5. Facebook, Inc.

Revenues 2018: $ 55.838 billion (€ 47.280 billion)

Overview

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Facebook, Inc. is the world's largest social networking platform with 2.8 billion active users per month (across all Facebook offerings, as of October 2019). 2.8 billion: If you add up the total populations of China and India, you get a similar number. Founded in 2004 by Harvard student Marc Zuckerberg and floated on the stock exchange in 2012, Facebook has developed into the world's largest and most powerful online and knowledge group alongside Google. Facebook has long since become more than a tool for uploading photos, sending status updates or chatting with friends. After a rapid expansion, the group controls numerous other communication channels, has invested massively in virtual reality technology and revolutionized the way media content is consumed over the Internet.

General Information

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Head office:
1601 Willow Road  
Menlo Park, California 94025
USA
Telephone: 001 650 5434800
Website: investor.fb.com

Branches of trade: Social networks, messenger services
Legal type: Public company
Financial year: 01.01. – 31.12.
Founded: 2004

Basic economic data
20182017201620152014
Revenue (US$ m)
55,83840,65327,63817,92812,466
Net income
(US$ m)
22,11215,93410,2173,6882,940
Share price (US$, year end) 131.09177.92115.04104.6678.02
Employees35,58725,10517,04812,6919,199

Executives and Directors

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Management:

  • Mark Zuckerberg, Founder & Chief Executive Officer
  • Sheryl Sandberg, Chief Operating Officer
  • Dave Wehner, Chief Financial Officer
  • Mike Schroepfer, Chief Technology Officer
  • Chris Cox, Chief Product Officer

Board of Directors:

  • Marc Zuckerberg, Facebook
  • Sheryl Sandberg, Facebook
  • Marc L. Andreessen, Andreessen Horowitz
  • Erskine B. Bowles, University of North Carolina, BDT Capital Partners
  • Susan D. Desmond-Hellmann, The Gates Foundation
  • Reed Hastings, Netflix
  • Peter A. Thiel, Founders Fund, Clarium Capital Management, LLC.
  • Jan Koum, WhatsApp

History

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The story of Facebook began in the summer of 2004, when Mark Zuckerberg, then a student at the renowned Harvard University, gained access to the university server and posted thousands of photos of students on a website called "Facemash". The concept of Facemash was to rate the people in the pictures according to their degree of attractiveness. In just a few hours, the site had about 500 visitors, who together viewed more than 20,000 photos. Although the data theft was quickly discovered and Zuckerberg had to apologize to his fellow students, his experiment showed how much potential such an online student directory had. In February 2004, the prototype called Thefacebook.com went online exclusively for Harvard students. It took less than two weeks for two thirds of the student body to be registered. Zuckerberg hired his roommates Dustin Moskovitz and Chris Hughes to help him develop additional applications and features for the site. Gradually, other universities were given their own Facebook network. The first were the university of Stanford and Yale; three months later, 30 universities already had a Facebook community.

Sean Parker, co-founder of the Napster music file-sharing platform, arranged the contact with Peter Thiel, the president of Clarium Capital, who was the first investor to invest USD 500,000 in venture capital. Like their role model Bill Gates, the Facebook team decided to take a break from everyday university life in order to concentrate on the further development of their social networking site. From then on, things went uphill: In November 2004, the millionth user registered with Facebook. In May 2005, the young company received a further injection of $13 million from the venture capital firm Accel Partners. Zuckerberg hired additional Internet engineers, including Steve Chen, who later caused a sensation with the video portal YouTube. At the end of 2005, five million users were logged on to Facebook. The number continued to rise when the site was opened to high school students and a photo function was integrated.

In September 2006 all barriers to entry fell. Although this development led to a further increase in membership, it was met with scepticism and lack of understanding by the long-established student users. A first uproar in the community occurred when new features called "News Feed" and "Mini Feed" were added to the profiles of Facebook users. All of a sudden, all Facebook-internal activities and changes made by friends and acquaintances appeared on each user profile in the form of short news items. The annoyance of the users was so great that within a short time 700,000 people joined the user group "Students Against Facebook News Feed". After Zuckerberg admitted mistakes via his blog and promised to better protect privacy in the future, the situation relaxed.

The number of registered Facebook users continued to rise. But also critical voices of data protectionists were raised. The operators of Facebook were accused of irresponsible handling of personal information. Media reports of prosecutions and arrests of American teenagers posing with alcohol or drugs on Facebook photos became more frequent. Universities and companies banned the use of Facebook because students and staff were distracted and because groups had been formed to defame teachers or supervisors. Now Facebook was openly criticized for privacy, invasion of privacy and censorship.

In November 2007, Zuckerberg further tested the limits of user tolerance in marketing and privacy. At a press conference, Zuckerberg presented a new feature called Beacon. This marketing tool informed the friends of a user as soon as he or she purchased a product from a manufacturer that had entered into a partnership with Facebook via their Facebook page. Immediately after the launch of Beacon, there was an outcry among Facebook users and data protectors. The anti-beacon movement, led by the democratic movement MoveOn.org, criticised in particular that the ad program had been launched without the consent of users. A modified version appeared two weeks after the launch. The reason for this was probably not so much the protests of non-governmental organisations, but rather the unrest caused by negative publicity on the part of Beacon's partner companies. The growing importance of Facebook in society was also symbolized by the David Fincher movie "The Social Network", a Hollywood portrait of the company founder Zuckerberg, released in 2010.

In 2012, the company went public, which initially involved technical difficulties and was investigated by the SEC due to irregularities. Particularly because Facebook initially found no effective way to monetize the growing mobile use of its services, the share price fluctuated alarmingly. As early as September 2012, the competing social network Instagram had been bought for $737 million, but with the development of the Android interface “Facebook Home” and especially after the spectacular $19 billion takeover of the messaging service Whatsapp (in February 2014), Facebook was able to expand its influence on smartphone screens. Then Facebook entered the consumer electronics market with the acquisition of virtual reality technology company Oculus. The Oculus Rift-VR glasses, which were launched in 2016, are primarily aimed at PC gamers, but could in the long term be integrated into the Facebook network and revolutionize the way friends communicate on the social network. 

In May 2016, the growing power of Facebook to shape public opinion was discussed for the first time in the US Congress. The reason for this was a report in the technology blog Gizmodo, according to which the company had systematically censored news and opinion articles and removed from its influential news feed those with a "conservative attitude". It was not popularity-based algorithms that determined what made it onto the "front page" of users, but rather – as in a traditional newspaper editorial office – political preferences of the responsible Facebook employees. Articles that did not come from the established mainstream media were supposedly simply ignored. Certain topics in turn were allegedly actively included in the news feed for political reasons. The Black Lives Matter movement, in which comparatively few Facebook users seemed to be interested, in contrast to Twitter users, is said to have been made a trending topic on Facebook on Zuckerberg's instructions.

Facebook's latest feature, Live Video push, could transform the social network into a kind of online TV channel in the long term. The company is already paying media like the New York Times or Vox.com to produce video content for Live Video push. The company also wants to pay celebrities to use the video app. Similar to Instant Articles, Facebook could thus become the first address for streaming videos. CEO Zuckerberg has reportedly made video streaming a top priority, partly to compete with the live video offensives of Twitter and Snapchat.

In its plan to recruit the next billion Facebook users in developing and emerging countries, the company suffered a defeat in 2016. The Indian government refused to approve Facebook's Free Basics service (formerly Internet.org). The official goal was to connect the remaining two-thirds of the world's population to the Internet without Internet access. Critics accused the campaign of being nothing more than a neo-colonial plan disguised as a charity, in violation of net neutrality principles, to get at the lucrative personal data of millions of new users.

Management

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Facebook founder Marc Zuckerberg grew up in the New York metropolitan area and began studying codes and programming languages at the age of eleven. His first major project was a computer version of the board game "Risk", which the college drop-out with a knowledge of Latin and Ancient Greek settled during the Roman Empire. Often dubbed "the next Bill Gates" because of its combination of success and nerd image, Zuckerberg became the most well-known face among Web 2.0 makers in 2007 thanks to massive media coverage. He owns 28 percent of Facebook and has total assets of 81 billion dollars.

Former Google manager Sheryl Sandberg has been in charge of Facebook's daily operations (COO) since 2008. She is responsible for advertising strategy, HR decisions and lobbying. While Zuckerberg took care of the technical side and the external image of the company, it was Sheryl Sandberg who turned Facebook into a multi-billion dollar business. With her Facebook shares, Sandberg is one of the few billionaires in Silicon Valley.

Business Units

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Facebook app
In the third quarter of 2019, the social network reached around 2.45 billion users who logged on to mobile phones and PCs every month “to connect, share, discover, and communicate with each other”, according to the Facebook Annual Report 2018. A core area here is the News Feed, which presents users with individualized, algorithm-based articles and advertisements. Facebook Ads is a system that enables companies to advertise on Facebook and reach the desired target group. It essentially consists of two elements: Facebook Pages allows companies and advertising artists to create a profile, just like students or other people do. Facebook Social Ads is a program that allows advertisers to place customized ads on user profiles, taking into account the social activities of the Facebook circle of friends.

Instagram
Thanks also to Instagram, the Oxford English Dictionary chose "Selfie" in 2013 as the word of the year. The social network developed by Kevin Systrom and Mike Krieger, which is mainly used for sharing photos and short videos, now has around one billion active users (as of June 2018).

Messenger
Facebook Messenger is a messaging application to send texts, pictures, music and videos. Voice and video telephony are also possible. Originally released as Facebook Chat in 2008, Facebook Messenger was the second most frequently loaded mobile app between 2011 and 2019 with 1.2 billion users in April 2017.

WhatsApp
The freeware messaging and telephony service, since 2015 "the world's most popular messaging application", is used by 1.5 billion people worldwide (as of February 2018).

Plus:
The Facebook subsidiary Oculus (founded in 2012, bought for $2.3 billion in 2014), which is active in the field of virtual reality and develops and sells VR headsets, apps and games; the B2B platform Workplace for in-house communication; "video-calling devices" developed under the Portal brand; and Calibra: the subsidiary commissioned with the development and market launch (probably 2020) of financial services. The focus here is on the "private complementary currency" Libra, which is controversial in terms of data protection law.

Commitment in Europe/Germany

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Facebook has been available in German since March 2008, and in March 2019 the following user figures were published for Germany: there were 32 million Facebook users per month, of which 91% were mobile. Martin Ott, who had managed the Northern Europe business, which also includes Germany, Austria and Switzerland, from Hamburg since 2012, resigned from his position as director in summer 2019. His successor as head of Germany: Tino Krause, previously head of the largest German media agency Mediacom. The situation he finds himself in is difficult, with user numbers stagnating.

Current Developments

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Is Facebook too big? We have already mentioned the fantastic number of 2.8 billion users, more than all Indians and Chinese combined. But it is also more than the 2.28 billion Christians and more than the 1.75 billion Muslims (figures from a study by the Pew Research Center). The comparison of religions and sects is not new, it is also obvious when Facebook advertises with the slogan: "Facebook - An open and networked world". A promise of salvation for the 21st century that promises nothing less than a better future for all mankind. Made possible by free communication for everyone everywhere.

Like other social networks, totalitarian states and religions, Facebook is trying to completely absorb its members. It started with all varieties of communication. Is Facebook now taking over also the money with its crypto-currency "Libra"? Is Facebook also breaking new ground in the field of love with its flirt portal "Facebook Dating", announced for 2021, and replacing the current market leader Tinder? For many, Facebook was initially an expression of the freedom that supposedly prevails on the Internet. But one must not forget: The social network is first and foremost a profit-oriented company. The freedom there is a freedom within narrow limits, dependent on the discretion of the management and shareholders of an American company. Which in the end is not about its users, but about the rate of return.

The criticism of Facebook concerns incomplete data protection, abuse of market position, fake news and propaganda. Especially after the US elections in 2016, Facebook faced a lot of headwind when the company was accused of influencing the election campaign in the sense of Trump. As early as 2015, Facebook's increasing importance as a news channel was documented by the Reuters Institute in Oxford. According to this study, 23% of 1,969 respondents of all age groups across Germany received their news via their Facebook timeline. In the USA, the corresponding figure was 41% of 23,557 respondents. Then Facebook said that they wanted to hire editors for their own news section in autumn 2019. There would no longer be automatic news selection, but "fewer than ten journalistic veterans" (according to the New York Times) who would select the articles for Facebook. And Mark Zuckerberg, the Facebook guru, as editor-in-chief would have a say in which news is read by well over two billion people. So much for Facebook's transformation from a pure technology company to a media conglomerate.

Another, darker side came to light in 2018 with the documentary "The Cleaners". Somewhere in Manila, so-called cleaners are evaluating photos and videos on Facebook and whether they violate community rules. They check and cleanse "monstrosities of human abysses". Quote Timothy Garton Ash about Facebook: "The greatest sewer in human history". For these reasons and after these incidents, many people today see Facebook in a negative light. "Facebook Is Terrible Not Because It's Evil, But Because It's Terrible," headlined Forbes in January 2018.

So is Facebook too big? Increasingly, there are voices calling for the tech giant to be smashed. Roger McNamee, a long-time Zuckerberg supporter, was the first in March 2019, Facebook co-founder Chris Hughes followed suit in May (he said that Instagram and Whatsapp should be separated), and former Democratic presidential candidate Elizabeth Warren also spoke out in favour of unbundling. Former Obama advisor Tim Wu contradicted Zuckerberg ("only companies the size of Facebook can invest sufficiently in protection against malicious actors"). Wu said: "In my opinion, anyone who studies systems knows that centralized systems are dangerous... because they represent a big, huge target." This is exactly what happened in the US elections of 2016. "What would Putin have done 20 years ago in the era of a more chaotic internet? Would he have put some ads on Craigslist or something to try to manipulate votes?"

It still is quite a crisis of confidence that Facebook is struggling with because of its long series of data scandals. In January 2019, people read about the "Apology Tour in Europe", on which Facebook top manager Sheryl Sandberg also appeared in the Alte Kongresshalle in Munich, as part of the digital conference DLD. "We are not the same company we were in 2016 or even a year ago," Sandberg said. "We know that we need to get better at making sure that we anticipate the risks involved in connecting so many people." The Handelsblatt of 20.01.2019 closes its article with: "After the worst year in its corporate history, the scandals surrounding Cambridge Analytica, hate comments, election rigging and data leaks, the network and its co-director are fighting for the favour of users, advertisers and politicians. Then the quarterly report published on 29.1.2020: Despite all the negative PR, Facebook continued to grow and had a turnover of 21 billion dollars in the fourth quarter of 2019. Compared to the same period last year, this was an increase of no less than 25 percent.

Further reading

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  • Bond, Robert M./Fariss,  Christopher J./Jones,  Jason J./Kramer,  Adam D. I./Marlow,  Cameron/Settle,  Jaime E./Fowler, James H. (2012): A 61-Million-Person Experiment in Social Influence and Political Mobilization. In: Nature 489, S. 295-298. DOI 10.1038/nature11421
  • Ellison, Nicole B./Steinfield, Charles (2007): The Benefits of Facebook “Friends”. Social Capital and College Students’ Use of Online Social Network Sites. In: Journal of Computer-Mediated Communication, 12 Jg., Nr. 4, S. 1143–1168. DOI 10.1111/j.1083-6101.2007.00367.x
  • Mezrich, Ben (2009): The Accidental Billionaires. Sex, Money, Betrayal and the Founding of Facebook. London: William Heinemann. 
  • Valenzuela, Sebastián/Park, Namsu/Kee, Kerk F. (2009): Is There Social Capital in a Social Network Site? Facebook Use and College Students' Life Satisfaction, Trust, and Participation. In: In: Journal of Computer-Mediated Communication, 14 Jg., Nr. 4, S. 875-901. DOI 10.1111/j.1083-6101.2009.01474.x