As the Spring 2004 Harvard semester wound down, things at Thefacebook
just got busier. By the end of May it was operating at thirty-four
schools and had almost 100,000 users.
In June 2004, business manager Saverin opened a bank account
and deposited more than $10,000 of his own money as working capital
and also began depositing advertising revenues there.
A month or so earlier, Saverin had gotten in touch with a firm called
Y2M. Y2M sold ads for college newspaper websites and Saverin invited
them to come talk about selling ads for Thefacebook. The meeting was
delayed a couple of times because Mark and Eduardo had exams or papers
due. When Y2M's Tricia Black finally sat down with them, Zuckerberg
pulled out a notebook with a printout of Thefacebook's traffic
data. Black was nonplussed. "You must be tracking it wrong," she said.
"There's no way you could have this much traffic." Zuckerberg suggested
that the ad company put their own monitoring software on the
server for a few days to track it for themselves.
The stunning numbers weren't an error. Black and her colleagues
were thrilled. Y2M began almost immediately placing ads for clients,
taking a commission of around 30 percent. One of the first advertisers
was MasterCard, seeking applications for a special credit card for
college students. But like Y2M itself and most of its other advertisers,
MasterCard executives were skeptical Thefacebook could really deliver
results. So instead of simply paying to display ads, as it did with this
campaign on other college sites, MasterCard agreed to pay only when
a student filled out a card application. At this point Thefacebook operated
at about twelve schools. MasterCard turned on its campaign at
5 P.M. on a Thursday. Within one day it received twice the applicants
it had expected for the entire four-month campaign. Thefacebook was
getting ads in front of exactly the right customers—wealthy undergrads
at the best schools. MasterCard continued advertising.
Y2M's executives started to see Thefacebook as a potential gamechanger
and by summer they wanted a piece of the action. Black and
another executive met with Zuckerberg and asked if Y2M could invest.
The young CEO said he'd consider it, but that they would have
to give Thefacebook a valuation of at least $25 million. Y2M decided
to hold off.
In situations like this, Zuckerberg tends to be impassive. Often he
says little, despite facing extravagant praise or seductive entreaties. He
was unimpressed with Y2M's advances. Even then he had his own vision
for the potential of Thefacebook, and it didn't have a lot to do with
money. "We're going to change the world," Black remembers him saying.
"I think we can make the world a more open place." These were
words he would speak again and again in coming years.
Maximizing revenue by selling ads was less important to Zuckerberg
than keeping users happy. He would allow advertisements, but only
on his terms. Advertisers could only use a few standard-size banners.
Those who requested customized treatments were refused. Zuckerberg
turned down ads from companies he thought were out of keeping with
the playful student mood of Thefacebook, including Mercer Management
Consulting and Goldman Sachs. Zuckerberg for a while even put
little captions above the display ads reading "We don't like these either
but they pay the bills." Says Joshua Iverson, a sales rep who worked for
Black at Y2M: "Mark never wanted ads. Eduardo was the businessperson."
Of course it wasn't unusual for contemporary Web thinkers to be
uninterested in advertising. Sites like Craigslist and Wikipedia were at
that time rapidly becoming among the Internet's largest by taking a patently
noncommercial approach.
Y2M tried to convince Zuckerberg to expand Thefacebook onto
campuses with larger student populations, like the University of Arizona.
But he was resolute it remain mostly Ivy League, or at least limited
to schools his users were asking him to add—places where their
friends went to school. This kept the circle small and exclusive those
first few months. Advertisers themselves couldn't even log on to Thefacebook.
com, since Zuckerberg insisted membership remain limited
to students, faculty, and alumni of the schools where it operated. It was
unheard-of for advertisers not to be able to see their own ads running.
But despite these challenges, Black was growing ever more certain
that Thefacebook was a sure thing. After Y2M itself failed to get a piece of
Thefacebook, she started campaigning for Saverin to hire her full-time.
Meanwhile, Zuckerberg was hedging his bets. He didn't take Thefacebook's
success for granted. In fact, while he had high hopes, he still
wasn't certain the website would amount to much. He still looked at
it as just one of his projects, although it was becoming an interesting
one. So, ever the entrepreneur, he embarked on yet another new project.
While he still spent most of his nonstudy time on Thefacebook,
he and Andrew McCollum, another talented sophomore programmer,
started working on new software they called Wirehog. Inspired in part
by the once-notorious music-sharing site Napster, Wirehog was going
to be a peer-to-peer content-sharing service. It would allow users not
only to exchange music, but video and text files or any kind of digital
information —and only with friends. It would connect directly to Thefacebook,
turning your friends there into sources for content.
Zuckerberg searched the Craigslist classifieds and found a fourbedroom
ranch house in Palo Alto, California, which he rented as a
summer sublet. He decided he wanted to go out to California for several
reasons. McCollum, with whom he was collaborating on Wirehog,
had a summer internship at nearby video game company Electronic
Arts, an industry giant that had created the Sims, Madden NFL games,
and many other hits. Exeter buddy Adam D'Angelo was willing to come
up from Caltech to hang out. But most of all it was the promised land
of technology. "Palo Alto was kind of like this mythical place where all
the techs used to come from," he told a reporter a few months later. "So
I was like, I want to check that out."
In a critical recruitment effort, Zuckerberg convinced Dustin Moskovitz
to join him on the trip to California. Moskovitz had already arranged
a summer job in the Harvard computer lab as a user assistant, or
UA. But Moskovitz had become indispensable. With his dogged work
ethic and growing knowledge of coding, he was more or less managing
Thefacebook's day-to-day operation. Zuckerberg promised to pay more
than he'd get in his UA job and convinced him the move would be
good for Thefacebook.
Spokesman and Zuckerberg roommate Chris Hughes had already
paid for a summer program in France and would only come out to Palo
Alto when that was over. His middle-class North Carolina family didn't
have a lot of money and he was by nature even more risk-averse than
Moskovitz, whose Florida family was fairly well-off. The more worldly
Brazilian Saverin had his own reasons not to join the trek to Palo Alto,
which appealed to him not at all. He headed to New York for the summer,
planning to drum up more advertising business and to work at an
investment firm where his father had connections.
Sean Parker was stressed out. It was a hot afternoon in Palo Alto, and
he hated doing physical work. But his lease was up and he was short on
cash. So here he was in June 2004 on the sidewalk in front of his girlfriend's
family's house, unloading boxes from his car. It was, admittedly,
a svelte vehicle—a white BMW 5-series he'd bought when times were
flush. Parker too was a bit svelte. His curly blond hair was stylishly long.
The slim twenty-four-year-old wore a fashionable and pricey T-shirt,
which on this day was getting sweaty.
When he noticed a group of boys heading toward him he stiffened.
His boxes contained expensive computer equipment. He didn't like the
look of these kids—all wearing sweatshirts with hoods up despite the
heat. He thought they had a menacing air, maybe a group of hoodlums.
But now the shortest one walked right up.
"Parker!" he said unexpectedly, with enthusiasm. "Sean —it's Mark,
Mark Zuckerberg." Suddenly it all snapped into place. This was the guy
he'd met for dinner in New York two months earlier. He'd said he was
coming out to California for the summer.
Zuckerberg introduced the other four—all Harvard undergrads,
not hoodlums: Thefacebook's curly-haired co-founder Dustin Moskovitz,
Andrew McCollum, Zuckerberg's Wirehog partner, and two skinny
interns that Thefacebook had hired for the summer, Harvard freshmen
Erik Schultink and Stephen Dawson-Haggerty. The five boys had been
on a mile-long walk home from the grocery store, since they didn't have
a car. They were living in a house just a block away. Zuckerberg invited
Parker to come over. A few hours later, the young entrepreneur walked
to the Thefacebook house at 819 La Jennifer Way.
Sean Parker was about to become a major—if controversial —
character in the Facebook story. He had a lot of Internet experience
for someone his age. In 1999 he'd hooked up online with a guy named
Shawn Fanning, the creator of Napster, and then joined him in San
Francisco to help launch the service that upended the music industry.
Parker left Napster after just a year and co-founded his own Internet
company, Plaxo. The venture quickly raised millions and began garnering
hundreds of thousands of users, but Parker ran into trouble
again with his financial backers. Plaxo's venture capitalists didn't like
his casual approach to scheduling and deadlines, his iconoclasm, his
insecurity, or his superior attitude, though they recognized he was
scary smart. The investors didn't much appreciate Parker's rock-androll
lifestyle, either. He would work weeks on end to accomplish some
company objective, sleeping in the office, then not come in at all for
days. Finally they booted him out. In the end they even hired a private
investigator to document his alleged misbehavior.
Parker was among the growing number of Silicon Valley executives
who were becoming convinced that social networking would become
a very big business. In the fall of 2003, Silicon Valley venture investors
had put a total of $36 million into four high-profile social networking
start-ups—Friendster, Linkedln, Spoke, and Tribe. In late March, not
long after Thefacebook took over the Stanford campus in mere days,
Parker sent Zuckerberg an email out of the blue. He played up his
Napster bona fides and offered to introduce Zuckerberg to savvy San
Francisco investors who understood social networking. He mentioned
that he was acquainted with the CEOs of Linkedln and Tribe, who
had jointly purchased a key patent that might be important for social
networks. Parker suggested that a meeting with them could help ensure
that the patent wasn't used against Thefacebook. Saverin emailed him
back, and they arranged a dinner in New York.
In early April, Parker flew to New York for the dinner. He joined
Zuckerberg, Zuckerberg's girlfriend Priscilla Chan, Saverin, and
Saverin's girlfriend at a trendy new Chinese place called 66 in Tribeca.
Zuckerberg was thrilled to meet a founder of Napster, which he considered
one of the most important things that had ever happened on
the Internet. And Parker was quickly impressed with Zuckerberg. At
the sleek, Richard Meier-designed restaurant, the two fell into intense
back-and-forth almost immediately, mostly leaving out Saverin and the
two women. Zuckerberg sketched out his vision for what Thefacebook
could become. It was an even bigger vision than Parker had expected.
"He was not thinking, 'Let's make some money and get out/" says
Parker. "This wasn't like a get-rich-quick scheme. This was 'Let's build
something that has lasting cultural value and try to take over the world.'
But he didn't know what that meant. He was a college student. Taking
over the world meant taking over college." Parker remembers thinking
Zuckerberg seemed incredibly ambitious. "He had imperial tendencies."
Parker had to overdraw his bank account to afford the dinner, but
he felt it was worth it.
When he ran into Parker two months later on the Palo Alto sidewalk,
Zuckerberg had a strong and positive recollection of the New
York meeting. Parker was one of the people who seemed to really understand
what Thefacebook was doing.
Over dinner in Palo Alto, Zuckerberg witnessed the denouement
of Parker's months-long battle with his former backers at Plaxo. The six
young men walked to a nearby restaurant, where Zuckerberg brought
Parker up to date on Thefacebook and introduced him more fully to
his Harvard chums. While they were sitting in the restaurant, Parker
got a critical call from his lawyer. The news was bad. The Plaxo board
had decided not to allow about half of Parker's remaining Plaxo shares
to vest. In other words, he was getting kicked out of his company and
losing his chance to make any money if it later went public or was sold.
Parker was enraged. He was getting screwed. Thefacebook's boys
listened in awe and dismay. It became the theme for the night. Zuckerberg
had little experience dealing with investors, though they had been
approaching him regularly since about March, hoping to get a piece
of Thefacebook. Hearing Parker's story was chastening. "VCs sound
scary," Zuckerberg recalls thinking. It was a formative moment, and a
critical one for Facebook's future. Feeling for his friend, and thinking
he might learn much from Parker, Zuckerberg invited him to move into
the house with them. By September, Zuckerberg was calling Parker the
company's president.
Parker is a unique sort of entrepreneur, even for Silicon Valley. A
precocious programmer and intellect, he is the son of a top U.S. government
oceanographer. He spent much of his Virginia childhood beset
by illness, devoting much of his time to reading and learning computer
programming. In 1995 he became an intern at fifteen at Freeloader,
one of Washington, D.C.'s first Internet start-ups. Several years later, in
1999, barely out of high school, he helped Shawn Fanning start Napster.
The renegade peer-to-peer music-sharing service attracted 26 million
users by its peak in early 2001. It was also the first big consumer service
to demonstrate a fundamentally new sort of Internet—one where users
connected directly to one another without a big company like eBay or
Yahoo or Microsoft in the middle. But Napster almost immediately encountered
an all-out legal assault from the big record labels. Parker, for
his part, lost his job there in a management shake-up after little more
than a year, when he was still just twenty. He got the company in trouble
by openly discussing in emails—displayed in a court case brought
by the labels—that what Napster's users were doing might be illegal.
Shortly thereafter, he and two friends formed Plaxo, which helped users
keep track of email addresses and contact information.
Despite his lack of formal education and loose respect for business
norms, Parker is a business intellectual. He could even perhaps be called
a business artist, if those two words can be juxtaposed. On his own Facebook
profile he calls himself "a twisted half-breed: a rational-aesthete."
He combines a subtle understanding of business history, economics,
and behavior with an artist's impatience, impulsiveness, and vision for
a better world. Not that his actual vision is any good. His eyes are bad
enough that if he forgets his contacts or his thick glasses he can need
help getting around. He has a certain weightless quality, as if he were
about to float off like Peter Pan, perhaps surrounded by one of his alwaysgorgeous
girlfriends. (Lately he has settled into a long-term relationship.)
A voracious reader with a deep fascination with politics, the selftaught
Parker may pepper an analysis of current trends with a reference
to "the intentions of the framers" (the men who wrote the U.S. Constitution,
that is). His Facebook profile includes quotes from T. S. Eliot,
Bertrand Russell, and Albert Camus. He likes to talk about things like
"business externalities." And if you show the slightest interest he will eagerly
describe his theory on the history of media since Gutenberg. Most
of all, he likes to talk, rapidly, intensely, and he likes to talk about ideas.
What he brought to Thefacebook was both a practiced understanding
of the realities of business and a penchant for philosophical argument
that prompted Zuckerberg to refine his vision. Hanging with Parker
wasn't that different from jawboning with classmates in the Harvard
dorms, except that the conversation now was all about making Thefacebook
successful.
The boys quickly settled into a routine—sleep late, walk into the dining
room, and get to work. The table there was piled high with computers,
cables, modems, cameras, and trash that got stuffed among them, along
with the requisite untossed bottles, cans, and cups. Zuckerberg slept
later than most—he seldom got to work before afternoon, and usually
worked well into the night. His typical garb in this office of sorts was
pajama bottoms and a T-shirt. When they sat at their laptops around
the dining room table on La Jennifer Way, it was eerily quiet. That's
because when they did talk to one another, they did it over instant messaging,
even when they were sitting right next to one another. It let the
others concentrate. Geeks like Zuckerberg and Moskovitz like to get
deep into what is almost a trance when they're coding, and while they
didn't mind background music or the TV playing, they couldn't stand
interruptions.
With Moskovitz and Parker, Zuckerberg had now put into place,
consciously or not, an ideal team to bracket his own talents. Moskovitz is
the kind of person every start-up needs—diligent, down-to-earth, versatile,
and pragmatic. He took responsibility for keeping the service operating
and setting up databases for new schools (with the interns doing much of
the tedious work). If he had to, he'd work all night to keep the system up.
Parker, by contrast, was an experienced company-maker, familiar
with the ways of the world. He specialized in networking in the realworld
sense. He knew a lot of people in the Valley and understood how
to get their ear. He was polished —spending money (when he had it) on
nice meals, haircuts, and stylish clothes. He might occasionally cancel
meetings unexpectedly after burning himself out at a party the night
before, but he was a slick front man who could talk up Thefacebook,
which was exactly what it needed. In Silicon Valley those who had heard
of it still mostly thought of Thefacebook as a silly thing for sex-starved
college kids. Parker's big-picture vision helped give the service gravitas.
Having the two of them in place meant Zuckerberg could do what
he does best—think about what Thefacebook should be and how it
should evolve. Or, depending on his mood, devote his energies to something
he wanted to use himself—Wirehog. Ironically, Zuckerberg was
not a heavy user of Thefacebook. Nor, in fact, were any of its founders
and early employees. This summer the interns, working with Moskovitz,
started to gather data on how people actually used the site. They
found that some users were looking at hundreds and even thousands of
profiles every day. These were the users they were designing for.
When he wasn't working on Wirehog, Zuckerberg was coding a
feature for Thefacebook he also thought would be pretty cool—a way to
get information out of the service using short messages, or SMS, from a
cell phone. Way before there was a Facebook application for the iPhone
or the BlackBerry, this was Thefacebook's mobile interface. You could
send messages with a person's name to m@Thefacebook.com and include
special codes to get friends' phone numbers or other information
sent back to your phone. The only problem was that it was unwieldy for
ordinary users. You needed to carry around a folded-up cheat sheet to
remember how to use it. Cool though it was, it didn't last long.
Parker moved into a room with a bare mattress on the floor. Zuckerberg
later said that aside from his car, the only impressive thing Parker
brought with him was a pair of "ridiculously nice sneakers." According
to Parker, here's how Zuckerberg asked him to take on the president
job: "Can you help us set up the company? We're screwed right now."
Part of the deal, though, was a quid pro quo —Parker got to stay in the
house; Zuckerberg and his friends got to share Parker's BMW.
At least one adviser urged Zuckerberg not to hire Parker, saying
his lax ways and dissipated lifestyle could taint the company. "He has a
problem with women and rock V roll," Zuckerberg's more-experienced
confidant said. But Zuckerberg was unmoved. He said he'd heard the
stories, but that Parker's experience and intelligence outweighed the
risks. After all, Parker helped start Napster. Not only that, but he was a
small investor in Friendster and a friend of its founder. He was already
talking about The facebook as "the chance to do Friendster correctly."
Thefacebook's traffic had dipped now that college kids were mostly
out of school. But Zuckerberg and Moskovitz were bolstering the site
for fall, when they expected growth would resume in earnest. Some
visitors saw their confidence as arrogance bred of upper-class Harvard
privilege. "Even back then they were talking like they knew this was
going to happen and they had the best thing in the world and they
were going to dominate everyone," says one slightly awed early visitor to
the house. "They used that word dominate all the time." Thefacebook
would dominate its rivals, they said. In fact, much of it was bluster, with
an added dash of the insouciance of youth.
Work would get intense in the late afternoon and early evening.
"Everyone would be working and someone would say 'Hey, I'm hungry.
I wanna go get In-N-Out,'" says another frequent visitor, "and Mark
would, like, pound the table and just say 'No! We're in lockdown! No
one leaves the table until we're done with this thing.'" Like dominate,
lockdown became a part of Facebook's lingo and lore that lasted for
years.
Despite his baby face and general shyness, Zuckerberg was firmly
and undisputedly in charge. Every page of Thefacebook included at the
bottom a little tagline: "A Mark Zuckerberg production." On the serthe
facebook effect
vice's "about" page, he was listed as "Founder, Master and Commander,
Enemy of the State." Moskovitz, by contrast, had the relatively ignominious
listing "No Longer Expendable Programmer, Paid Assassin." Saverin's
job was said to be "Business Stuff, Corporate Stuff, Brazilian Affairs."
Zuckerberg was beginning, fitfully, to show qualities of natural
leadership. Says Sean Parker: "The leader of a company needs to have a
decision tree in his head—if this happens we go this way, but if it winds
up like that, then we go this other way. Mark does that instinctively." He
liked to have fun as much as any of his colleagues —in fact he could be
a bit of a comic—but he also was determined to keep this ship moving
forward. And he was more than happy to be the captain.
Not infrequently, in fact, he acted like he was captain of a pirate
ship. When he started thinking hard about something or was debating
an idea with one of the others, Zuckerberg would often jump up and
start pacing back and forth around the room with his hands clasped
behind his back. Among the few possessions he had brought out with
him were his fencing paraphernalia, which he left lying in a pile not
far away. Often he'd grab his foil and start swinging it through the air.
"Okay, we've got to talk about this," he would declare, one hand held
behind his back, lunging forward with his foil. It got on Moskovitz's
nerves. "I'm the personality type where that would get me sometimes,"
says Moskovitz. "It was a pretty small room. I'm like a cautious mother—
Tou're going to break something!' But when he got into the mood he
would do it for a couple hours." Later Moskovitz and the others banned
fencing from the house.
Behind the house was a nice kidney-shaped pool, and the triangular
backyard was mostly paved. One night Zuckerberg and Parker spent a
few hours standing around outside talking. Zuckerberg had his foil, and
was waving it too close to Parker's face for comfort. He found it very bad
for concentration to have a fencing sword swing a few inches from his
face every few seconds. "Do you think this thing is really going to last?"
Zuckerberg asked at one point between thrusts. "I do," replied Parker,
wincing. "Unless we get outcompeted by somebody else or we don't execute
well or we let our servers fail like Friendster did, there's no reason
why this can't last."
"Mark was actually very rational about the low probability of
building a true empire," recounts Parker. "He had these doubts. Was
it a fad? Was it going to go away? He liked the idea of Thefacebook,
and he was willing to pursue it doggedly, tenaciously, to the end. But
like the best empire builders, he was both very determined and very
skeptical. It's like [former Intel CEO] Andy Grove says, 'only the paranoid
survive/"
Adam D'Angelo, up from Caltech, was by far the most gifted and
accomplished programmer of the bunch, but he was working on his
own projects. He was also neither expert in nor very interested in the
relatively simple Web-based languages Thefacebook was employing—
PHP, JavaScript, and HTML. D'Angelo had a bad case of carpal tunnel
syndrome, which meant his hands and arms hurt when he typed. So he
was trying to come up with his own alternative —invent a way to move
his hands in the air that a video camera could recognize, in order to
manipulate text on a screen. It was a pretty challenging project, maybe
too challenging, and as summer went on he spent less time on that and
more time helping McCollum and Zuckerberg with Wirehog.
While the young engineers worked to bolster the site and refine
its features, Parker started thinking about what it would mean to turn
Thefacebook into a company. He hired the lawyer who'd helped set
up Plaxo. He started looking for someone to manage "operations," a
fundamental task in Internet companies that involves making sure the
data center and servers are operating properly. Up until then, all that
work had been outsourced to third-party companies, but Thefacebook
was getting too big for that. Parker discovered that his young colleagues
didn't even know the basics about network management, like what a
router was. He found an engineer named Taner Halicioglu, who had
experience at eBay. He worked from home in San Jose.
Parker became Thefacebook's front man, especially with investors.
It wasn't uncommon for fancy cars to be parked outside on the deadend
street, under the big droopy trees that loomed over the front of
the house. That meant someone with money was inside. Some guys
from the Benchmark venture capital firm wanted to know if there was a
chance of an equity investment. The answer was no, for the time being.
But Thefacebook was going to need more funding in the near future, so
Parker made sure such people felt comfortable calling or stopping by.
A couple of Google executives came over to see if there might be
a way to work with or even buy Thefacebook. Even at this early date,
Google was well aware that something noteworthy was going on in Palo
Alto. Zuckerberg and Parker were leery, though, because the risk of
becoming subsumed by Silicon Valley's Internet giant was real. If they
wanted to do their own thing, they had to stay independent, they believed.
Anyway, what they were trying to do was very different from what
Google did. Their site was about people; Google was about data.
One area where Parker and Zuckerberg clashed was over Wirehog,
on which development continued. The new president thought it was a
huge distraction from the work of growing Thefacebook. And his history
with Napster made him leery of getting into another tussle with music
and media companies. To Parker it seemed likely that such companies
would accuse Wirehog—and with it Thefacebook—of helping users
steal content, just as the music industry had with Napster. With Wirehog
engineer McCollum, the two flew down to Los Angeles where they
met with Edgar Bronfman, Jr., CEO of Warner Music Group, and Tom
Whalley, who ran Warner Bros. Records. Parker had gotten to know
Whalley in his Napster days. Unsurprisingly, they were wholeheartedly
opposed to Wirehog. Though Parker feared that a successful lawsuit
against Wirehog could take Thefacebook down along with it, he failed
to sway Zuckerberg, who persevered.
"Really great leadership," says Parker, "especially in a start-up, is
about knowing when to say no—evoking a vision very clearly, getting
everybody excited about it, but knowing where to draw the line, especially
with products. You can't do everything. And that's a lesson Mark
didn't know yet. That's a lesson Mark learned."
Work was hardly the only priority, of course. What group of twentyyear-
olds suddenly occupying their own house wouldn't want to party?
Nerds these guys might have been, but they were fun-loving nerds.
Stanford was just a mile or so away. It operates on a quarter system, so
students were still around in the summer. Using a feature in Thefacebook
that enabled ads to be targeted at just one school, the housemates
announced their parties right on the service — "Thefacebook is having
a party!"—and then often found themselves mobbed by both Stanford
students and townies. Moskovitz started dating a girl who had just graduated
from Palo Alto High School.
The parties were typical beer-and-booze-fueled affairs. Here's where
Parker came in particularly handy. He was the only one in the group
over twenty-one, so they relied on him to buy the alcohol. There was a
fair amount of pot smoking, too, though Zuckerberg frowned on it and
didn't partake. "Mark is just about the most anti-drug person Fve ever
met," says one friend.
Hanging out around the pool was of course a major activity. If a
glass broke, the shards often just got swept into the water. McCollum
strung a wire from the chimney on top of the house to a spot slightly
lower on a telephone pole beyond the pool. With a pulley, he turned it
into a zip line, so you could ride down the wire and, suspended over the
pool, drop in with a massive splash.
One favorite party activity was Beirut, or beer pong, a beer-drinking
game for teams of two or more players that involves throwing a Ping-
Pong ball into a bunch of beer cups arrayed in a triangle at the other
end of a table. If you get your ball into the opposing team's cup, they
have to drink that cup's contents. Once all the losing team's cups are
eliminated, its members drink the remaining beer on the winning
team's side. The losers get really drunk.
Beirut was so popular at Thefacebook (and at Harvard) that six
months later Zuckerberg and friends launched a national college Beirut
tournament. Thefacebook planned to pit campus teams against one another,
then each school's winning team was to come to New York for the
final to compete for a $10,000 prize. (The Stanford Daily asked Zuckerberg
why Thefacebook would host an event it had to spend $10,000 on,
and he replied "Because it's cool.") Thousands of students paid ten dollars
each to register, but Thefacebook canceled the competition only four
days after it launched, after being deluged with complaints from colleges.
The house felt like a dorm. They'd often grill hamburgers or steaks
out by the pool, and eat, raucously, at an outdoor table. If the talking
lasted too late at night, the neighbors would get peeved. If someone
brought a girl back to his room, his roommate had to sleep downstairs on
the couch or drag his mattress into another room. Some people—female
and male—stopped by for days and just hung around.
One of them was a friend of Parker's named Aaron Sittig. He had
earlier helped create a version of Napster for the Macintosh, called
Macster, which Napster bought. At this point he was working for a nascent
music-oriented social network called Imeem, located a few blocks
away in Palo Alto. Sittig is a quiet, self-effacing, blond surfer type who
in addition to being a programmer is a superb graphic designer and typographer.
But back then he was feeling burned-out and unmotivated.
Parker brought him around because he thought he could help Thefacebook,
especially with design.
But Sittig wasn't showing a lot of initiative. "I kept explaining to
Mark that Aaron was brilliant," says Parker. "But Aaron would just sit
on the couch and diddle around on his computer all day playing with
fonts. Mark kept saying Who is this guy? He's worthless. He doesn't
do anything.' Mark thought it was bad for the work ethic to have him
hanging around seeming to do nothing." (The following year, after reenrolling
at the University of California at Berkeley for a semester to
study philosophy, Sittig did come to work at Thefacebook. He became
one of Zuckerberg's closest confidants.)
Oftentimes the coding, swordplay, and raucous meetings would
go on well into the night, sometimes punctuated by breaks for drinking,
movie-watching, and video-game playing. The Xbox got a workout,
with the game Halo a particular favorite. Somehow Tom Cruise became
a group obsession, and thus ensued a lengthy Tom Cruise movie
marathon. They rented an entire stack of his DVDs. Why Tom Cruise?
Sittig, who put down his laptop long enough to watch along with everyone
else, explains: "Tom Cruise was funny because he's not a very cool
character. He's not a cool guy." It was camp.
Pretty soon they were naming the servers on which Thefacebook's
software was running after characters in Tom Cruise movies: "Where's
that script running?' 'It's running on Maverick.' Well, run it instead on
PaloAlto
Iceman, I need Maverick to test this feature/" (Maverick and Iceman
were characters in Cruise's 1986 film Top Gun.) The Ben Stiller movie
Zoolander was another house favorite, watched to excess. It played over
and over in the background while people were working. These guys
found it funny to quote big chunks of the movie to one another. They
may have been developing a revolutionary Internet service, but they
were still really just college kids.
With a total of seven guys living in the house, they needed more
than Parker's BMW to get around, so Zuckerberg and company bought
a car. They were planning to return to Harvard in the fall so expected to
sell it again in three months. They spent a few hundred dollars on one
they thought couldn't depreciate further—a forest-green, twelve-yearold,
manual-transmission Ford Explorer. It was so worn-out you could
rotate the key halfway and turn off the engine, then remove it. To start
it up again, you didn't need a key at all. Just grab the ignition and twist.
It was transportation well suited for a bunch of impatient guys who half
the time couldn't find the ignition key anyway.
But despite the horseplay and silliness, it was becoming apparent that
Thefacebook was turning into a serious business. Zuckerberg knew he
had to take more deliberate steps to keep it evolving both technologically
and as a business. That summer the growth started to seem a bit
scary. They didn't add any new schools until midsummer, but membership
kept steadily climbing all summer at the thirty-four colleges where
Thefacebook was already operating. And everybody assumed the beginning
of the school year would bring massive new demands. New users
meant they needed more reliable software and more computing power.
The software and data for Thefacebook was running on servers at a
shared facility in Santa Clara, twelve miles south. The guys had to drive
down there frequently to unbox, install, and wire up more servers—an
activity for which they often recruited friends to help.
They began assuming that Thefacebook was going to continue to
keep growing. Every time the database was upgraded or the server array
reconfigured, Zuckerberg tried to do it in a way that could accommothe
facebook effect
date ten times more users than Thefacebook had at that moment. This
implicit optimism proved incredibly prescient. If Zuckerberg hadn't
had that confidence as early as the summer of 2004, his company
might have easily suffered embarrassing and possibly catastrophic outages.
But the specter of Friendster's failure to manage its own growth
loomed large. Zuckerberg was determined it would not happen to
Thefacebook.
The twenty-year-old CEO became obsessed with how well Thefacebook
was working technically. He knew that for a communications
service like this, performance was key. If the speed with which
it delivered new pages to users began to slow, that could be the kiss of
death—the beginning of being "Friendstered." There had already been
a few frightening outages and slowdowns. He and Moskovitz inserted a
timer in the software that discreetly showed on every page just how long
the servers had taken to display it. He would argue with the others if
they proposed a feature that might reduce that speed. Milliseconds mattered.
In an article published around this time, Zuckerberg was quoted
saying, "I need servers just as much as I need food. I could probably go
a while without eating, but if we don't have enough servers then the site
is screwed."
But there was an additional factor that helped spare Thefacebook
from performance disaster in its early days, even as its users' zeal and
number continued to shock its founders. Zuckerberg and Moskovitz were
able to deliberately pace Thefacebook's growth. They did it by deciding
when to turn on new schools. Traffic growth followed a clear pattern—
launch at a new school and watch usage build steadily, then level off.
Each time they added a campus, traffic surged. So if the systems were
acting up, capacity was at the max, or they couldn't yet afford new servers,
they'd simply wait before launching at the next school. This was a rare
asset in an underfinanced Web start-up. It allowed Thefacebook to grow
methodically even though it was being run by a bunch of inexperienced
kids. Says Zuckerberg: "We didn't just go out and get a lot of investment
and scale it. We kind of intentionally slowed it down in the beginning.
We literally rolled it out school by school."
Another key factor in Thefacebook's early success was its use of
open-source software. From the beginning its database was the opensource
MySQL. It cost nothing, nor did PHP, the special programming
language for website development that governed how Thefacebook's
pages worked. In fact, an up-from-the-bottom Web business like this
without real backers could not have emerged much before this. Opensource
Web operations software in 2004 had only recently achieved robustness
and maturity. Without it, Zuckerberg would not have been
able to create a fully featured website in his dorm room and pay for
nothing other than the server to run it. Even with 100,000 users, the
company's only real costs were the servers and salaries.
Nonetheless, keeping it all running and buying new equipment as
Thefacebook grew was starting to cost real money. Zuckerberg spent
about $20,000 in the first couple of weeks his crew was in Palo Alto,
mostly to add servers at the hosting facility. And more spending was
clearly going to be necessary.
The money came out of the account Saverin had set up in Florida.
In addition to the cash he and Zuckerberg had deposited, the account
was augmented with a considerable amount of advertising income. But
with school out, ad sales had pretty much stopped for the summer.
Parker and the new lawyer were trying to straighten out the company's
legal status. The limited-liability corporation Saverin had set up
was not a sufficient formal structure. It lacked governing documents to
define how the company operated. There were no contracts, no official
employees, and no payroll. Outside investment would soon be needed,
but to get it Thefacebook would have to be turned into a real company.
However, Saverin started to make that very difficult. By mid-July,
Parker was starting to talk to investors about putting money into Thefacebook.
But when Saverin got wind of these discussions, he wrote a
letter to Zuckerberg saying that the original agreement between the
partners was that he would have "control over the business," and he
wanted a contract to guarantee him that control. Says Parker: "It was
so sophomoric. He fundamentally didn't appreciate the importance of
product design and technology in this picture. He had this idea that the
business stuff was what was important and all this product design and
user interface design and engineering and code—you just hire a bunch
of engineers and put them in the engine room and they take care of
that, you know?" The product as it is engineered and programmed and
designed is the business for an Internet company, especially a nascent
one. The slightest strategic error in advancing and operating those
could mean there would be no more ads to sell.
Whether or not Saverin understood the essential mechanics of
launching an Internet company, there were good reasons for him to feel
frustrated with the Palo Alto crowd. He had invested his own money (or
his family's) and he was the guy working with Y2M and making the calls
to bring in ads. Meanwhile, he felt his partner was blase, to say the least,
about revenue. When there was a request for some special treatment
from an advertiser, Saverin would bring it to Zuckerberg and Moskovitz.
He frequently met a brick wall. What was the chance his investment
was ever going to amount to much if Thefacebook couldn't be turned
into a proper business? Zuckerberg seemed content that there merely
be enough money to pay the bills and keep the site operating.
Saverin had a difficult job at Thefacebook. Advertisers demand responsiveness.
They want recipients of their money to be available if they
have a question or problem —usually immediately. It was thus harder
for Saverin to set his own hours as Zuckerberg and Moskovitz could.
His job, unlike theirs, required interacting with customers. It wasn't
easy to do that and still keep up with his courses at Harvard.
But he did share one thing with Zuckerberg—ambivalence about
Thefacebook's likelihood of future success. He made no secret that
Thefacebook was just one of his business activities. He planned to enroll
in business school after graduation, so keeping his grades up mattered,
despite whatever the company might want from him.
All this later led to a lawsuit. In a legal filing, Zuckerberg and company
characterized Saverin's position: "Until he had written authority
to do what he wanted with the business, he would obstruct the efforts
of the other shareholders and the advancement of the business itself.
Saverin also stated that since he owned 30% of the business, he would
make it impossible for the business to raise any financing until this matter
was resolved."
As their disagreements sharpened, Zuckerberg and Saverin had
endless phone calls, which seldom ended with any clear resolution.
The Palo Alto group took the view that Saverin was pushing so hard
mostly because his father, the hard-driving, self-made Brazilian multimillionaire,
was urging him to. "His father was telling him to play
hardball," says Parker, "but this is not somebody who should be playing
hardball." Parker reports that when pressed to make a decision about
something, Saverin would often say either "I have to go talk to my dad"
or "I can't give you an answer now." A day or two later he would predictably
come back with a firm answer—one that was unyielding.
Despite his hardball, everybody still liked Saverin. He was charming
and congenial and smart. But since he didn't seem to be making
a commitment to the company like the rest of them, his efforts to get
more authority didn't make sense. He was, in effect, demanding to be
CEO of Thefacebook without even making a full-time commitment.
The boys were inexperienced, but they were working hard, usually until
all hours every night, doing whatever had to be done. Saverin appeared
to be luxuriating in New York. He didn't get it, they thought.
In any case, Saverin's business skills didn't impress his colleagues.
Saverin was getting a lot of business from Internet banner ad networks
that bought space in bulk, but they paid very little, and would take
months before they did pay. Even Tricia Black, who has a higher opinion
of Saverin than the co-founders had, acknowledges that "there were
situations where there wasn't any follow-through or there were problems
with advertisers."
When Saverin had an idea for Thefacebook, it didn't always go over
well with his colleagues. For instance, he thought it would be smart to
change the process for requesting a new friend so that it required an
additional mouse click. To Zuckerberg—fanatically devoted to making
his service easy to use—that was apostasy. But Saverin thought it made
sense because in the interim you could show the user an additional
ad. There couldn't be a worse reason to do it, in Zuckerberg's opinion.
Saverin argued strenuously with Zuckerberg and Moskovitz that Thefacebook
ought to put a big banner ad at the top of the page. "We just
thought that was the worst possible thing you could do/' says Moskovitz.
"We thought we would make more revenue in the long run if we didn't
compromise the site."
Parker and the lawyer, meanwhile, were preparing to create an entirely
new legal structure. They were filing papers to incorporate Thefacebook
in Delaware. (Most American companies—including just about
all Silicon Valley start-ups —incorporate there because Delaware's laws
are favorable for business.) Parker, managing the restructuring, was particularly
concerned that the intellectual property (IP) that defined what
Thefacebook was—that is, the company's most critical possession—was
not owned by the company. Saverin in setting up the LLC had not sufficiently
defined what it controlled. (As the creator, most of the software
and design was by rights owned by Zuckerberg personally, along with
some owned by Moskovitz.) Legally speaking, there hardly was a company
before this point. Saverin controlled the bank account, but the
servers where the service actually resided, along with the intellectual
property, were under the control of Zuckerberg, Moskovitz, and Parker.
The Florida LLC was more or less an empty shell, and what it actually
owned was unclear. Zuckerberg and Moskovitz signed over their portion
of the LLC, plus the critical IP, to the new Delaware corporation.
Zuckerberg won't talk about this dispute now, but his legal filings
say he told Saverin that because he refused to move to California with
the rest of them and had not done work he'd said he'd do, he would subsequently
no longer be an employee of the company. While his ownership
interests would remain, they were inevitably subject to dilution
(meaning they would represent a smaller and smaller percent of the
total company) as employees were hired and given stock options, and
as investors bought into Thefacebook. Zuckerberg and Moskovitz, by
contrast, would be eligible to receive additional grants of stock based on
their continuing contributions.
The new corporate bylaws provided that Zuckerberg, with 51 percent
ownership, was the company's sole director. Saverin got 34.4 percent.
Zuckerberg upped Moskovitz's portion of the company to 6.81
percent in recognition of his increasing contributions. He also gave
his new confidant Parker 6.47 percent. But apparently nobody's loyalty
could be taken for granted at this point, so the shares of both Parker
and Moskovitz were to double if they stayed until the following year,
which would significantly dilute Saverin's share. Interviewed by the
Harvard Crimson a few months later, Zuckerberg explained why he'd
increased Moskovitz's stake: "Everyone else was like, What the fuck
are you doing?' And I was like, 'What do you mean? This is the right
thing to be doing. He clearly does a lot of work/" The law firm got the
remaining 1.29 percent.
Saverin later claimed that he did not know the company was being
reincorporated, or about several other aspects of this plan. But something
he learned around this time must have made him a lot angrier
because this is when he "attempted to hijack the business," in the
words of Thefacebook's later legal filing. He froze the Florida bank account,
making it impossible for the company to pay its bills. He said he
wouldn't release any money until his business demands were met. "It
felt like we were negotiating with terrorists," says someone who was in
the Palo Alto house. This was just when it had become apparent that big
purchases of new servers would soon be required. Saverin said he had
prepared an operating agreement that described the respective roles the
boys would play in the company, but he wouldn't let Zuckerberg see
it unless he promised to sign it without showing it to his lawyer or anybody
else. Zuckerberg responded by creating his own document, which
described the responsibilities he believed were appropriate for both of
them, but Saverin would have none of it.
As the negotiations continued, Zuckerberg had to spend his own
money to keep the lights on at 819 La Jennifer Way and more importantly,
to keep buying servers. Zuckerberg had tens of thousands of dollars
he had saved from programming and website jobs he'd done in his
summers and spare time. His dentist father and psychologist mother
also contributed thousands. This was money, according to a later lawsuit,
that had been intended for his college tuition. Zuckerberg and his
family ended up spending $85,000 that summer. For twenty-five new
servers alone, he spent $28,000.
Chris Hughes didn't return from France and show up at the house
until the end of the summer. But even so, he played a critical part in
Zuckerberg's brain trust. Thefacebook's Palo Alto geeks lacked confidence
in their own judgments about how people would respond to the
product. Humanities major Hughes had a better feel than they did for
how users would respond to new features. Immediately upon his arrival
Hughes was deluged with requests to look at this or that feature or page
design. He talked a lot about privacy and simplicity. Even after Hughes
left to go back to school for his junior year, master and commander
Zuckerberg often wielded Hughes's opinions when arguing a point with
one of the others. Hughes remained Thefacebook's public spokesman,
fielding an ever-growing number of interview requests out of his dorm
room, mostly from college papers around the country.
At summer's end, Thefacebook had over 200,000 users. Zuckerberg
and Moskovitz were planning to launch at seventy more campuses in
September. Parker was well along in continued discussions with investors
who the guys hoped would give them the money they needed without
too many strings. Negotiations with Saverin continued.
Some weeks earlier, Zuckerberg and Moskovitz took about five minutes
to decide they wouldn't return to Harvard. Earlier they had thought
they'd be able to run Thefacebook from their dorm room again, but
signs were that this could be an explosive school year for the service.
They didn't want to mess it up. D'Angelo and the interns returned to
school, as did Saverin. Zuckerberg, Moskovitz, Parker, and Halicioglu
were, for now, Thefacebook. McCollum stayed on to work on Wirehog.
On September 11, the owners of the house stopped by to check
on its condition. They did not like what they found. Zuckerberg had
sublet it from tenants for the summer. In a later court case, a memo
the owners subsequently wrote was entered in the record. "The house
appeared to be in total disarray and very dirty," they wrote. "Furniture
out in garage —unsure about what is missing and/or broken . . . Ashes
from bar-b-q dumped —some on deck and some in a flowerpot out in
back yard. Broken glass all around yard and some on deck . . . An antique
Indian basket . . . had been taken outside and left on top of the
built-in bar-b-q. It was broken and burned. . . . " They also complained
about damage to the chimney from the zip line, repair costs for the
pool filter damaged by pieces of glass, a broken laundry room door, etc.
College shenanigans had been extensive at Thefacebook's corporate
headquarters.
In early September, even as he was still wrestling by phone with
Saverin, Zuckerberg was served documents informing him that Tyler
and Cameron Winkelvoss and Divya Narendra had filed suit in federal
court. They contended that Zuckerberg had stolen the idea for Thefacebook
from them.
just got busier. By the end of May it was operating at thirty-four
schools and had almost 100,000 users.
In June 2004, business manager Saverin opened a bank account
and deposited more than $10,000 of his own money as working capital
and also began depositing advertising revenues there.
A month or so earlier, Saverin had gotten in touch with a firm called
Y2M. Y2M sold ads for college newspaper websites and Saverin invited
them to come talk about selling ads for Thefacebook. The meeting was
delayed a couple of times because Mark and Eduardo had exams or papers
due. When Y2M's Tricia Black finally sat down with them, Zuckerberg
pulled out a notebook with a printout of Thefacebook's traffic
data. Black was nonplussed. "You must be tracking it wrong," she said.
"There's no way you could have this much traffic." Zuckerberg suggested
that the ad company put their own monitoring software on the
server for a few days to track it for themselves.
The stunning numbers weren't an error. Black and her colleagues
were thrilled. Y2M began almost immediately placing ads for clients,
taking a commission of around 30 percent. One of the first advertisers
was MasterCard, seeking applications for a special credit card for
college students. But like Y2M itself and most of its other advertisers,
MasterCard executives were skeptical Thefacebook could really deliver
results. So instead of simply paying to display ads, as it did with this
campaign on other college sites, MasterCard agreed to pay only when
a student filled out a card application. At this point Thefacebook operated
at about twelve schools. MasterCard turned on its campaign at
5 P.M. on a Thursday. Within one day it received twice the applicants
it had expected for the entire four-month campaign. Thefacebook was
getting ads in front of exactly the right customers—wealthy undergrads
at the best schools. MasterCard continued advertising.
Y2M's executives started to see Thefacebook as a potential gamechanger
and by summer they wanted a piece of the action. Black and
another executive met with Zuckerberg and asked if Y2M could invest.
The young CEO said he'd consider it, but that they would have
to give Thefacebook a valuation of at least $25 million. Y2M decided
to hold off.
In situations like this, Zuckerberg tends to be impassive. Often he
says little, despite facing extravagant praise or seductive entreaties. He
was unimpressed with Y2M's advances. Even then he had his own vision
for the potential of Thefacebook, and it didn't have a lot to do with
money. "We're going to change the world," Black remembers him saying.
"I think we can make the world a more open place." These were
words he would speak again and again in coming years.
Maximizing revenue by selling ads was less important to Zuckerberg
than keeping users happy. He would allow advertisements, but only
on his terms. Advertisers could only use a few standard-size banners.
Those who requested customized treatments were refused. Zuckerberg
turned down ads from companies he thought were out of keeping with
the playful student mood of Thefacebook, including Mercer Management
Consulting and Goldman Sachs. Zuckerberg for a while even put
little captions above the display ads reading "We don't like these either
but they pay the bills." Says Joshua Iverson, a sales rep who worked for
Black at Y2M: "Mark never wanted ads. Eduardo was the businessperson."
Of course it wasn't unusual for contemporary Web thinkers to be
uninterested in advertising. Sites like Craigslist and Wikipedia were at
that time rapidly becoming among the Internet's largest by taking a patently
noncommercial approach.
Y2M tried to convince Zuckerberg to expand Thefacebook onto
campuses with larger student populations, like the University of Arizona.
But he was resolute it remain mostly Ivy League, or at least limited
to schools his users were asking him to add—places where their
friends went to school. This kept the circle small and exclusive those
first few months. Advertisers themselves couldn't even log on to Thefacebook.
com, since Zuckerberg insisted membership remain limited
to students, faculty, and alumni of the schools where it operated. It was
unheard-of for advertisers not to be able to see their own ads running.
But despite these challenges, Black was growing ever more certain
that Thefacebook was a sure thing. After Y2M itself failed to get a piece of
Thefacebook, she started campaigning for Saverin to hire her full-time.
Meanwhile, Zuckerberg was hedging his bets. He didn't take Thefacebook's
success for granted. In fact, while he had high hopes, he still
wasn't certain the website would amount to much. He still looked at
it as just one of his projects, although it was becoming an interesting
one. So, ever the entrepreneur, he embarked on yet another new project.
While he still spent most of his nonstudy time on Thefacebook,
he and Andrew McCollum, another talented sophomore programmer,
started working on new software they called Wirehog. Inspired in part
by the once-notorious music-sharing site Napster, Wirehog was going
to be a peer-to-peer content-sharing service. It would allow users not
only to exchange music, but video and text files or any kind of digital
information —and only with friends. It would connect directly to Thefacebook,
turning your friends there into sources for content.
Zuckerberg searched the Craigslist classifieds and found a fourbedroom
ranch house in Palo Alto, California, which he rented as a
summer sublet. He decided he wanted to go out to California for several
reasons. McCollum, with whom he was collaborating on Wirehog,
had a summer internship at nearby video game company Electronic
Arts, an industry giant that had created the Sims, Madden NFL games,
and many other hits. Exeter buddy Adam D'Angelo was willing to come
up from Caltech to hang out. But most of all it was the promised land
of technology. "Palo Alto was kind of like this mythical place where all
the techs used to come from," he told a reporter a few months later. "So
I was like, I want to check that out."
In a critical recruitment effort, Zuckerberg convinced Dustin Moskovitz
to join him on the trip to California. Moskovitz had already arranged
a summer job in the Harvard computer lab as a user assistant, or
UA. But Moskovitz had become indispensable. With his dogged work
ethic and growing knowledge of coding, he was more or less managing
Thefacebook's day-to-day operation. Zuckerberg promised to pay more
than he'd get in his UA job and convinced him the move would be
good for Thefacebook.
Spokesman and Zuckerberg roommate Chris Hughes had already
paid for a summer program in France and would only come out to Palo
Alto when that was over. His middle-class North Carolina family didn't
have a lot of money and he was by nature even more risk-averse than
Moskovitz, whose Florida family was fairly well-off. The more worldly
Brazilian Saverin had his own reasons not to join the trek to Palo Alto,
which appealed to him not at all. He headed to New York for the summer,
planning to drum up more advertising business and to work at an
investment firm where his father had connections.
Sean Parker was stressed out. It was a hot afternoon in Palo Alto, and
he hated doing physical work. But his lease was up and he was short on
cash. So here he was in June 2004 on the sidewalk in front of his girlfriend's
family's house, unloading boxes from his car. It was, admittedly,
a svelte vehicle—a white BMW 5-series he'd bought when times were
flush. Parker too was a bit svelte. His curly blond hair was stylishly long.
The slim twenty-four-year-old wore a fashionable and pricey T-shirt,
which on this day was getting sweaty.
When he noticed a group of boys heading toward him he stiffened.
His boxes contained expensive computer equipment. He didn't like the
look of these kids—all wearing sweatshirts with hoods up despite the
heat. He thought they had a menacing air, maybe a group of hoodlums.
But now the shortest one walked right up.
"Parker!" he said unexpectedly, with enthusiasm. "Sean —it's Mark,
Mark Zuckerberg." Suddenly it all snapped into place. This was the guy
he'd met for dinner in New York two months earlier. He'd said he was
coming out to California for the summer.
Zuckerberg introduced the other four—all Harvard undergrads,
not hoodlums: Thefacebook's curly-haired co-founder Dustin Moskovitz,
Andrew McCollum, Zuckerberg's Wirehog partner, and two skinny
interns that Thefacebook had hired for the summer, Harvard freshmen
Erik Schultink and Stephen Dawson-Haggerty. The five boys had been
on a mile-long walk home from the grocery store, since they didn't have
a car. They were living in a house just a block away. Zuckerberg invited
Parker to come over. A few hours later, the young entrepreneur walked
to the Thefacebook house at 819 La Jennifer Way.
Sean Parker was about to become a major—if controversial —
character in the Facebook story. He had a lot of Internet experience
for someone his age. In 1999 he'd hooked up online with a guy named
Shawn Fanning, the creator of Napster, and then joined him in San
Francisco to help launch the service that upended the music industry.
Parker left Napster after just a year and co-founded his own Internet
company, Plaxo. The venture quickly raised millions and began garnering
hundreds of thousands of users, but Parker ran into trouble
again with his financial backers. Plaxo's venture capitalists didn't like
his casual approach to scheduling and deadlines, his iconoclasm, his
insecurity, or his superior attitude, though they recognized he was
scary smart. The investors didn't much appreciate Parker's rock-androll
lifestyle, either. He would work weeks on end to accomplish some
company objective, sleeping in the office, then not come in at all for
days. Finally they booted him out. In the end they even hired a private
investigator to document his alleged misbehavior.
Parker was among the growing number of Silicon Valley executives
who were becoming convinced that social networking would become
a very big business. In the fall of 2003, Silicon Valley venture investors
had put a total of $36 million into four high-profile social networking
start-ups—Friendster, Linkedln, Spoke, and Tribe. In late March, not
long after Thefacebook took over the Stanford campus in mere days,
Parker sent Zuckerberg an email out of the blue. He played up his
Napster bona fides and offered to introduce Zuckerberg to savvy San
Francisco investors who understood social networking. He mentioned
that he was acquainted with the CEOs of Linkedln and Tribe, who
had jointly purchased a key patent that might be important for social
networks. Parker suggested that a meeting with them could help ensure
that the patent wasn't used against Thefacebook. Saverin emailed him
back, and they arranged a dinner in New York.
In early April, Parker flew to New York for the dinner. He joined
Zuckerberg, Zuckerberg's girlfriend Priscilla Chan, Saverin, and
Saverin's girlfriend at a trendy new Chinese place called 66 in Tribeca.
Zuckerberg was thrilled to meet a founder of Napster, which he considered
one of the most important things that had ever happened on
the Internet. And Parker was quickly impressed with Zuckerberg. At
the sleek, Richard Meier-designed restaurant, the two fell into intense
back-and-forth almost immediately, mostly leaving out Saverin and the
two women. Zuckerberg sketched out his vision for what Thefacebook
could become. It was an even bigger vision than Parker had expected.
"He was not thinking, 'Let's make some money and get out/" says
Parker. "This wasn't like a get-rich-quick scheme. This was 'Let's build
something that has lasting cultural value and try to take over the world.'
But he didn't know what that meant. He was a college student. Taking
over the world meant taking over college." Parker remembers thinking
Zuckerberg seemed incredibly ambitious. "He had imperial tendencies."
Parker had to overdraw his bank account to afford the dinner, but
he felt it was worth it.
When he ran into Parker two months later on the Palo Alto sidewalk,
Zuckerberg had a strong and positive recollection of the New
York meeting. Parker was one of the people who seemed to really understand
what Thefacebook was doing.
Over dinner in Palo Alto, Zuckerberg witnessed the denouement
of Parker's months-long battle with his former backers at Plaxo. The six
young men walked to a nearby restaurant, where Zuckerberg brought
Parker up to date on Thefacebook and introduced him more fully to
his Harvard chums. While they were sitting in the restaurant, Parker
got a critical call from his lawyer. The news was bad. The Plaxo board
had decided not to allow about half of Parker's remaining Plaxo shares
to vest. In other words, he was getting kicked out of his company and
losing his chance to make any money if it later went public or was sold.
Parker was enraged. He was getting screwed. Thefacebook's boys
listened in awe and dismay. It became the theme for the night. Zuckerberg
had little experience dealing with investors, though they had been
approaching him regularly since about March, hoping to get a piece
of Thefacebook. Hearing Parker's story was chastening. "VCs sound
scary," Zuckerberg recalls thinking. It was a formative moment, and a
critical one for Facebook's future. Feeling for his friend, and thinking
he might learn much from Parker, Zuckerberg invited him to move into
the house with them. By September, Zuckerberg was calling Parker the
company's president.
Parker is a unique sort of entrepreneur, even for Silicon Valley. A
precocious programmer and intellect, he is the son of a top U.S. government
oceanographer. He spent much of his Virginia childhood beset
by illness, devoting much of his time to reading and learning computer
programming. In 1995 he became an intern at fifteen at Freeloader,
one of Washington, D.C.'s first Internet start-ups. Several years later, in
1999, barely out of high school, he helped Shawn Fanning start Napster.
The renegade peer-to-peer music-sharing service attracted 26 million
users by its peak in early 2001. It was also the first big consumer service
to demonstrate a fundamentally new sort of Internet—one where users
connected directly to one another without a big company like eBay or
Yahoo or Microsoft in the middle. But Napster almost immediately encountered
an all-out legal assault from the big record labels. Parker, for
his part, lost his job there in a management shake-up after little more
than a year, when he was still just twenty. He got the company in trouble
by openly discussing in emails—displayed in a court case brought
by the labels—that what Napster's users were doing might be illegal.
Shortly thereafter, he and two friends formed Plaxo, which helped users
keep track of email addresses and contact information.
Despite his lack of formal education and loose respect for business
norms, Parker is a business intellectual. He could even perhaps be called
a business artist, if those two words can be juxtaposed. On his own Facebook
profile he calls himself "a twisted half-breed: a rational-aesthete."
He combines a subtle understanding of business history, economics,
and behavior with an artist's impatience, impulsiveness, and vision for
a better world. Not that his actual vision is any good. His eyes are bad
enough that if he forgets his contacts or his thick glasses he can need
help getting around. He has a certain weightless quality, as if he were
about to float off like Peter Pan, perhaps surrounded by one of his alwaysgorgeous
girlfriends. (Lately he has settled into a long-term relationship.)
A voracious reader with a deep fascination with politics, the selftaught
Parker may pepper an analysis of current trends with a reference
to "the intentions of the framers" (the men who wrote the U.S. Constitution,
that is). His Facebook profile includes quotes from T. S. Eliot,
Bertrand Russell, and Albert Camus. He likes to talk about things like
"business externalities." And if you show the slightest interest he will eagerly
describe his theory on the history of media since Gutenberg. Most
of all, he likes to talk, rapidly, intensely, and he likes to talk about ideas.
What he brought to Thefacebook was both a practiced understanding
of the realities of business and a penchant for philosophical argument
that prompted Zuckerberg to refine his vision. Hanging with Parker
wasn't that different from jawboning with classmates in the Harvard
dorms, except that the conversation now was all about making Thefacebook
successful.
The boys quickly settled into a routine—sleep late, walk into the dining
room, and get to work. The table there was piled high with computers,
cables, modems, cameras, and trash that got stuffed among them, along
with the requisite untossed bottles, cans, and cups. Zuckerberg slept
later than most—he seldom got to work before afternoon, and usually
worked well into the night. His typical garb in this office of sorts was
pajama bottoms and a T-shirt. When they sat at their laptops around
the dining room table on La Jennifer Way, it was eerily quiet. That's
because when they did talk to one another, they did it over instant messaging,
even when they were sitting right next to one another. It let the
others concentrate. Geeks like Zuckerberg and Moskovitz like to get
deep into what is almost a trance when they're coding, and while they
didn't mind background music or the TV playing, they couldn't stand
interruptions.
With Moskovitz and Parker, Zuckerberg had now put into place,
consciously or not, an ideal team to bracket his own talents. Moskovitz is
the kind of person every start-up needs—diligent, down-to-earth, versatile,
and pragmatic. He took responsibility for keeping the service operating
and setting up databases for new schools (with the interns doing much of
the tedious work). If he had to, he'd work all night to keep the system up.
Parker, by contrast, was an experienced company-maker, familiar
with the ways of the world. He specialized in networking in the realworld
sense. He knew a lot of people in the Valley and understood how
to get their ear. He was polished —spending money (when he had it) on
nice meals, haircuts, and stylish clothes. He might occasionally cancel
meetings unexpectedly after burning himself out at a party the night
before, but he was a slick front man who could talk up Thefacebook,
which was exactly what it needed. In Silicon Valley those who had heard
of it still mostly thought of Thefacebook as a silly thing for sex-starved
college kids. Parker's big-picture vision helped give the service gravitas.
Having the two of them in place meant Zuckerberg could do what
he does best—think about what Thefacebook should be and how it
should evolve. Or, depending on his mood, devote his energies to something
he wanted to use himself—Wirehog. Ironically, Zuckerberg was
not a heavy user of Thefacebook. Nor, in fact, were any of its founders
and early employees. This summer the interns, working with Moskovitz,
started to gather data on how people actually used the site. They
found that some users were looking at hundreds and even thousands of
profiles every day. These were the users they were designing for.
When he wasn't working on Wirehog, Zuckerberg was coding a
feature for Thefacebook he also thought would be pretty cool—a way to
get information out of the service using short messages, or SMS, from a
cell phone. Way before there was a Facebook application for the iPhone
or the BlackBerry, this was Thefacebook's mobile interface. You could
send messages with a person's name to m@Thefacebook.com and include
special codes to get friends' phone numbers or other information
sent back to your phone. The only problem was that it was unwieldy for
ordinary users. You needed to carry around a folded-up cheat sheet to
remember how to use it. Cool though it was, it didn't last long.
Parker moved into a room with a bare mattress on the floor. Zuckerberg
later said that aside from his car, the only impressive thing Parker
brought with him was a pair of "ridiculously nice sneakers." According
to Parker, here's how Zuckerberg asked him to take on the president
job: "Can you help us set up the company? We're screwed right now."
Part of the deal, though, was a quid pro quo —Parker got to stay in the
house; Zuckerberg and his friends got to share Parker's BMW.
At least one adviser urged Zuckerberg not to hire Parker, saying
his lax ways and dissipated lifestyle could taint the company. "He has a
problem with women and rock V roll," Zuckerberg's more-experienced
confidant said. But Zuckerberg was unmoved. He said he'd heard the
stories, but that Parker's experience and intelligence outweighed the
risks. After all, Parker helped start Napster. Not only that, but he was a
small investor in Friendster and a friend of its founder. He was already
talking about The facebook as "the chance to do Friendster correctly."
Thefacebook's traffic had dipped now that college kids were mostly
out of school. But Zuckerberg and Moskovitz were bolstering the site
for fall, when they expected growth would resume in earnest. Some
visitors saw their confidence as arrogance bred of upper-class Harvard
privilege. "Even back then they were talking like they knew this was
going to happen and they had the best thing in the world and they
were going to dominate everyone," says one slightly awed early visitor to
the house. "They used that word dominate all the time." Thefacebook
would dominate its rivals, they said. In fact, much of it was bluster, with
an added dash of the insouciance of youth.
Work would get intense in the late afternoon and early evening.
"Everyone would be working and someone would say 'Hey, I'm hungry.
I wanna go get In-N-Out,'" says another frequent visitor, "and Mark
would, like, pound the table and just say 'No! We're in lockdown! No
one leaves the table until we're done with this thing.'" Like dominate,
lockdown became a part of Facebook's lingo and lore that lasted for
years.
Despite his baby face and general shyness, Zuckerberg was firmly
and undisputedly in charge. Every page of Thefacebook included at the
bottom a little tagline: "A Mark Zuckerberg production." On the serthe
facebook effect
vice's "about" page, he was listed as "Founder, Master and Commander,
Enemy of the State." Moskovitz, by contrast, had the relatively ignominious
listing "No Longer Expendable Programmer, Paid Assassin." Saverin's
job was said to be "Business Stuff, Corporate Stuff, Brazilian Affairs."
Zuckerberg was beginning, fitfully, to show qualities of natural
leadership. Says Sean Parker: "The leader of a company needs to have a
decision tree in his head—if this happens we go this way, but if it winds
up like that, then we go this other way. Mark does that instinctively." He
liked to have fun as much as any of his colleagues —in fact he could be
a bit of a comic—but he also was determined to keep this ship moving
forward. And he was more than happy to be the captain.
Not infrequently, in fact, he acted like he was captain of a pirate
ship. When he started thinking hard about something or was debating
an idea with one of the others, Zuckerberg would often jump up and
start pacing back and forth around the room with his hands clasped
behind his back. Among the few possessions he had brought out with
him were his fencing paraphernalia, which he left lying in a pile not
far away. Often he'd grab his foil and start swinging it through the air.
"Okay, we've got to talk about this," he would declare, one hand held
behind his back, lunging forward with his foil. It got on Moskovitz's
nerves. "I'm the personality type where that would get me sometimes,"
says Moskovitz. "It was a pretty small room. I'm like a cautious mother—
Tou're going to break something!' But when he got into the mood he
would do it for a couple hours." Later Moskovitz and the others banned
fencing from the house.
Behind the house was a nice kidney-shaped pool, and the triangular
backyard was mostly paved. One night Zuckerberg and Parker spent a
few hours standing around outside talking. Zuckerberg had his foil, and
was waving it too close to Parker's face for comfort. He found it very bad
for concentration to have a fencing sword swing a few inches from his
face every few seconds. "Do you think this thing is really going to last?"
Zuckerberg asked at one point between thrusts. "I do," replied Parker,
wincing. "Unless we get outcompeted by somebody else or we don't execute
well or we let our servers fail like Friendster did, there's no reason
why this can't last."
"Mark was actually very rational about the low probability of
building a true empire," recounts Parker. "He had these doubts. Was
it a fad? Was it going to go away? He liked the idea of Thefacebook,
and he was willing to pursue it doggedly, tenaciously, to the end. But
like the best empire builders, he was both very determined and very
skeptical. It's like [former Intel CEO] Andy Grove says, 'only the paranoid
survive/"
Adam D'Angelo, up from Caltech, was by far the most gifted and
accomplished programmer of the bunch, but he was working on his
own projects. He was also neither expert in nor very interested in the
relatively simple Web-based languages Thefacebook was employing—
PHP, JavaScript, and HTML. D'Angelo had a bad case of carpal tunnel
syndrome, which meant his hands and arms hurt when he typed. So he
was trying to come up with his own alternative —invent a way to move
his hands in the air that a video camera could recognize, in order to
manipulate text on a screen. It was a pretty challenging project, maybe
too challenging, and as summer went on he spent less time on that and
more time helping McCollum and Zuckerberg with Wirehog.
While the young engineers worked to bolster the site and refine
its features, Parker started thinking about what it would mean to turn
Thefacebook into a company. He hired the lawyer who'd helped set
up Plaxo. He started looking for someone to manage "operations," a
fundamental task in Internet companies that involves making sure the
data center and servers are operating properly. Up until then, all that
work had been outsourced to third-party companies, but Thefacebook
was getting too big for that. Parker discovered that his young colleagues
didn't even know the basics about network management, like what a
router was. He found an engineer named Taner Halicioglu, who had
experience at eBay. He worked from home in San Jose.
Parker became Thefacebook's front man, especially with investors.
It wasn't uncommon for fancy cars to be parked outside on the deadend
street, under the big droopy trees that loomed over the front of
the house. That meant someone with money was inside. Some guys
from the Benchmark venture capital firm wanted to know if there was a
chance of an equity investment. The answer was no, for the time being.
But Thefacebook was going to need more funding in the near future, so
Parker made sure such people felt comfortable calling or stopping by.
A couple of Google executives came over to see if there might be
a way to work with or even buy Thefacebook. Even at this early date,
Google was well aware that something noteworthy was going on in Palo
Alto. Zuckerberg and Parker were leery, though, because the risk of
becoming subsumed by Silicon Valley's Internet giant was real. If they
wanted to do their own thing, they had to stay independent, they believed.
Anyway, what they were trying to do was very different from what
Google did. Their site was about people; Google was about data.
One area where Parker and Zuckerberg clashed was over Wirehog,
on which development continued. The new president thought it was a
huge distraction from the work of growing Thefacebook. And his history
with Napster made him leery of getting into another tussle with music
and media companies. To Parker it seemed likely that such companies
would accuse Wirehog—and with it Thefacebook—of helping users
steal content, just as the music industry had with Napster. With Wirehog
engineer McCollum, the two flew down to Los Angeles where they
met with Edgar Bronfman, Jr., CEO of Warner Music Group, and Tom
Whalley, who ran Warner Bros. Records. Parker had gotten to know
Whalley in his Napster days. Unsurprisingly, they were wholeheartedly
opposed to Wirehog. Though Parker feared that a successful lawsuit
against Wirehog could take Thefacebook down along with it, he failed
to sway Zuckerberg, who persevered.
"Really great leadership," says Parker, "especially in a start-up, is
about knowing when to say no—evoking a vision very clearly, getting
everybody excited about it, but knowing where to draw the line, especially
with products. You can't do everything. And that's a lesson Mark
didn't know yet. That's a lesson Mark learned."
Work was hardly the only priority, of course. What group of twentyyear-
olds suddenly occupying their own house wouldn't want to party?
Nerds these guys might have been, but they were fun-loving nerds.
Stanford was just a mile or so away. It operates on a quarter system, so
students were still around in the summer. Using a feature in Thefacebook
that enabled ads to be targeted at just one school, the housemates
announced their parties right on the service — "Thefacebook is having
a party!"—and then often found themselves mobbed by both Stanford
students and townies. Moskovitz started dating a girl who had just graduated
from Palo Alto High School.
The parties were typical beer-and-booze-fueled affairs. Here's where
Parker came in particularly handy. He was the only one in the group
over twenty-one, so they relied on him to buy the alcohol. There was a
fair amount of pot smoking, too, though Zuckerberg frowned on it and
didn't partake. "Mark is just about the most anti-drug person Fve ever
met," says one friend.
Hanging out around the pool was of course a major activity. If a
glass broke, the shards often just got swept into the water. McCollum
strung a wire from the chimney on top of the house to a spot slightly
lower on a telephone pole beyond the pool. With a pulley, he turned it
into a zip line, so you could ride down the wire and, suspended over the
pool, drop in with a massive splash.
One favorite party activity was Beirut, or beer pong, a beer-drinking
game for teams of two or more players that involves throwing a Ping-
Pong ball into a bunch of beer cups arrayed in a triangle at the other
end of a table. If you get your ball into the opposing team's cup, they
have to drink that cup's contents. Once all the losing team's cups are
eliminated, its members drink the remaining beer on the winning
team's side. The losers get really drunk.
Beirut was so popular at Thefacebook (and at Harvard) that six
months later Zuckerberg and friends launched a national college Beirut
tournament. Thefacebook planned to pit campus teams against one another,
then each school's winning team was to come to New York for the
final to compete for a $10,000 prize. (The Stanford Daily asked Zuckerberg
why Thefacebook would host an event it had to spend $10,000 on,
and he replied "Because it's cool.") Thousands of students paid ten dollars
each to register, but Thefacebook canceled the competition only four
days after it launched, after being deluged with complaints from colleges.
The house felt like a dorm. They'd often grill hamburgers or steaks
out by the pool, and eat, raucously, at an outdoor table. If the talking
lasted too late at night, the neighbors would get peeved. If someone
brought a girl back to his room, his roommate had to sleep downstairs on
the couch or drag his mattress into another room. Some people—female
and male—stopped by for days and just hung around.
One of them was a friend of Parker's named Aaron Sittig. He had
earlier helped create a version of Napster for the Macintosh, called
Macster, which Napster bought. At this point he was working for a nascent
music-oriented social network called Imeem, located a few blocks
away in Palo Alto. Sittig is a quiet, self-effacing, blond surfer type who
in addition to being a programmer is a superb graphic designer and typographer.
But back then he was feeling burned-out and unmotivated.
Parker brought him around because he thought he could help Thefacebook,
especially with design.
But Sittig wasn't showing a lot of initiative. "I kept explaining to
Mark that Aaron was brilliant," says Parker. "But Aaron would just sit
on the couch and diddle around on his computer all day playing with
fonts. Mark kept saying Who is this guy? He's worthless. He doesn't
do anything.' Mark thought it was bad for the work ethic to have him
hanging around seeming to do nothing." (The following year, after reenrolling
at the University of California at Berkeley for a semester to
study philosophy, Sittig did come to work at Thefacebook. He became
one of Zuckerberg's closest confidants.)
Oftentimes the coding, swordplay, and raucous meetings would
go on well into the night, sometimes punctuated by breaks for drinking,
movie-watching, and video-game playing. The Xbox got a workout,
with the game Halo a particular favorite. Somehow Tom Cruise became
a group obsession, and thus ensued a lengthy Tom Cruise movie
marathon. They rented an entire stack of his DVDs. Why Tom Cruise?
Sittig, who put down his laptop long enough to watch along with everyone
else, explains: "Tom Cruise was funny because he's not a very cool
character. He's not a cool guy." It was camp.
Pretty soon they were naming the servers on which Thefacebook's
software was running after characters in Tom Cruise movies: "Where's
that script running?' 'It's running on Maverick.' Well, run it instead on
PaloAlto
Iceman, I need Maverick to test this feature/" (Maverick and Iceman
were characters in Cruise's 1986 film Top Gun.) The Ben Stiller movie
Zoolander was another house favorite, watched to excess. It played over
and over in the background while people were working. These guys
found it funny to quote big chunks of the movie to one another. They
may have been developing a revolutionary Internet service, but they
were still really just college kids.
With a total of seven guys living in the house, they needed more
than Parker's BMW to get around, so Zuckerberg and company bought
a car. They were planning to return to Harvard in the fall so expected to
sell it again in three months. They spent a few hundred dollars on one
they thought couldn't depreciate further—a forest-green, twelve-yearold,
manual-transmission Ford Explorer. It was so worn-out you could
rotate the key halfway and turn off the engine, then remove it. To start
it up again, you didn't need a key at all. Just grab the ignition and twist.
It was transportation well suited for a bunch of impatient guys who half
the time couldn't find the ignition key anyway.
But despite the horseplay and silliness, it was becoming apparent that
Thefacebook was turning into a serious business. Zuckerberg knew he
had to take more deliberate steps to keep it evolving both technologically
and as a business. That summer the growth started to seem a bit
scary. They didn't add any new schools until midsummer, but membership
kept steadily climbing all summer at the thirty-four colleges where
Thefacebook was already operating. And everybody assumed the beginning
of the school year would bring massive new demands. New users
meant they needed more reliable software and more computing power.
The software and data for Thefacebook was running on servers at a
shared facility in Santa Clara, twelve miles south. The guys had to drive
down there frequently to unbox, install, and wire up more servers—an
activity for which they often recruited friends to help.
They began assuming that Thefacebook was going to continue to
keep growing. Every time the database was upgraded or the server array
reconfigured, Zuckerberg tried to do it in a way that could accommothe
facebook effect
date ten times more users than Thefacebook had at that moment. This
implicit optimism proved incredibly prescient. If Zuckerberg hadn't
had that confidence as early as the summer of 2004, his company
might have easily suffered embarrassing and possibly catastrophic outages.
But the specter of Friendster's failure to manage its own growth
loomed large. Zuckerberg was determined it would not happen to
Thefacebook.
The twenty-year-old CEO became obsessed with how well Thefacebook
was working technically. He knew that for a communications
service like this, performance was key. If the speed with which
it delivered new pages to users began to slow, that could be the kiss of
death—the beginning of being "Friendstered." There had already been
a few frightening outages and slowdowns. He and Moskovitz inserted a
timer in the software that discreetly showed on every page just how long
the servers had taken to display it. He would argue with the others if
they proposed a feature that might reduce that speed. Milliseconds mattered.
In an article published around this time, Zuckerberg was quoted
saying, "I need servers just as much as I need food. I could probably go
a while without eating, but if we don't have enough servers then the site
is screwed."
But there was an additional factor that helped spare Thefacebook
from performance disaster in its early days, even as its users' zeal and
number continued to shock its founders. Zuckerberg and Moskovitz were
able to deliberately pace Thefacebook's growth. They did it by deciding
when to turn on new schools. Traffic growth followed a clear pattern—
launch at a new school and watch usage build steadily, then level off.
Each time they added a campus, traffic surged. So if the systems were
acting up, capacity was at the max, or they couldn't yet afford new servers,
they'd simply wait before launching at the next school. This was a rare
asset in an underfinanced Web start-up. It allowed Thefacebook to grow
methodically even though it was being run by a bunch of inexperienced
kids. Says Zuckerberg: "We didn't just go out and get a lot of investment
and scale it. We kind of intentionally slowed it down in the beginning.
We literally rolled it out school by school."
Another key factor in Thefacebook's early success was its use of
open-source software. From the beginning its database was the opensource
MySQL. It cost nothing, nor did PHP, the special programming
language for website development that governed how Thefacebook's
pages worked. In fact, an up-from-the-bottom Web business like this
without real backers could not have emerged much before this. Opensource
Web operations software in 2004 had only recently achieved robustness
and maturity. Without it, Zuckerberg would not have been
able to create a fully featured website in his dorm room and pay for
nothing other than the server to run it. Even with 100,000 users, the
company's only real costs were the servers and salaries.
Nonetheless, keeping it all running and buying new equipment as
Thefacebook grew was starting to cost real money. Zuckerberg spent
about $20,000 in the first couple of weeks his crew was in Palo Alto,
mostly to add servers at the hosting facility. And more spending was
clearly going to be necessary.
The money came out of the account Saverin had set up in Florida.
In addition to the cash he and Zuckerberg had deposited, the account
was augmented with a considerable amount of advertising income. But
with school out, ad sales had pretty much stopped for the summer.
Parker and the new lawyer were trying to straighten out the company's
legal status. The limited-liability corporation Saverin had set up
was not a sufficient formal structure. It lacked governing documents to
define how the company operated. There were no contracts, no official
employees, and no payroll. Outside investment would soon be needed,
but to get it Thefacebook would have to be turned into a real company.
However, Saverin started to make that very difficult. By mid-July,
Parker was starting to talk to investors about putting money into Thefacebook.
But when Saverin got wind of these discussions, he wrote a
letter to Zuckerberg saying that the original agreement between the
partners was that he would have "control over the business," and he
wanted a contract to guarantee him that control. Says Parker: "It was
so sophomoric. He fundamentally didn't appreciate the importance of
product design and technology in this picture. He had this idea that the
business stuff was what was important and all this product design and
user interface design and engineering and code—you just hire a bunch
of engineers and put them in the engine room and they take care of
that, you know?" The product as it is engineered and programmed and
designed is the business for an Internet company, especially a nascent
one. The slightest strategic error in advancing and operating those
could mean there would be no more ads to sell.
Whether or not Saverin understood the essential mechanics of
launching an Internet company, there were good reasons for him to feel
frustrated with the Palo Alto crowd. He had invested his own money (or
his family's) and he was the guy working with Y2M and making the calls
to bring in ads. Meanwhile, he felt his partner was blase, to say the least,
about revenue. When there was a request for some special treatment
from an advertiser, Saverin would bring it to Zuckerberg and Moskovitz.
He frequently met a brick wall. What was the chance his investment
was ever going to amount to much if Thefacebook couldn't be turned
into a proper business? Zuckerberg seemed content that there merely
be enough money to pay the bills and keep the site operating.
Saverin had a difficult job at Thefacebook. Advertisers demand responsiveness.
They want recipients of their money to be available if they
have a question or problem —usually immediately. It was thus harder
for Saverin to set his own hours as Zuckerberg and Moskovitz could.
His job, unlike theirs, required interacting with customers. It wasn't
easy to do that and still keep up with his courses at Harvard.
But he did share one thing with Zuckerberg—ambivalence about
Thefacebook's likelihood of future success. He made no secret that
Thefacebook was just one of his business activities. He planned to enroll
in business school after graduation, so keeping his grades up mattered,
despite whatever the company might want from him.
All this later led to a lawsuit. In a legal filing, Zuckerberg and company
characterized Saverin's position: "Until he had written authority
to do what he wanted with the business, he would obstruct the efforts
of the other shareholders and the advancement of the business itself.
Saverin also stated that since he owned 30% of the business, he would
make it impossible for the business to raise any financing until this matter
was resolved."
As their disagreements sharpened, Zuckerberg and Saverin had
endless phone calls, which seldom ended with any clear resolution.
The Palo Alto group took the view that Saverin was pushing so hard
mostly because his father, the hard-driving, self-made Brazilian multimillionaire,
was urging him to. "His father was telling him to play
hardball," says Parker, "but this is not somebody who should be playing
hardball." Parker reports that when pressed to make a decision about
something, Saverin would often say either "I have to go talk to my dad"
or "I can't give you an answer now." A day or two later he would predictably
come back with a firm answer—one that was unyielding.
Despite his hardball, everybody still liked Saverin. He was charming
and congenial and smart. But since he didn't seem to be making
a commitment to the company like the rest of them, his efforts to get
more authority didn't make sense. He was, in effect, demanding to be
CEO of Thefacebook without even making a full-time commitment.
The boys were inexperienced, but they were working hard, usually until
all hours every night, doing whatever had to be done. Saverin appeared
to be luxuriating in New York. He didn't get it, they thought.
In any case, Saverin's business skills didn't impress his colleagues.
Saverin was getting a lot of business from Internet banner ad networks
that bought space in bulk, but they paid very little, and would take
months before they did pay. Even Tricia Black, who has a higher opinion
of Saverin than the co-founders had, acknowledges that "there were
situations where there wasn't any follow-through or there were problems
with advertisers."
When Saverin had an idea for Thefacebook, it didn't always go over
well with his colleagues. For instance, he thought it would be smart to
change the process for requesting a new friend so that it required an
additional mouse click. To Zuckerberg—fanatically devoted to making
his service easy to use—that was apostasy. But Saverin thought it made
sense because in the interim you could show the user an additional
ad. There couldn't be a worse reason to do it, in Zuckerberg's opinion.
Saverin argued strenuously with Zuckerberg and Moskovitz that Thefacebook
ought to put a big banner ad at the top of the page. "We just
thought that was the worst possible thing you could do/' says Moskovitz.
"We thought we would make more revenue in the long run if we didn't
compromise the site."
Parker and the lawyer, meanwhile, were preparing to create an entirely
new legal structure. They were filing papers to incorporate Thefacebook
in Delaware. (Most American companies—including just about
all Silicon Valley start-ups —incorporate there because Delaware's laws
are favorable for business.) Parker, managing the restructuring, was particularly
concerned that the intellectual property (IP) that defined what
Thefacebook was—that is, the company's most critical possession—was
not owned by the company. Saverin in setting up the LLC had not sufficiently
defined what it controlled. (As the creator, most of the software
and design was by rights owned by Zuckerberg personally, along with
some owned by Moskovitz.) Legally speaking, there hardly was a company
before this point. Saverin controlled the bank account, but the
servers where the service actually resided, along with the intellectual
property, were under the control of Zuckerberg, Moskovitz, and Parker.
The Florida LLC was more or less an empty shell, and what it actually
owned was unclear. Zuckerberg and Moskovitz signed over their portion
of the LLC, plus the critical IP, to the new Delaware corporation.
Zuckerberg won't talk about this dispute now, but his legal filings
say he told Saverin that because he refused to move to California with
the rest of them and had not done work he'd said he'd do, he would subsequently
no longer be an employee of the company. While his ownership
interests would remain, they were inevitably subject to dilution
(meaning they would represent a smaller and smaller percent of the
total company) as employees were hired and given stock options, and
as investors bought into Thefacebook. Zuckerberg and Moskovitz, by
contrast, would be eligible to receive additional grants of stock based on
their continuing contributions.
The new corporate bylaws provided that Zuckerberg, with 51 percent
ownership, was the company's sole director. Saverin got 34.4 percent.
Zuckerberg upped Moskovitz's portion of the company to 6.81
percent in recognition of his increasing contributions. He also gave
his new confidant Parker 6.47 percent. But apparently nobody's loyalty
could be taken for granted at this point, so the shares of both Parker
and Moskovitz were to double if they stayed until the following year,
which would significantly dilute Saverin's share. Interviewed by the
Harvard Crimson a few months later, Zuckerberg explained why he'd
increased Moskovitz's stake: "Everyone else was like, What the fuck
are you doing?' And I was like, 'What do you mean? This is the right
thing to be doing. He clearly does a lot of work/" The law firm got the
remaining 1.29 percent.
Saverin later claimed that he did not know the company was being
reincorporated, or about several other aspects of this plan. But something
he learned around this time must have made him a lot angrier
because this is when he "attempted to hijack the business," in the
words of Thefacebook's later legal filing. He froze the Florida bank account,
making it impossible for the company to pay its bills. He said he
wouldn't release any money until his business demands were met. "It
felt like we were negotiating with terrorists," says someone who was in
the Palo Alto house. This was just when it had become apparent that big
purchases of new servers would soon be required. Saverin said he had
prepared an operating agreement that described the respective roles the
boys would play in the company, but he wouldn't let Zuckerberg see
it unless he promised to sign it without showing it to his lawyer or anybody
else. Zuckerberg responded by creating his own document, which
described the responsibilities he believed were appropriate for both of
them, but Saverin would have none of it.
As the negotiations continued, Zuckerberg had to spend his own
money to keep the lights on at 819 La Jennifer Way and more importantly,
to keep buying servers. Zuckerberg had tens of thousands of dollars
he had saved from programming and website jobs he'd done in his
summers and spare time. His dentist father and psychologist mother
also contributed thousands. This was money, according to a later lawsuit,
that had been intended for his college tuition. Zuckerberg and his
family ended up spending $85,000 that summer. For twenty-five new
servers alone, he spent $28,000.
Chris Hughes didn't return from France and show up at the house
until the end of the summer. But even so, he played a critical part in
Zuckerberg's brain trust. Thefacebook's Palo Alto geeks lacked confidence
in their own judgments about how people would respond to the
product. Humanities major Hughes had a better feel than they did for
how users would respond to new features. Immediately upon his arrival
Hughes was deluged with requests to look at this or that feature or page
design. He talked a lot about privacy and simplicity. Even after Hughes
left to go back to school for his junior year, master and commander
Zuckerberg often wielded Hughes's opinions when arguing a point with
one of the others. Hughes remained Thefacebook's public spokesman,
fielding an ever-growing number of interview requests out of his dorm
room, mostly from college papers around the country.
At summer's end, Thefacebook had over 200,000 users. Zuckerberg
and Moskovitz were planning to launch at seventy more campuses in
September. Parker was well along in continued discussions with investors
who the guys hoped would give them the money they needed without
too many strings. Negotiations with Saverin continued.
Some weeks earlier, Zuckerberg and Moskovitz took about five minutes
to decide they wouldn't return to Harvard. Earlier they had thought
they'd be able to run Thefacebook from their dorm room again, but
signs were that this could be an explosive school year for the service.
They didn't want to mess it up. D'Angelo and the interns returned to
school, as did Saverin. Zuckerberg, Moskovitz, Parker, and Halicioglu
were, for now, Thefacebook. McCollum stayed on to work on Wirehog.
On September 11, the owners of the house stopped by to check
on its condition. They did not like what they found. Zuckerberg had
sublet it from tenants for the summer. In a later court case, a memo
the owners subsequently wrote was entered in the record. "The house
appeared to be in total disarray and very dirty," they wrote. "Furniture
out in garage —unsure about what is missing and/or broken . . . Ashes
from bar-b-q dumped —some on deck and some in a flowerpot out in
back yard. Broken glass all around yard and some on deck . . . An antique
Indian basket . . . had been taken outside and left on top of the
built-in bar-b-q. It was broken and burned. . . . " They also complained
about damage to the chimney from the zip line, repair costs for the
pool filter damaged by pieces of glass, a broken laundry room door, etc.
College shenanigans had been extensive at Thefacebook's corporate
headquarters.
In early September, even as he was still wrestling by phone with
Saverin, Zuckerberg was served documents informing him that Tyler
and Cameron Winkelvoss and Divya Narendra had filed suit in federal
court. They contended that Zuckerberg had stolen the idea for Thefacebook
from them.
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