Facebook Inc. is set to steal Google's glory

Social-networking site poised to net creator millions

November 18, 2007|By Jessica Guynn | Jessica Guynn,LOS ANGELES TIMES

Palo Alto, Calif. -- Google Inc. is used to being the center of attention, the giant that executives at other Internet companies wish Silicon Valley would shut up about already.

For the moment, they've got their wish. Now people here can't stop talking about Facebook Inc.

Commanding their attention: the social-networking site's rocketing growth, cheeky business strategies and staggering valuation.

Microsoft Corp. took a small stake in Facebook last month that valued the company at $15 billion. The deal may have positioned Facebook's 23-year-old founder and chief executive, Mark Zuckerberg, to supplant Google co-founder Sergey Brin one day as the technology industry's youngest self-made billionaire.

Brin, whose company lost the bidding war to Microsoft, played down the defeat at a recent gathering for analysts, saying, "We don't feel at a higher level that we need to own everything successful on the Internet."

Maybe not. Google's spectacular success has made it the seventh most valuable U.S. company. Still, after years of all Google, all the time, it's Facebook's turn in the spotlight.

Started in a Harvard University dorm room less than four years ago, Facebook spread like wildfire among college students. Last year, it opened membership to the world at large, and the wildfire is still raging. Facebook now has more than 54 million users, second among social networks to Beverly Hills-based MySpace. And it's become a magnet for Silicon Valley engineering talent.

Presidential hopefuls and entertainment heavyweights seek out Facebook's executives. Venture capitalists and software developers stalk its employees in coffee shops and on the site itself. Users post love songs about it on YouTube. Programmers and marketers pack conferences devoted to understanding the site better. Stanford University even offers a course in creating free software for Facebook.

One ex-Googler who recently joined Facebook's ranks called it "that company that shows up once in a very long while," meaning that it is bursting with the creative intensity that set Mountain View, Calif.-based Google apart when it was smaller.

Google wants to organize the world's information, but Facebook wants to connect the world's people. On Facebook, high school and college students mingle with baby boomers and retirees, squeezing their social and professional lives into minimalist profile pages they load with photos, games, polls and updates on their activities.

Half of them visit the site at least once a day to announce hookups or breakups, send friends virtual gifts and cocktails, stump for political candidates or support cancer sufferers, all of which generates an average of 2 billion page views a day.

Facebook has become such an integral part of some people's lives that it's replacing e-mail. That's exactly what Zuckerberg has in mind - his site as the starting and focal point of the Internet experience.

On a recent afternoon, the Harvard dropout sat in a Facebook conference room, wearing his uniform of hooded sweatshirt, T-shirt, jeans and Adidas flip-flops. His boyish face, framed by curly brown hair, lit up when he talked about Facebook's potential to transform how people connect.

"The things that are most powerful aren't the things that people would have done otherwise if they didn't do them on Facebook," he said. "Instead, it's the things that would never have happened otherwise."

Like his role models, Apple Inc. CEO Steve Jobs and Google founders Brin and Larry Page, Zuckerberg means it when he says he wants his company to change the world.

Despite his youth, he has risen above rivals and confounded skeptics with a string of strategic moves inspired by his goal to make good technology and keep users happy.

He rejected takeover offers that would have netted him several hundred million dollars, girding instead for an initial public offering that investors have said could happen in about a year.

He secured $40.7 million in funding from top private investors, plus $240 million from Microsoft.

Zuckerberg keeps a tight rein on his fledgling company, trying to avoid the kind of mistakes made by past Internet highfliers that crashed.

And he waited to milk the site for serious advertising revenue - until this month, when Facebook unveiled an ambitious plan to harness word-of-mouth advertising and turn users into spokespeople for brands.

Members already alert their friends about the things they love and hate, such as movies, restaurants, clothing and cars.

Now advertisers can feast on all the information they share, and even attach commercial messages.

They can do this when users befriend a product on its Facebook page or engage with the product on sites run by Facebook partners.

For example, members can tell their pals when they add movies to their rental queue on Blockbuster.com or sell items on eBay.

Tracking what users do and buy online could help marketers direct more relevant ads to consumers and ultimately sell more. That's one big reason advertisers are likely to nearly triple their annual worldwide spending on social networks to $3.6 billion by 2011, according to research firm eMarketer Inc.

"Users usually perceive ads as the cost they pay to have a free experience," said Mike Murphy, Facebook's vice president of media sales.

"We are trying to find ways to create such relevant messaging that it feels more like content, so that users will actually appreciate it and interact with it more."

If users greet marketers with open arms, Facebook could generate "the most valuable data in the history of the media world," Pali Capital analyst Rich Greenfield said.

Jessica Guynn writes for the Los Angeles Times.

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