you don’t know anyone and want to ask somebody for help, this is a way to find out the names of people in that class,” said thefacebook.com user Roberto C. Acosta ’05.
From (another) 2004 article on Facebook’s:
“I did it because I wanted to be current,” says Kennedy. “I do interact with a lot of students, so I wanted to seem hip and relevant to them. And it also allowed me to have a relationship with students that I might not interact with and see on a regular basis.”
You couldn’t do this on Friendster or Myspace. And that made all the difference. Inclusivity actually worked against Friendster (just like how it’s driving millions of people like me away from Facebook). From the NYMag’s 2004 profile of Friendster, accurately titled Fake Friends (read the article in entirety, replace Friendster-in-2004 with Facebook-in-2018 and you will not find many differences).
But the people on your list aren’t really your friends. If you had that many friends, you wouldn’t be sitting alone in your apartment in your underwear.”
With the fake friends, the flings, and the former lovers all hanging out in the same room..
One Friendster member, Maya, 24, a sculptor, was aghast when her 62-year-old mother, Harriet, informed her that she had joined Friendster at the request of Maya’s sister. “I said, ‘You’re on Friendster?’ She said, ‘Why is that bad?’ I said, ‘I don’t know,’ and then told her not to friend-request me. She got really hurt, so I said, ‘Oh, all right.’ ”.. Maya says with a sigh. “I know Friendster is up there for everyone to see. I just didn’t expect the day to come when my mom would be there.”
In 2004, your mom couldn’t send you a friend request on Facebook but she could do so on Friendster. Guess where all the teenagers flocked to?
What this means is that all “social networks” are not created equal and (the right kind of) tiny details matter. So the next time someone pitches you to invest in their social network, don’t reject them just because Facebook has a billion users now. Their its-like-Facebook-but-with-X-feature could potentially make it a very different thing.
Future takes its own course
People make plans and predictions primarily for their psychological comfort and they generally overestimate success rate of their plans (about one in two drops out from their new year resolutions within the first month; but there’s a way for you to belong to the other half.)
Regarding future plans of Facebook, this is what Mark Zuckerberg had to say in 2004.
He said that he did not create the website with the intention of generating revenue.
“I’m not going to sell anybody’s e-mail address,” he said. “At one point I thought about making the website so that you could upload a resume too, and for a fee companies could search for Harvard job applicants. But I don’t want to touch that. It would make everything more serious and less fun.”
Well, well, well. We all know how this has turned out. Facebook does generate (a lot of) revenue, it does sell email address (not technically, but it lets advertisers target you by email address, so it serves the same function) and it took them 14 years to launch the job application feature. How’s that for keeping your new year resolutions?
The commentary by a Harvard official who was tasked with creating an official facebook for the college is also very illuminating.
Director of Residential Computing Kevin S. Davis ’98 said that the popularity of thefacebook.com will not ruin the College’s plans to create an official Internet facebook by the end of the spring semester.
“I’m a bit curious to see if Mark’s website is a short-term phenomenon,” he said. “Last year there was a thing called buddyzoo.com where you could post your buddy list online and create a network, but after a while people definitely lost interest in it.”
Kevin was making the error that I’ll call as surface-level comparisons. It’s an easy error to make because we like categorizing things. This is a social network, that one is an OS, and here’s a phone. But all these labels are made for our convenience of conversation. It’s an error to substitute a label for the real thing. Kevin thought just because buddyzoo is a social network and it fizzled out, facebook, a social network, could also fizzle out. If he had thought one level deeper, he would have realized the difference between connecting with your “buddies” online and connecting with people you meet in real life every day made buddyzoo and facebook very different things. So the next time, you find anyone saying cryptocurrencies is a fad, ask them: which one.
It’s interesting to note that a third-year undergraduate knew about what made Facebook tick (but this director didn’t). Quoting from a 2004 article covering Facebook’s launch in University of Chicago (a full 3 months after its launch in Harvard).
Many students familiar with similar websites such as Friendster and Livejournal prefer The Facebook for its combination of utility with a fun gimmick. Ethan Jewett, a third-year in the College, emphasized how the restriction of the website to one’s university, as opposed to an abstract network of friends, is critical to the site’s success.
“Building a network on thefacebook.com isn’t creating a new community disjoint from your natural social community, it’s creating a directory and a tool to help you navigate your flesh and blood social network,” Jewett said. “While some students still engage in a popularity contest, the impulse is moderated since no one wants to look like they’re desperate for friends in a place where their real friends will see them.”
All this time, the mainstream media was celebrating the popularity of Friendster and MySpace.
New York times in 2005 covered MySpace’s rise in an extensive article which had just 2 mentions of Facebook (and that too not very positively). They wrote:
Although many people over 30 have never heard of MySpace, it has about 27 million members, a nearly 400 percent growth since the start of the year. It passed Google in April in hits.. According to Nielsen/NetRatings, users spend an average of an hour and 43 minutes on the site each month, compared with 34 minutes for facebook.com and 25 minutes for Friendster
These failed predictions by Mark Zukerburg and New York Times has some lessons:
- a) never trust your own future plans; plan for future, but co-evolve with what comes your way
- b) never dismiss any small phenomenon as a toy
- c) never assume good things last forever
- d) focus on details and how something’s different (rather than how it’s same as the one that already exists)
Hyperfocus on the college niche
In my last article, I talked about how mass-market launch can actually work against a startups’ success and how products with network effects are adviced to focus on a niche first. I learned the value of focus quite late. Early on, whenever someone asked me about what types of businesses can use VWO, I’d say everyone. There’s an irrational appeal in wanting the market to be large. Entrepreneurs confuse functionality of a product with customers’ preference to use it. Facebook knew this from the start and that’s why instead of branching into getting everyone on the platform (which could have fizzled its rise), they focused just on colleges. For the longest time, only users with .edu email could sign up for it. (In case you’re wondering, VWO now focuses on mid-market businesses and not everyone).
This also meant Mark Zuckerburg could focus his energy on launching features that are relevant to the niche of college students. From the same 2004 dated FB’s launch in Univesity of Chicago article.
In the meantime, the founders appear to remain one step ahead of the game. The website’s most recent feature, an option to list summer plans, allows students to connect with others who will be near them during the summer, fostering additional opportunities for social networking.
The exclusivity of only allowing .edu signups actually worked in Facebook’s favor as they expanded. In 2005, Mike Arrington covered it on TechCrunch (it’s interesting to note that TechCrunch itself was 2 months old at that time; notice the evolution of Mike’s writing style from first few months to now.)
I’ve read the articles that describe a vibrant and growing social network, but lamented that I simply could not get in to it! To get past the login page you need a valid .edu college/university email address, and I am not a college student.
What’s underappreciated right now?
Now that you’ve read the article, I have a question for you.
What things/startups/phenomena you think are under-appreciated but on the rise?
And, what established things/companies/phenomena are on the decline but very few realize it?
I'll RT interesting responses.
— Paras Chopra (@paraschopra) January 4, 2018
If you had to bet on something, what would you bet on? Tweet your response to me as a reply to this thread and I’ll retweet the most interesting examples. In the same thread, you can also check out and comment on what others proposed.
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