EVERY SPOKEN WORD
150 min read · 30,065 words- 0:00 – 5:54
Why Meta is historically unprecedented at human scale
- BGBen Gilbert
All right, so I was up late last night. Late for me, as a dad, is, like, 11:00 PM. But I'm sitting here at my computer in my dark basement, you know, pulling notes together. David, what music did I have on? You have one guess.
- DRDavid Rosenthal
Uh, oh, oh, I know exactly what you had on.
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
You had Trent Reznor, Social Network soundtrack. [laughing]
- BGBen Gilbert
[laughing] It makes anything you're doing feel, uh, you know, twice as important and twice as revolutionary, and, uh, it just felt very apt for this episode.
- DRDavid Rosenthal
Oh, man. So I have been listening, in the last twenty-four hours, to 50 Cent, In Da Club, because that came out my freshman year of college, same year as the facebook.com, and, like... Man, 50 Cent, facebook.com, can't get any better than that.
- BGBen Gilbert
Perfect, match made in heaven. Well, I'll check out our Wall the Wall from the old days, and see if there are any posts about that. [laughing]
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
All right, let's do it.
- DRDavid Rosenthal
Let's do it.
- SPSpeaker
Who got the truth? [upbeat music] Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth?
- BGBen Gilbert
Welcome to the Fall 2024 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
- DRDavid Rosenthal
I'm David Rosenthal.
- BGBen Gilbert
And we are your hosts. Today, we are studying a company whose products are used by more humans than any other company in history, Meta, of course, formerly known as Facebook. So I figured I would contextualize [chuckles] these numbers a little bit. Meta has four billion monthly active users.
- DRDavid Rosenthal
And daily active users are over three billion.
- BGBen Gilbert
Yeah, nuts. There are only eight billion humans on Earth. So as I started to brainstorm what the closest competitors could be to serving half of the humans, I thought, "Surely I can find it in empires or governments from the past, where there is some larger percentage."
- DRDavid Rosenthal
Yeah, makes sense.
- BGBen Gilbert
Nope. The Roman Empire, at its peak, was only forty percent of humans, tops. You know, the data's a little bit hard to actually find from that period of time. But the British Empire, which we have a little bit better handle on, at its peak, was only twenty-three percent of the global human population. So no government, tech company, utility, et cetera, has ever addressed so much of the world.
- DRDavid Rosenthal
It's just wild. There's no other way to put it.
- BGBen Gilbert
In the over twenty years since its founding, Meta truly has connected humanity through its apps: Facebook, Instagram, WhatsApp, Messenger, and now Threads. So today, we're gonna study how they did it. There's been a lot of ink spilled writing about Facebook over the years, and for its first ten years, most of that writing focused on the many benefits to society, with breathless exuberance over milestone after milestone. And for the past ten years, it's kinda seemed like Meta could do nothing right. Reporting focused on its many stumbles, the massive mistakes, the incredible controversies surrounding the company, and while we will, of course, discuss these events as part of our story and analysis, our goal today, on this podcast episode, is really to understand how it is that Meta became the dominant fabric that connects the human race, and why they've been so successful at continuing to win over and over again. No matter what you think of the company, it is undeniably one of the most important institutions in the world, and their global scale is no accident. It is the result of careful actions from some of the most motivated and brilliant people in the world, who believe in one mission: connecting as many people as possible.
- DRDavid Rosenthal
I hadn't thought about this till now, but almost sort of tautologically, this is, like, the most important episode we'll ever do, to try and understand this. [chuckles]
- BGBen Gilbert
[chuckles]
- DRDavid Rosenthal
Like, it's the biggest company that has ever existed. It's the biggest thing that's ever existed.
- BGBen Gilbert
Yeah, by these measures that we're talking about right now.
- DRDavid Rosenthal
Right.
- BGBen Gilbert
Now, of course, the story of how we got here is nuts. It is the perfect Acquired stew, like you're saying, David. They speed-ran their startup phase, they swerved through multiple disruptive technology waves, they battled fierce competitors, they invented, or maybe discovered, one of the greatest business models ever, and they're now trying to pull forward the next technology generation through sheer force of will with AR, VR, and AI. So finally, listeners, we tackle one of the greatest corporate stories ever, Facebook, the Mark Zuckerberg production. So listeners, we have one big announcement for you today. It is time for our annual Acquired survey. If you have three to five minutes, please click the link in the show notes, or go to acquired.fm/survey to take it. We'll be raffling off a pair of shiny new Meta Ray-Bans-
- DRDavid Rosenthal
Yeah
- BGBen Gilbert
... and giving away a bunch of ACQ dad hats as well. This is really our one big ask of you all year, and it helps us immensely with making the show better, to hear your suggestions, and also to help our sponsors understand just how impactful the Acquired audience is. So go to acquired.fm/survey, and David and I are both eternally grateful. After this episode, discuss it in the Slack, and check out ACQ2, our second show, where we just had Clem Delangue, the CEO of Hugging Face, on to talk about his view on how the open-source AI ecosystem will play out. And before we dive in, we wanna briefly thank our presenting partner, J.P. Morgan Payments.
- DRDavid Rosenthal
Yes, just like how we say every company has a story, every company's story is powered by payments, and J.P. Morgan Payments is part of so many companies' journeys, from seed to IPO and beyond.
- BGBen Gilbert
So with that, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only. David, Roman Empire? Like-
- 5:54 – 17:43
Mark Zuckerberg’s formative inputs: Civilization, coding, and classics
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
And really, I mean, where else can you start? I can make up pseudo-Roman Empire, classics, Aeschylus, whatever T-shirt saying Mark has this day of the week, but-... Facebook has always started and ended with Mark Zuckerberg. So we start in May of 1984, when Mark Elliot Zuckerberg is born as the second of four children to Karen and Ed Zuckerberg in Dobbs Ferry, New York. Small, little suburban town, suburb of New York City.
- BGBen Gilbert
Yep, and his mom is a psychologist, and his dad is a dentist. Is that right?
- DRDavid Rosenthal
That's right. Ed studied dentistry at NYU. He was always, like, really into math and computers, though, but growing up the son of Jewish immigrants in New York City, you know, the expectation was you're gonna be a doctor or a lawyer. So he goes to dentistry school, becomes a dentist. He meets Karen. They get married. After Ed finishes dental school, they move up to Dobbs Ferry in Westchester County, and Mark and his three sisters grow up as prototypical middle-class suburban American kids in the '90s. Life is good. Your grandparents worked really hard to make a bunch of sacrifices for your parents. Your parents are now professionals. They're also working hard to give opportunity to you, and the family is kind of leveling up in America. It's the classic story here.
- BGBen Gilbert
And you can play sports, and you can hang out with your friends and play video games.
- DRDavid Rosenthal
Indeed, and for Mark and for me growing up, and maybe you, too, like, it's kind of amazing. Like, there's no reason not to just explore your passions, and for Mark, those passions become threefold: one, turn-based strategy video games, most particularly Sid Meier's Civilization; two, programming computers; and three, as you mentioned and everybody who watched our Chase Center show knows, ancient Greek and Latin history. [chuckles]
- BGBen Gilbert
Classics.
- DRDavid Rosenthal
The classics, and pretty much in that order of importance, both to him personally and the future course of Facebook and Meta. [chuckles] So let's start with Civilization. September of 1991-
- BGBen Gilbert
David, I toyed with the intro to this show being, "And we are your hosts. Civilization is a video game upon which..." [chuckles] But I decided not to.
- DRDavid Rosenthal
Right? I mean, it's kind of laughable, but like, no, this is really important here. So September 1991, when Mark is seven years old, Civilization, or Civ, as its fans call it, comes out for PCs, and young Mark gets hooked. And for those of you who haven't played Civ, it is a very particular type of turn-based strategy game and is probably the foremost example of what is known as the 4X genre. That's the number 4, letter X, and 4X stands for Explore, Expand, Exploit, Exterminate. And despite that sort of nefarious-sounding nature to the last one there especially, Civ and 4X games were kind of this radical branch of video games at the time, where the action of playing and the way to win wasn't just about, like, killing all the enemies on screen. It's a lot more like a board game or like Risk, if you're familiar with that. It's about strategy. It's about growing and marshaling your resources effectively, and most importantly, there are multiple ways to win the game. Most other games out there, you can win by defeating all the other players, but you can also win by completing a technology development tree and reaching, like, the peak of technology, which is, in the game, launching a spaceship to go colonize a new planet. So that's another way to win, and in modern versions of the game, you can also win by diplomacy, by getting elected the leader of the UN. You can also win by dominating all the other players on either culture or religious dimensions, too. So it's kind of like this amazing simulation of what it's like to run one of the top ten market cap mega capitalization-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
... companies in the world today.
- BGBen Gilbert
But to your point, this idea that it's turn-based, you try to amass resources, figure out how to deploy your resources, have multiple concurrent strategies so that you, as the roll of the dice of the universe happens and things unfold before you and you're-
- DRDavid Rosenthal
And other players make their moves, yep.
- BGBen Gilbert
Right, to be able to effectively react to it all and use your resources to win in whatever way winning means to you.
- DRDavid Rosenthal
It's kind of funny. This is way too simplistic of an analogy and, you know, not fair to Mark on any dimension, but the whole construct here sort of reminds me of the book Ender's Game. You know, where like, it's these kids growing up playing this game, and they didn't realize all along it was actually-
- BGBen Gilbert
Literally
- DRDavid Rosenthal
... the real game. [laughing] Uh, so playing Civ and other video games when he's young, PC games, leads young Mark to want to learn how to program himself. So when he's 10, he has his parents take him to the local Barnes & Noble one day and begs them to buy him C++ for Dummies, and he dives into the book, learns everything in there, and he's like, "I, I need more, I need more." So after that, his parents hire a local tutor to come and tutor him for an hour a week in programming and learning how to write software. And Mark has this quote that he says later: "I'd go to school, and I'd go to class and come home, and the way I'd think about it was, 'Awesome, I have five whole hours to just sit and play on my computer and write software.' And then Friday afternoon would come along, and it would be like, 'Okay, wow, now I have two whole days to sit and write software. This is amazing!' "
- BGBen Gilbert
It really is astonishing as a 10-year-old to be learning C++. This is not Basic. This is a language where you are thinking very close to the metal. You have to be very aware of the constraints of your system, of manually managing memory. It's impressive for 14 or 16-year-olds to be learning simplistic languages. This is a whole different ballgame.
- DRDavid Rosenthal
As it always is with Mark. So-... while he's a kid here, you know, in Dobbs Ferry, he codes up all sorts of little projects, including a family chat tool for all the networked computers in the house, and also his dad's dentistry office is attached to the house. So he builds this network called Zucknet, [chuckles] which is family chat between all the computers. Very prescient here. And then, speaking of family and friends chat, in 1997, when Mark is 13 years old, AOL launches AIM, AOL Instant Messenger.
- BGBen Gilbert
Ooh, I remember it well. Many, many, many hours lost to AIM, and, uh, warning my friends and other dynamics of the AIM system to gang up on people and to have other people gang up on me, and-
- DRDavid Rosenthal
Oh, man, punting people off AIM, and-
- BGBen Gilbert
Yes, having to create a new screen name, and log off, and log on, and message someone, and pretend you're someone else. I mean, the whole... This was middle school.
- DRDavid Rosenthal
This was middle school for all of us, and this was middle school for Mark, too. The crazy thing about AIM, to go on just a quick little digression here, I had no idea till doing the research, it was actually, like, a rogue skunkworks project within AOL. Did you know this?
- BGBen Gilbert
Hmm, no.
- DRDavid Rosenthal
Yeah, so it was a couple engineers that just went off and built this, almost against the wishes of management. It was not originally intended to really be for social use or for kids at all. It was more like the idea they had was it was gonna be kinda like Slack, like chat for workplaces.
- BGBen Gilbert
Oh, wow!
- DRDavid Rosenthal
They ended up using it internally at AOL to communicate, and that's actually where away messages come from.
- BGBen Gilbert
Oh.
- DRDavid Rosenthal
So they came up with away messages 'cause people would be in meetings or, you know, this is the days of desktops. There's no cell phones, barely even laptops. People would go out to lunch, and they'd have to put up a message so that when their colleagues were trying to communicate with them, be like, "No, no, I'm in a meeting. No, I'm away."
- 17:43 – 32:41
Exeter and early ‘AI’: Synapse and the Adam D’Angelo connection
- DRDavid Rosenthal
County. He does two years at the local public high school, at Ardsley High School, and after two years at Ardsley, Mark is like, "Well, you know, a couple things. I'm not sure that this is the right high school for me for the rest of my high school career. One, I think I would enjoy just being in a sort of, like, better school, like, a higher level of competition, higher level of learning." You know, he's definitely at the top of the class at Ardsley.... two is, you know, I'm really into Latin and classics, and, like, I'm gonna tap out on that real fast here at Ardsley. There's gotta be a place I can go where I can really study this, and that takes us to Phillips Exeter Academy.
- BGBen Gilbert
In New Hampshire, right?
- DRDavid Rosenthal
Yes, in New Hampshire. And so Exeter is one of these private boarding high schools that have existed basically as long as Ivy League colleges have, and they're there just kind of as feeder schools into Ivy League colleges. So Mark applies to Exeter, gets in, and the summer before he's about to go, the school hosts an event in New York City, in the city, for incoming two-years to meet each other, get to know the school, get ready, et cetera. And there, Mark meets another kid who's a lot like himself, who also is really into computers, really into AIM and everything going on there, and Mark's like, "Yeah, man, I've really made the right choice. Like, everybody here is gonna be just like the two of us," and that person is Adam D'Angelo, future CTO of Facebook.
- BGBen Gilbert
Amazing they met in high school.
- DRDavid Rosenthal
Now, the great irony of this story is that Mark and Adam ended up being, like, the only two kids who were really into computers in the class. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
It was just the two of them. [chuckles] They just happened to meet in New York City at the pre-school event.
- BGBen Gilbert
Which is probably one of the last few years that that would be the case. I'm sure if you went to this school today, it'd be eighty percent of the class is re- or a hundred percent of the class is really into computers.
- DRDavid Rosenthal
Yes, I think in large part because of Mark and Adam, [chuckles] it's quite different these days.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So the two of them, when they get to Exeter, become fast friends. They work on all sorts of computer projects together, software projects, and by the end of their senior year, to graduate from Exeter, you have to do a senior project. And, you know, most people do this, like, a mini college thesis, or they do something in the community, et cetera, et cetera. Mark and Adam are like, "No, we're gonna build some software. This is what we do." So Mark one day is listening to music on his computer, I think probably on Winamp, which is how everybody listened to MP3s that you got from Napster back in the day.
- BGBen Gilbert
I think I listened on SoundJam, but it's just because I had a Mac.
- DRDavid Rosenthal
Oh, yeah! Future seeds of iTunes.
- BGBen Gilbert
Yep, that's right. It got acquired by Apple, and then eventually they, I think, built off the same code base and turned it into iTunes. But everyone used Winamp. That was the AIM of music players.
- DRDavid Rosenthal
And in fact, AOL, I think, would acquire Winamp a couple years later.
- BGBen Gilbert
Ah.
- DRDavid Rosenthal
Bring it all into the fold. So legend has it, Mark is listening to a playlist in Winamp one day during his senior year, and he gets to the end of the playlist, and he's like, "Why did the music stop? I listen to so much music all the time on Winamp. It should just know what I like and automatically pick the next song. It should just be a DJ." And then inspiration hits, and he s- calls up Adam, and he's like: "I've got our senior project. We are going to build an AI DJ plug-in for Winamp," and they call this Synapse, and, like, they did it, these two high school kids. They build an AI, you know, ver... AI, it wasn't called AI at the time, but like a, you know, a recommender system that looks at the data of what songs you've consumed on Winamp and predicts what song you're gonna like to consume next. I mean, it's basically Spotify today.
- BGBen Gilbert
What year is this?
- DRDavid Rosenthal
This would've been spring of 2002.
- BGBen Gilbert
Yeah, real early days.
- DRDavid Rosenthal
So they build this thing, and then they release it to the internet, and people start using it. It starts getting some adoption, and, um, a couple companies, including Winamp itself, reach out to Mark and Adam and are like, "Hey, do you wanna come work here? Like, can we buy this?"
- BGBen Gilbert
Yeah, and I think Microsoft was one of them, too. It was for, like, a, a million-dollar acquisition offer or something like... It wasn't, you know, crazy, but these are high school kids.
- DRDavid Rosenthal
Right, in 2002.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
But, yeah, this is really important, 'cause they're about to graduate. Adam is gonna go off to college at Caltech. Mark is gonna go off to college at Harvard in the fall, but Mark is not just like any student coming into Harvard. He's like, "I can build these things, and they have value, and big companies are gonna be willing to pay me for them. I don't need to be that worried about getting a job."
- BGBen Gilbert
Right. He sort of always knew he had a great fallback plan, so it kinda let him be risk-on.
- DRDavid Rosenthal
So Mark graduates. He goes off to Harvard. It's the natural choice on many fronts. I mean, one, Mark, of course, aces his SATs. I think he gets a 1600 on the SATs. There's this great legend about, um, you had to take SAT twos to get into college back then. I don't know if you still do, but I think you had to have a minimum of three. Mark doesn't study or prepare for them at all. He walks in the day of the test, says, "I'm gonna take all three that I'm gonna take on the same day." He gets eight hundreds on all of them. College admissions was not gonna be a big deal, and his older sister Randi was already there at Harvard.
- BGBen Gilbert
So clearly, gonna go to Harvard if he wants.
- DRDavid Rosenthal
Yes, and I think he wants enough. Like, I, I don't know that it's that important to him, but he's like, "Yeah, sure. Harvard, it's the best. I'm gonna go there."
- BGBen Gilbert
Yep. In fact, there's a video of that.
- 32:41 – 43:31
Harvard’s ‘small projects’ era: CourseMatch, Facemash, and identity lessons
- DRDavid Rosenthal
Yep, so the first of which, right as they're getting back to campus that fall, is Mark builds a tool called CourseMatch.
- BGBen Gilbert
Oh, yeah, that's right.
- DRDavid Rosenthal
And this is as students are shopping for classes for fall semester, you can upload which classes you're thinking of taking or which classes you've signed up for, and you can see who of your friends have also signed up for that class or are planning to sign up for that class. This is just text. All this is, is a list of classes and a list of people who sign up, and it takes Harvard by storm. I mean, think about it, right? Like, it's obvious in hindsight. A bunch of college undergraduates, yeah, you wanna take classes you're interested, but, like, really, you wanna make sure you take the classes with the people that you want to be around.
- BGBen Gilbert
I was literally texting my friend yesterday, who was at Harvard at this time, and she said, "Oh, yeah, people totally chose their classes based on who was in them."
- DRDavid Rosenthal
Of course, of course. So Mark sees this, and he's kind of like... You know, again, it's one of these learnings, an observation about the world. He's like: Wow, people are spending a lot of time on this tool.
- BGBen Gilbert
It's literally just lists of people. You click on a class name, and people would spend a lot of time just combing over that list of people.
- DRDavid Rosenthal
Totally. There's nothing visually compelling here. So he's like, "Well, okay, now it's time for my next project. You know, people have registered for classes. What if there was something visually compelling [chuckles] for people to spend time on?"
- BGBen Gilbert
What if I overstepped a little bit and, uh- [chuckles]
- DRDavid Rosenthal
Yeah, and this is Facemash, well-chronicled in all the many books, stories-
- BGBen Gilbert
The Steven Levy book, the David Kirkpatrick book.
- DRDavid Rosenthal
Movies, you know, whatever. [laughing]
- BGBen Gilbert
Movies. Movie.
- DRDavid Rosenthal
Movie. Mark codes this up in one evening in his dorm in Kirkland House, and it's basically the website Hot or Not for Harvard, with a couple of, like, actually interesting mechanical twists on it. Now, the two big problems with it are, one, this is probably just not a good idea or not, like, kind. Generally, it is a head-to-head voting mechanic on which picture is, quote-unquote, "hotter than the other picture." The other thing that is really not great is, rather than having users upload their own pictures, Mark hacks into the Kirkland House servers and downloads the face book photos of all the students to populate the website.
- BGBen Gilbert
Lower case face, space, lower case book.
- DRDavid Rosenthal
Yes. So we should probably spend a minute and talk about what a face book was before Facebook. So my big question for you is, did Ohio State have a face book?
- BGBen Gilbert
It did not.
- DRDavid Rosenthal
It probably would've been like a telephone book-sized thing if they did.
- BGBen Gilbert
I mean, I went to college in the fall of 2007, and so you could look up people's email addresses if you had their first and last name. You might be able to get some other, maybe major, but it was a text blob, it wasn't a photo.
- DRDavid Rosenthal
Well, I think most, if not all, Ivy League schools back in the day had these. Princeton, where I went, certainly had these when I showed up on campus.
- BGBen Gilbert
In fact, Phillips Exeter had one. The private high schools did, too.
- DRDavid Rosenthal
That's right, that's right. So you had to give the university, or in Exeter's case, the high school, a school photo of you when you were coming in, before you matriculated, and then they would literally make a book, like, a printed book with the names and class years and photos of all the incoming students from the freshman class. And I think if I remember right, at Princeton at least, they would republish the book every year-
- BGBen Gilbert
Hmm
- DRDavid Rosenthal
... you know, for your class, 'cause, you know, some people would leave, some people would join, et cetera, et cetera.
- BGBen Gilbert
All right, so these are photos stored digitally that Mark then, while plugged into the campus network from his dorm room, is-... accessing, downloading, and then putting up on his own website that he is hosting.
- DRDavid Rosenthal
Yes, called Facemash. Now, a couple interesting things about Facemash. One, gosh, if Mark was blown away by the engagement of the Harvard population with CourseMatch, Facemash takes that to such a whole another level that it actually melts down [chuckles] the servers in Kirkland House, and the IT department at Harvard has to shut off internet within hours of it going live to all of Kirkland House, lest this, like, continue to spread virally within Harvard and take down, like, all of the servers.
- BGBen Gilbert
Oh, so maybe he didn't actually rehost the images. Maybe he was just pointing at the URLs that were hosted by Kirkland House.
- DRDavid Rosenthal
Oh, I didn't think about that. Yeah, that might have been how it worked.
- BGBen Gilbert
But either way, dude knows how to make something that gets engagement.
- DRDavid Rosenthal
Yes. Yes, he does. So the other interesting thing from Mark's perspective about Facemash is that it was the first time he was building a rich web app as one of these projects. You know, fully built on the LAMP stack, and he had probably used the LAMP stack, Linux, Apache, MySQL, PHP, for CourseMatch.
- BGBen Gilbert
And so to be clear, that's an operating system, a web server with Apache, MySQL, the free open-source database, PHP, the free open-source programming language.
- 43:31 – 57:19
thefacebook.com launches: dense networks, trust, and the ‘nuclear reactor’ seed
- DRDavid Rosenthal
Totally. So this takes us to Harvard's Christmas break. Now, at the time, Harvard did final exams for the fall semester after Christmas break in January. So the idea is, all the students go home for Christmas break, you come back in January, and then there's a week of reading period, where you re-familiarize yourself with all the material from your classes, then you take final exams, then there's a little break, there's a course shopping period for spring semester, and spring semester starts in February.
- BGBen Gilbert
So Mark has a few weeks to program a new idea. [chuckles]
- DRDavid Rosenthal
Exactly, to not study and program a new idea. And during Christmas break, he had actually come out to Silicon Valley, to the Bay Area, to hang out with some friends out here. And seeing, you know, the physical embodiment of all these great tech companies, Yahoo, early Google, et cetera, drove by them all. And so he comes back, and he's, like, extra, extra motivated. He's like, "You know, this digital Facebook idea, I think this is something that a lot of people want. I bet I can code this up in a week and just launch it."
- BGBen Gilbert
And again, not a business, just, like, a project. He has this gut feeling that people will use this if he makes it.
- DRDavid Rosenthal
Totally. Now, importantly, though, all the stuff he'd been doing throughout the year, he's like, "Well, I can incorporate that into this project, too. It'd be pretty boring if it's just a digital Facebook. Like, I don't think people want that. But I've made all this other stuff that people really, really like and engage with."
- BGBen Gilbert
And when you say just a digital Facebook, you mean, like, essentially, the profile page would just be a photo and a name.
- DRDavid Rosenthal
Right, just like the physical version of, like, here is a list of all the students in the class, and here is their, you know, stock profile picture.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So later, after thefacebook.com blew up, Mark told The Harvard Crimson in an interview, "I don't really know what the next big thing is, because I don't spend my time making big things. I spend time making small things, and then when the time comes, I put them together. That's the kind of stuff I do, small little projects, and eventually, they all fit together." And that's what thefacebook.com ends up being. So Mark gets back from reading period. Instead of studying, he dives in. He IMs his friend, Andrew McCollum, who he knows from CS classes, and asks Andrew to do the page design. Andrew says, "Yeah, sure thing, I'll help you out." Andrew goes and fires up Photoshop. He finds an image on the Internet of some guy who looks kinda cool and, uh, puts it in the header of the design for the site.
- BGBen Gilbert
Behind a cloud of ones and zeros, because it's cool.
- DRDavid Rosenthal
It's like the Matrix.
- BGBen Gilbert
Yes. [chuckles]
- DRDavid Rosenthal
[chuckles]
- BGBen Gilbert
And it's gradiented. You know, it's sort of white on the left, blue on the right.
- DRDavid Rosenthal
And for, like, you know, a year or two, however long the Facebook guy was at the header, everybody's like, "Who is the Facebook guy?" People think it's Al Pacino. People are like, "Is it a student?" Do you know who the Facebook guy was?
- BGBen Gilbert
I totally do. I looked this up. I spent, like, two hours-
- DRDavid Rosenthal
I did, too
- BGBen Gilbert
... trying to figure this out. Really? [chuckles]
- DRDavid Rosenthal
Yeah, it's amazing. [chuckles]
- BGBen Gilbert
'Cause everyone always said it's Al Pacino, and I'm like, it doesn't really...
- DRDavid Rosenthal
No.
- BGBen Gilbert
Al Pacino must've looked really different when he was younger [chuckles] and it's not.
- DRDavid Rosenthal
All right, tell me your answer. I'll tell you if it matches mine.
- BGBen Gilbert
All right, so there was an '80s song that got really big called "Centerfold."
- DRDavid Rosenthal
Oh, yes, this is it.
- BGBen Gilbert
And the image is of Peter Wolf.
- DRDavid Rosenthal
Yep, who is the lead singer of the J. Geils Band.
- BGBen Gilbert
We'll link to that image. There's this great Quora post, which we should say, Adam D'Angelo, founder and CEO of Quora, after Facebook. There's a great Quora post about this, where there's unmistakably the photo of Peter Wolf that Facebook guy is based on. They just sort of pixelated it and, you know, made it duotone instead of the original photograph.
- DRDavid Rosenthal
So great.
- BGBen Gilbert
Yeah.
- 57:19 – 1:06:25
Rapid expansion, early cofounders, and the Winklevoss dispute
- DRDavid Rosenthal
Yep. But to your point, very quickly, Mark is adding features, adding functionality, adding things to do to the site. The other thing that he does right off the bat is say, "Okay, we're taking this to other colleges, too." So he recruits his roommates. Dustin Moskovitz comes on to help maintain the site. Dustin was actually an econ major. He had no idea how to code. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
He goes out and buys Perl for Dummies, and Mark's like, "Uh, that's great that you read that. The site is written in PHP." [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
So Dustin goes and learns PHP, too, and helps with coding the site and keeping up with everything.
- BGBen Gilbert
Eh, you know Perl, you can learn PHP. It's much easier.
- DRDavid Rosenthal
Chris Hughes joins, too. Andrew McCollum joins, and then they need to keep buying servers to keep up with the traffic, or else everything is gonna melt down. So one of Mark's fraternity brothers in AEPi is a guy named Eduardo Saverin, and Eduardo was, I think, part of the business and investing club at Harvard. So they recruit Eduardo in, and Eduardo invests a thousand dollars in infrastructure for the site. Mark invests another thousand dollars, so together, there's two thousand dollars of investment in the facebook.com, and the deal they strike is that Mark gets two-thirds of the company, and Eduardo gets one-third of the company, and Eduardo sets up a business entity to formalize all of this as a Florida LLC. Eduardo was from Florida. Right away, as we were saying, Mark's like, "Great, this is not just a Harvard thing. We need to bring it to other colleges." And he specifically chooses Columbia because, Ben, as you said, there was an existing competitor there, and he's like, "I wanna see how Facebook competes, and, like, I wanna know right away, can we displace it?"
- BGBen Gilbert
It's so interesting. He doesn't go to the schools where there's nothing. He goes to the schools where there is something and wants to be better than it.
- DRDavid Rosenthal
Which is so counterintuitive to how most people would think. They'd say, like, "Oh, no, this is a race. I'm gonna go to the white space. I'm gonna gobble everything up and then wait to take on competitors when I'm bigger and stronger." Like, Mark's like, "Nope, right away."
- BGBen Gilbert
This is a early mindset of we are [chuckles] gonna be globally dominant. If you're okay splitting the market, you go for the white space, and then you say, "Let's see how much of the low-hanging fruit we can easily get." But if you're Facebook, you're gonna say, "Let's go to the hardest possible competitor, extinguish them [chuckles] ..."
- DRDavid Rosenthal
Yes. [chuckles]
- BGBen Gilbert
... and then, [chuckles] and then we, uh, we'll have a better shot at owning the whole market, and we can get to the low-hanging fruit later." By the way, their strategy, once they did win at a school like Columbia, was to go figure out all the schools that were, like, closest to Columbia in terms of network connections and then win there, too, to kinda, like, build a moat around their victory.
- DRDavid Rosenthal
Yep. So there we have the initial crew: Mark, Dustin, Chris, Andrew, and Eduardo, the five co-founders of Facebook. The other interesting thing about going to Columbia, which they do three weeks after the launch at Harvard, twenty-two days, it was the same month, all within February 2004. They set up Columbia as a completely different network than Harvard. So if you join the Columbia Facebook, you can't then go access all the profiles of Harvard students.
- BGBen Gilbert
Right, at first, there was zero connectivity between the two.
- DRDavid Rosenthal
Which is another sort of counterintuitive thing. You'd think, like, "Oh, great, I wanna build this as big as possible. Mark clearly wants to conquer all these other schools. The best way to do that is to have all this alive content come right to them from Harvard."... I think he realized that had he done that, it would've socially inhibited sharing within Harvard.
- BGBen Gilbert
Yeah. The scarce commodity is trust. That is the important lesson here. It's also a very convenient infrastructure decision, where if these two systems truly don't need to talk to each other, that's great! Put different servers in different data centers. Don't worry about overloading the database. Don't worry about number of writes per second and reads per se- it's great. If every school gets its own server rack, you'd end up not having some of these issues that the other social networks have. Friendster is out there trying to compute second-degree friends of friends, which is this crazy, hard computer science problem, especially as the global number of people growing. It's an N-squared problem. And Facebook is over here, or the Facebook at the time, in the land where they're keeping N small. So even anything that's N squared is contained within that school, and their servers aren't falling over and taking 20-plus seconds to load pages the way that the Friendsters of the world are.
- DRDavid Rosenthal
This is such an interesting point, because technology infrastructure advantage has always been a core part of Facebook, even back to this very beginning. What's interesting is that it flips at some point. As Facebook grows and eventually becomes open to everybody, their competitive advantage becomes their tech is so good and their infra is so good that they can do everything you were just talking about that Friendster couldn't do and that MySpace couldn't do. But in these early days, their competitive advantage is actually like, "No, we're scale out, not scale up." And then Mark was totally willing to just flip the bit later. [chuckles]
- BGBen Gilbert
Right, it's effectively counter-positioning. They're building the Facebook in such a way that the use cases don't require incredibly sophisticated technology to accomplish those feature sets. There's this funny chicken or the egg thing here, and I think the answer, like many chicken or the egg, is both. Mark, at the moment he conceives of an idea, thinks through the technical requirements and the user experience, and they're sort of co-mingled in the product development process. And so I really do think even at age 19, he was sort of aware of the scaling benefits, in addition to the user experience benefits, of launching in this way.
- DRDavid Rosenthal
Totally agree. Okay, fun bit of trivia about Harvard's leave policy that we referenced earlier. Do you know what else Mark does on the same evening that they launch Columbia?
- BGBen Gilbert
No idea.
- DRDavid Rosenthal
He goes to hear Bill Gates speak on campus.
- BGBen Gilbert
That was the same night?
- DRDavid Rosenthal
The same night, during which speech, Bill mentions that he actually felt comfortable dropping out of Harvard because he discovered that Harvard had this really-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
... generous leave policy, that you could take an infinite leave of absence and pursue something else and come back any time you want. And Mark would actually say later that Bill saying that at the event was part of what got him comfortable doing the same thing.
- BGBen Gilbert
Unbelievable. It is crazy. Tying this back to our Microsoft episode, this would've been, what, early 2004, and so this would've been right after Bill stopped being CEO, handed the CEO reins to Steve. He was still the chief architect and still chairman of the board, but it's sort of this like post-DOJ time for Microsoft, where Bill is just technically focused and can do things like go speak at Harvard.
- DRDavid Rosenthal
Yeah. It is amazing how much influence Microsoft had on Facebook and on Mark. We have a lot more to talk about on that front. So, next couple days after Columbia launches, Facebook launches at Stanford, at Yale. By the end of the semester, they're in over 100 schools, in like, you know what, three, four months. Like, the speed they're moving with is crazy.
- BGBen Gilbert
And they start building these wait lists. I mean, this is the other... Th- there's so many common startup things that Facebook kind of invented. They built tremendous demand before they would light up the network. They knew that as soon as you're in Facebook, you wanna quickly get to seven friends or 10 friends or whatever the metric is to create that sort of magic moment where you're like, "Oh, yeah, Facebook now works for me." So they wanted to wait until they had sufficient demand to, boom, open that school, and then once it's open, everybody should have the best possible experience. And so you're seeing Facebook basically say, "Okay, wherever there's really strong demand, that's where we'll open next, and we're not gonna open anywhere where we see like, you know, middling demand for our product."
- DRDavid Rosenthal
Yep, totally. Meanwhile, here we are at the end of the school year. The Winklevoss twins take the whole ConnectU situation to Harvard's president, Larry Summers, to adjudicate this dispute between them and Mark. Larry says, "Hey, Harvard is not gonna get involved here. This is a business dispute between students." Eventually, the two twins sue Mark and Facebook. They settle for $65 million, 45 million of which is paid in pre-IPO Facebook stock. Obviously, that grows. A large portion of that, then, I think they sell and put into Bitcoin in like 2011 and 2012 timeframe. So t- they end up pretty- [chuckles] ... pretty fine out of all this.
- BGBen Gilbert
They did great.
- 1:06:25 – 1:27:22
Palo Alto summer + Sean Parker: founder control, fundraising, and ‘Wirehog’
- DRDavid Rosenthal
They did great. But here we are at the end of the school year, summer comes around, and Andrew McCollum has some connections out in the Bay Area. He had interned at Electronic Arts. Adam D'Angelo is gonna be spending the summer from Caltech. So the crew all decides like, "Hey, great, let's not get internships. Let's go rent a house out in Palo Alto, move to Silicon Valley, and work on Facebook there for the summer and see what happens." And yes, the house did indeed have a pool. Yes, they did indeed install a zip line off the chimney. [chuckles]
- BGBen Gilbert
Yes. [chuckles]
- DRDavid Rosenthal
That was not fiction in the movie. That did actually happen.
- BGBen Gilbert
... And it is important to know, to this point, it is a project. Mark and Dustin and Chris, and everyone who moves out, they are there to work on a project that they think is cool and seems to be working, and get exposure to Silicon Valley and venture capitalists for when they start their startup, having a network. That is literally the mentality. Facebook is live at how many schools, David?
- DRDavid Rosenthal
A hundred.
- BGBen Gilbert
A hundred schools, and they are going out, not with the intent to make this a company, but to contemplate what company they could start, and meet people that can help them with that.
- DRDavid Rosenthal
Yep. Now, when we say, "crew who moves out," that crew did not include Eduardo. Eduardo had an internship in New York, and decided that he was not gonna move out for the summer.
- BGBen Gilbert
Yeah. [sighs] Tough decision.
- DRDavid Rosenthal
Not a great decision. On the other hand, he ends up with 2% of Facebook, so he's also fine.
- BGBen Gilbert
Yeah, so to make a long story short, yes, everything you saw on The Social Network around this, the result is effectively correct, that Eduardo Saverin goes from owning a third of this Florida-based LLC to something like 2% of this C corp, that is a Delaware C corp based in California, that goes on to become, or is Facebook, Inc. And the justification that they effectively use in changing this structure is, "Hey, a bunch of us moved to California to start a company together. You stayed back, and, yes, you sold some ads in the meantime, but, like, you didn't come start the company with us." Listener, we leave it to you to sort of decide how that should have played out and what's fair. None of us were there. He was a co-founder of Facebook, and then ended up with 2% and lived on a different coast. Okay, so they're in California. They get really serious about the Facebook. They actually are still working on something else called Wirehog concurrently within [chuckles] the same team, but they're starting to realize, "Okay, this, the Facebook thing, really, really has legs." And as they're sort of contemplating their next move, they literally run into someone on the street who will change everything. David, who is this person?
- DRDavid Rosenthal
That person is the co-founder of Napster, Sean Parker, who would have a brief but very, very large impact on the company.
- BGBen Gilbert
Yes, so before we tell the Sean Parker chapter of the Facebook, now is a great time to talk about our presenting partner, J.P. Morgan Payments. In these critical moments, like we are talking about now, where a new paradigm or technology shift happens, David and I typically focus on the founders and the innovators who figure out how to build something really great. But unfortunately, it's not just the good actors who take advantage of these opportunities.
- DRDavid Rosenthal
Oh, yeah. There are always bad actors on the other side of the same new technology, and this is especially true whenever money or value is exchanged, whether it be phone scammers taking advantage of international networks in the '80s and '90s, viruses spreading through the early Internet, or today's cybercrime, like AI-powered identity theft. As technology gets smarter, so will the fraud tactics.
- BGBen Gilbert
Enter J.P. Morgan Payments. With the digital payments ecosystem expanding rapidly through innovations like real-time payments, blockchain, and peer-to-peer networks, the attack surface has grown exponentially. For a company like J.P. Morgan, who moves $10 trillion a day across 160 countries, staying ahead of bad actors is critical for the entire global financial system. That's why they've been investing in technology like AI and cyber fraud prevention for years. Their AI models have been trained on billions of transactions. That is unparalleled scale and expertise when it comes to fraud intelligence, and it's only getting smarter and more reliable, given they're processing over 5,000 transactions per second with 99.9% accuracy. Regardless of your size or industry, you can leverage their enterprise-grade solutions, like validation services, which validates bank accounts, individuals, and businesses.
- DRDavid Rosenthal
One great example is a Fortune 500 global media company. They needed an automated solution for the thousands of influencers on their platform to do rapid onboarding, minimize errors, and ensure consistent validation of bank account information. They were able to compress validation times from days to minutes, so they could scale.
- BGBen Gilbert
They've got a great payments developer portal. It's a trusted, scalable platform built with payment security and risk management in mind.
- DRDavid Rosenthal
Developers can even integrate their preventative fraud solutions to act before an incident takes place. Sardine, a leader in financial crime prevention, collaborates with J.P. Morgan Payments and embeds its account validation services API to analyze and protect over two billion devices for 300 companies, with AI to the highest standards of fraud and compliance safety.
- BGBen Gilbert
David, I actually met the founder of Sardine at the meetup that we did after the Chase Center event with J.P. Morgan Payments in San Francisco last month.
- DRDavid Rosenthal
That's right!
- BGBen Gilbert
It was awesome. Ultimately, every business benefits from built-in fraud prevention, whether you're moving $100 or a billion dollars, and with the trust and innovation from J.P. Morgan Payments' whole ecosystem, you can drive growth while protecting your business. Check out more payment solutions and stories at jpmorgan.com/acquired. Okay, David, Sean Parker enters the picture. Here we go.
- DRDavid Rosenthal
So Sean Parker had, of course, started Napster with Shawn Fanning back in the late 1990s, and after the whole Napster saga, Parker ended up starting the email contact list company called Plaxo, which was kind of its own proto-social network and pioneered [chuckles] email address book exploitation and, uh, exporting.
- BGBen Gilbert
Which is how every social company got its start. Facebook did a ton of this, LinkedIn did a ton of this, WhatsApp did this.
- DRDavid Rosenthal
Exactly. It pioneered the first bootstrap viral social network mechanic.
- BGBen Gilbert
"Hey, let me see who all the people you know are, so that on this new thing, that you wanna be connected to all the people you know, you're connected to all the people you know. Oh, by the way, we might also invite all the people that, uh, you've ever contacted." [chuckles]
- DRDavid Rosenthal
Yep. So Sean and his co-founders at Plaxo raise money for Plaxo from venture capitalists, and not just any venture capitalists...... the best venture capitalists from Sequoia Capital, and all is going well. Plaxo is going fine. Sir Michael Moritz is on the board of the company. Anyway, after a couple of years, [exhales] Sean Parker ends up getting kicked out of the company by the board. Now, Sean wasn't exactly the most, like, reliable employee and, uh, definitely was, um, quirky. But the result of this is Sean's everlasting enmity for Sequoia and paranoid distrust of all venture capitalists and company boards. This is gonna become very, very, very important here in a sec. So rewind slightly back to the spring of two thousand and four, when the team is still at Harvard. Sean is living in Palo Alto, and one of his housemate's girlfriends, who's, I believe, a student at Stanford, pulls up the facebook.com on her laptop, and it's kind of like the scene where this happens in The Social Network movie. Sean is like: "Holy crap, this is it. This is the winning social network." And Sean, I believe, had actually been an advisor to Friendster as well, so he was, like, between Plaxo and Napster, uh, Friendster, really believed social networking was gonna become a thing.
- BGBen Gilbert
Totally. And it is kind of crazy to think about. Unless you had a student show you on their computer, "This is what Facebook is," there's no real way for you to know other than the sign-up page.
- DRDavid Rosenthal
Right, which you can't get past it and see how alive the thing is.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So Sean, being the enterprising person that he is, he cold emails the company's business email address and asks to set up a meeting, and Eduardo Saverin replies to Sean and is like: "Oh, cool, you're the co-founder of Napster. Yeah." They set up a dinner in New York City. This is while the spring semester is still going on at Harvard, and Mark and Eduardo and Sean all get dinner together, and Mark and Sean really bond. Mark is super pumped to meet him, but that's about it. Like, there's no, you know, discussion about, you know, "What's cool? A billion dollars," you know, et cetera, et cetera, as dramatized in the movie. That doesn't happen. They kind of think that they're just gonna go their separate ways.
- BGBen Gilbert
Right. "Nice to meet you." I don't think even Mark knows yet that he's moving to California this summer.
- 1:27:22 – 1:38:17
Thiel/Founders Fund, venture debt, Accel Series A—and the 2005 product roadmap
- DRDavid Rosenthal
Okay, so they take the idea to Peter. In the meeting, Reid brings along a young guy who's working for him at LinkedIn, named Matt Cohler, [chuckles] uh, to come help, you know, talk to Peter, evaluate this from an investing standpoint. They strike a deal that Peter's gonna lead a round of $500,000. Reid and Mark Pincus are each gonna invest 37,500. Peter's gonna do the rest at a $5 million pre-money valuation, so 5.5 million post. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
Which, you know, on the one hand, is, like, laughable now. On the other hand, at this point in time, for a bunch of kids who started this a couple of months ago, it's crazy that this would be worth $5 million.
- BGBen Gilbert
At a $5 million valuation, the multiple since then has been about 250,000X. [laughing]
- DRDavid Rosenthal
[laughing] So that takes us to the end of the summer. So everybody now has to make a decision: Do they stay in Palo Alto and keep working full-time on Facebook, or do they go back to school? So Eduardo never came out in the first place, so he did his internship in New York. He goes back to Harvard and starts his junior year. Chris Hughes also goes back to Harvard, starts his junior year, graduates in 2006, and then rejoins Facebook after graduation. Andrew McCollum stays in Palo Alto for a couple years, and then goes back to Harvard later and completes his degree. He takes the, uh, you know, Bill Gates road not traveled option. Dustin never goes back, stays with the company until 2008, when he leaves to start Asana. And Mark, I think, probably never really even considered going back. [chuckles]
- BGBen Gilbert
Yeah, at this point, the 70% stat keeps being true. Despite the fact that they keep opening all these new schools, it keeps being true that 70% of people who have ever signed up are daily active users. So I think Mark realizes, "Oh, I have created one of the most engaging technology applications ever."
- DRDavid Rosenthal
Yes, and certainly, at this point, the combination of Sean, Peter, Reid, Mark Pincus, all advising and being part of the company, they know, [chuckles] and they have certainly helped him realize that.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
Adam D'Angelo does go back to Caltech, and then through AIM, I guess, remotely helps collaborate with the company until he graduates in, in 2006 and becomes CTO officially.
- BGBen Gilbert
Got it.
- DRDavid Rosenthal
Sean, like we said, his impact on the company was huge. I really wanna underscore this again. Mark having full control over the company, as we are gonna see time and time and time again as we go through the story here, makes all the difference in the world, and that is 100% because of Sean Parker.
- BGBen Gilbert
Yep. So how long is Sean at the company?
- DRDavid Rosenthal
Not very long, [chuckles] because at some point in time the next spring-
- BGBen Gilbert
So it's, like, nine total months at the company.
- DRDavid Rosenthal
Yeah, I think about nine total months. Sean ends up leaving the company after charges get filed against him as a result of some drug incidents at a house party during a trip to North Carolina.
- BGBen Gilbert
Charges do eventually get dropped, but in the meantime, the decision is made, "Hey, this is not something the company's gonna get sucked into."
- DRDavid Rosenthal
Yep. He immediately joins, where else?
- BGBen Gilbert
Founders Fund. [chuckles]
- DRDavid Rosenthal
Founders Fund, [chuckles] which Peter, partially on the back of this Facebook investment, has now set up and raised officially. And like we said, Sean goes on to find and fund, and really help nurture Spotify through his role at Founders Fund.
- BGBen Gilbert
Yep. It's kind of amazing thinking about Founders Fund raising capital off the, on the back of this investment. One pitch is, "We invested in Facebook."... The flip side of it is, we just invested in a company. We're currently holding it flat, 'cause there's been no markup yet from any other investors, and they're not generating any revenue. [laughing]
- DRDavid Rosenthal
[laughing] Well, let's talk about, uh, other investors. By this point, kinda towards the end of spring semester 2005, Facebook had now dropped the "The," become just Facebook. That was one of Sean Parker's final impacts on the company, is he actually negotiated the domain name purchase of facebook.com-
- BGBen Gilbert
Ah, I didn't know that.
- DRDavid Rosenthal
For the company. Yeah, I believe they bought it for $200,000?
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
Which actually was a good chunk of that venture money that-
- BGBen Gilbert
Yeah
- DRDavid Rosenthal
... they raised.
- BGBen Gilbert
Right, 'cause it was 500K that they raised before.
- DRDavid Rosenthal
It was 500K, yep.
- BGBen Gilbert
And they're actively spending that. The company has never consumed that much capital, but they are having to spend it on servers. As they stand up new colleges, they are having to go into data centers and rack servers, or rent servers on a monthly basis, and the server bills are starting to add up, especially as they scaled to... How many schools were they at in the fall of 2004?
- 1:38:17 – 2:08:33
Photos and the engagement flywheel: from profiles to modern social loops
- DRDavid Rosenthal
Which brings us now to the summer of 2005, where Mark, motivated by this perhaps, I hadn't quite thought about that, announces to the company his product roadmap for the summer, and it is a six-point product plan. Number one, a redesign of the site. Bye-bye, Facebook guy. [laughing] Number two, a photo application.
- BGBen Gilbert
Which, by the way, Ph- Photos got written by, like, one guy in two weeks.
- DRDavid Rosenthal
Yes. Move fast and break things.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
Number three, a personalized newspaper based on all of your friends' activity. Number four, an events feature. Number five, a local business product. And number six, a sort of vague idea for a feature called I'm Bored, which would let users on the site who were bored consume media and play games.
- BGBen Gilbert
That's a pretty big [chuckles] feature mandate.
- DRDavid Rosenthal
This is freaking wild. So now, okay, of that, I think only the redesign and photos would actually ship in 2005. Maybe events did, too, I'm not entirely sure, but this is incredible. Photos, newsfeed, platform, which is really what this I'm Bored feature is. Summer 2005, it's all right there in the vision, and Mark thinks they can accomplish all of this by the end of the summer. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
And the wild thing is, they do accomplish all of this in the next two years, [chuckles] which two big points on this: for any other company, these are all, like, multi-year-long development processes.
- BGBen Gilbert
Well, and each one is its own company.
- DRDavid Rosenthal
Exactly.
- BGBen Gilbert
Photos is Flickr. There are independent game platform companies out there.
- DRDavid Rosenthal
Miniclip, et cetera. Yeah, flash games.
- BGBen Gilbert
What were some of the other ones?
- DRDavid Rosenthal
Events, Eventbrite.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
Personalized newspaper, well, that becomes a true, true innovation in News Feed, but I think at the time, there was a lot of buzz and talk about personalized portals, and, like, Yahoo was really big on this, and Google was even kind of big on this, of like, "Oh, make this your homepage."
- BGBen Gilbert
Oh, iGoogle. Do you remember iGoogle?
- DRDavid Rosenthal
Yes, iGoogle, exactly, and I think that might have been somewhat of the inspiration, although, obviously, Mark was thinking way bigger than that. But like, yeah, again, local business product, Yelp, each one of these, under the old paradigm, was its own company, and Mark was like, "No, this is all part of Facebook."
- BGBen Gilbert
Crazy.
- DRDavid Rosenthal
Super crazy. And this really, I think, speaks to the genius of Mark as a product strategist. It's one thing to say, "I'm gonna add a lot of random features to my site, and I'm gonna throw spaghetti against the wall." This was not a random grouping of features. Everything reinforced one another and drove the engagement loop of the site. So just as one example, let's take from, you know, this roadmap that Mark lays out. Events, let's start there. Events and parties planned on Facebook get tagged with who's gonna attend the events. All of those tags get published out as activity to News Feed. That drives interest and FOMO among the friend network, so more friends come to the actual event. At the event, photos get taken, and now there's more people there. Well, those photos get posted back to the site afterwards, and they all get tagged with the people who were there, who are in the photos. All of that becomes activity that then gets published to News Feed. That generates more desire from more people who see that on Facebook in the News Feed to either engage with the photos and like and comment on them, or if they're hearing about it from their friends and they're not yet on Facebook, to now register for Facebook and get involved in this loop. All of that now gets published back to News Feed. So now it's time for the next party, and you can see how this just grows and builds on itself over and over and over again.
- BGBen Gilbert
It's funny, as you're saying all this, it sounds like very old hat, like, almost boring. Of course, it does all of that. At the time, it was so revolutionary.
- DRDavid Rosenthal
Everything I just described was there within the next 18 months.
- BGBen Gilbert
So photos, I think, was, like, late summer of '05. Interestingly, photos did not originally include photo tagging. Photo tagging was, like, a pretty new concept. I think Flickr may have had it, but the idea that, like, you're tagging a person, and then you can go browse that person's profile by photos they've been tagged in, that wasn't brand-new innovation. That is a mechanic that was not thought of in social networks before. If you think about what Friendster and MySpace were, you could upload a limited set of photos, which, by the way, you'd have to delete one to add another.
- DRDavid Rosenthal
Yes, so MySpace only allowed you to have eight photos maximum at the time, and this is, A, Ben, what you're describing of person tagging in photos, incredible innovation-
- BGBen Gilbert
Right
- DRDavid Rosenthal
... that drives the whole viral loop.
- BGBen Gilbert
And this is a through line through the whole episode. What social media or social networks are definitionally changes every year, and often, Facebook was the one, in the early days, to push the envelope and say, "This is what it means to be a social network." In the later years, it was Facebook's competitors, that then they had to sort of adopt that functionality. But the idea that a social network includes an infinite number of photos that you can tag and give XY coordinates on the photo to map to a specific person that is another entity in the social network, that was actually a new-... component to what it meant to be a social network. And as you were saying with News Feed, that wouldn't happen for another, what was that? Late summer of 2006 or something.
- DRDavid Rosenthal
September 2006.
- BGBen Gilbert
Yeah, so another year, year and a half after this. That completely turned what social media, social networking was on its head again.
- 2:08:33 – 2:24:31
News Feed + open registration: the defining product shift and the growth reignition
- DRDavid Rosenthal
So the three of them start working on News Feed, and so we've talked about things like photos and the fundamental architecture of the site.... News Feed required, like, a whole new level of engineering prowess to get this thing to work. Like, you're not just gonna code this up in PHP. Like, photos also required real engineering, but News Feed was, like, pushing the state of the art of what was possible in technology and on the internet.
- BGBen Gilbert
So the first question you have to ask yourself, if you're a good product designer, developer, capital allocator, someone in Mark's shoes saying, "Should we do this?" is, do people want this? If we build this, will it be valuable? The reason they knew it would be valuable is because the company is data-obsessed, and they watch the analytics like a hawk to figure out: what are people doing on our site? And they noticed this behavior where people were browsing to other people's profiles just to look at them and see if anything changed. The user was doing the heavy compute lifting, rather than having a personalized newspaper, of just bouncing around to a bunch of people's profiles and saying, "Anything new here?" So there was an engineer who did something really kinda hacky, because they didn't wanna at first put all the engineering resources into building out something like News Feed, which is, well, when something changes for some period of time, we'll just highlight it in yellow.
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
So it's easy for you, as you're bouncing around to different profiles, to just see, "Oh, hey, this thing changed," and that totally worked. They watched the lift in that, and they were like, "Oh, it's a good feature."
- DRDavid Rosenthal
People like that.
- BGBen Gilbert
So that sort of gave them the confidence of, "We should find a way to make it more obvious to you when new updates happen, when things change." Technically, David, for people who aren't in the sort of tech ecosystem, why is it so difficult to build something like a news feed? 'Cause now we're all trained to believe that, like, a feed is, um, you know, a primitive that is available to you as a developer when you're building a product, because feeds are everywhere. Feeds are the core feature of most products. When you hit the homepage, it's some sort of feed. That was not true at the time. That was not true in any product. I actually challenge you right now, think back to 2005, what was a feed on the web? What was sort of an infinite scrolling-
- DRDavid Rosenthal
They didn't exist. This was the first one.
- BGBen Gilbert
Right.
- DRDavid Rosenthal
This was the invention of the feed.
- BGBen Gilbert
Like, maybe you've got Reddit and Digg, and you could sort of make an argument that they're feeds. They're paginated rankings of stories, so you could see, like, oh, what are the most important stories? But even that's a pretty different fundamental thing.
- DRDavid Rosenthal
I don't think Reddit had launched yet. Digg maybe exists, but yes, as you said.
- BGBen Gilbert
Oh, yeah, Reddit was in the first YC batch, which was '05, so it wasn't really... It was right around this same time. Okay, so how do you make a feed? Well, if you are an algorithms developer, the way you would sort of think of it is, "Okay, well, first, I need to pick a point in time, and then from that point in time, and let's call that maybe the last time someone looked at their feed, I need to store that timestamp, and now I need to go look at every single profile of someone that you are connected to," so this is N, "and download or cache all of their recent updates since that time period." So I need to, like, store that somewhere. I need a new place to store a copy of all of this information that lives on someone's profile, or at least pointers to that on everybody's profile, and I need that to happen for every user. So now it's N squared. Every single person on [chuckles] the entire Facebook needs to have something running in the background that is looking at every other person on Facebook since a particular time, and then that compute and storage all needs to happen fast enough, such that by the time they wanna go check the feed again, it's happened again. And obviously, like, now that happens in real time, and I think it was something like every three hours, there was, like, a new batch.
- DRDavid Rosenthal
Yeah, it was four times a day when it initially launched. There was, like, a four X a day refresh.
- BGBen Gilbert
Okay, so every six hours.
- DRDavid Rosenthal
Yeah, it was a cron job, 'cause they didn't have enough memory to run it in real time.
- BGBen Gilbert
That's right. They needed to happen on separate boxes to run this process, cache the results, and then when you loaded your news feed, go fetch them. So this is, like, a whole new application using the same data that the company has to build in order to make News Feed happen.
- DRDavid Rosenthal
And so what you just described is all the technical work, just making a feed possible.
- BGBen Gilbert
On the back end. This doesn't contemplate any of the front-end design or engineering or incredible permutations of how to display this data when it does come back, given a massive combinatorial problem of how might this data come back?
- DRDavid Rosenthal
Exactly. Then you need to make the feed actually compelling. [chuckles] Like, I don't really care about, you know, somebody who I'm tangentially connected to, what they had for lunch today, but I really care about, like, a photo of Ben at the Acquired meetup.
- BGBen Gilbert
Right. So now you're telling me you wanna rank order it by something other than-
- DRDavid Rosenthal
Chronology.
- BGBen Gilbert
Make another pass and figure out what I think is gonna be the most interesting to you, which on its own, is an incredibly difficult computer science problem. What is interesting to you? What data should we use to inform that decision?
- DRDavid Rosenthal
Right. Totally. Who are your close friends? Who do you care about the most? You know, what general news do you care about the most? What types of stuff do you care about?
- BGBen Gilbert
Do we have to put weights on every relationship in this entire complex friend graph between every single entity and how close they are, and then re-rank that very often? Eventually, yeah.
- DRDavid Rosenthal
Yes. So the team spends the better part of 2006 working on this. By September, it's ready, and so by September 5th, 2006, just in time for the new school year, they launch it. And, uh, people noticed- [laughing] ... 'cause they launched it, like, to everybody right away, and this is a massive paradigm shift.
- BGBen Gilbert
Yeah, it's not opt-in or anything.
- DRDavid Rosenthal
This is Facebook changing the game of social. Not opt-in. Everybody gets it right away. [chuckles] ... They get 30,000 angry emails to support on the first day [chuckles] from users who are really upset about this. Ten percent of the entire global user base- [laughing]
- BGBen Gilbert
Yes
- DRDavid Rosenthal
- signs up for a group, a Facebook group, called Students Against Facebook News Feed. I'm pretty sure I was part of this group. [laughing] The irony here is they had only just launched open groups across school networks-
- BGBen Gilbert
[laughing]
- 2:24:31 – 2:58:49
Platform (F8), Microsoft partnership, Beacon failure, and Sheryl Sandberg’s arrival
- DRDavid Rosenthal
Growth really picks up. So this brings us now to spring of '07 and the final piece of Mark's original product roadmap, I'm bored, AKA Platform. And Platform is this kind of forgotten thing right now. I mean, like, it's FarmVille, it's Zynga, it's apps on Facebook.
- BGBen Gilbert
It's quizzes.
- DRDavid Rosenthal
It's quizzes, [chuckles] yes. [laughing]
- BGBen Gilbert
That will come back up later.
- DRDavid Rosenthal
That'll come back. For a period of about four years, from 2007 to 2011, this is the most important thing in the company, and this is what everybody believes the core and future of the company is. Facebook has become a platform. This is the goal of a technology company: become a platform, be like Microsoft. This is now... Facebook is like Microsoft. We are a developer platform.
- BGBen Gilbert
And there was this incredible tension, at least it seemed like the m- tech media wanted to play up this tension, are they an advertising company or a platform company? 'Cause they're super different business models with very different incentives, and users kinda need to know how to think about it, and it was kind of at the same time, uh, Cheryl had just joined the company or was about to join the company.
- DRDavid Rosenthal
The next year, in 2008.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
So, yeah, not yet.
- BGBen Gilbert
And so they really hadn't gotten serious. She sort of led them to figure out, "Hey, let's survey all the business models, do some work on each of them, and figure out and commit to being an ads company." At this point in time, like, they were showing ads, but the whole leadership team, at least I'm convinced, believed, "We are on the way to becoming a platform."
- DRDavid Rosenthal
100%. So May 24th, 2007, Facebook holds its first developer conference to launch their developer platform, F8, which again, let's take a step back. This whole idea is kinda wild, a developer platform on the web. The web is a developer platform. [chuckles] Facebook is now becoming a platform on top of an open developer platform.
- BGBen Gilbert
But they have two important things that, as an application developer, you're interested in: one, user attention-
- DRDavid Rosenthal
Yep
- BGBen Gilbert
... you know, the same way that Microsoft had user attention with PCs, 'cause they had the install base of Windows, and two, a whole crap ton of data about each person that you could then build into your application to make it really rich and feel personalized.
- DRDavid Rosenthal
... And it turned out that that was really attractive to developers. So at F8, they announced that the Facebook user base is now over twenty million, and it is growing by over a hundred thousand users a day, so growth is accelerating.
- BGBen Gilbert
Wait, it's twenty million total and growing by a hundred thousand a day?
- DRDavid Rosenthal
Yes. I mean, OpenRed had just launched a couple of months before, so, like, this thing is really taking off.
- BGBen Gilbert
Oh, my God! Every ten days, they're adding another twentieth of their user base, and they're growing by five per-- what is that? Uh, it's like seven percent every two weeks. It's like three and a half percent a week.
- DRDavid Rosenthal
Yeah. Pretty good.
- BGBen Gilbert
Wow!
- DRDavid Rosenthal
At a scale of over twenty million already. [chuckles]
- BGBen Gilbert
Wow.
- DRDavid Rosenthal
It is the sixth highest trafficked site in the world, and they're announcing to all the developers in attendance, "The Facebook API, Facebook Graph, is now open to you. You can build apps and publish and run them natively on Facebook." For users, and part of Mark's original product roadmap from two thousand and five, this is huge. Until this point in time, Facebook was about digitizing everything that happened in your offline life, your real friends, your real parties you went to, the real photos you took. There wasn't anything detached from your offline reality to do on Facebook. Now, all of a sudden, you can play games on Facebook, you can take quizzes on Facebook, you can use apps on Facebook, and you can do them all with your friends.
- BGBen Gilbert
It's pretty compelling. I remember playing, was it Scrabulous?
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
Yeah, I think I was playing with my sister, with my grandma. I mean, it is a great way to, like, do things digitally with the people that matter to you.
- DRDavid Rosenthal
Yep. And I think it's also an early foreshadowing of the job that mobile and the smartphone would really do in people's lives, which is, hey, there's actually, like, a lot of white space where you're just bored [chuckles] during your day. [chuckles] I mean, Mark's original title of the feature of I'm Bored was perfect. This is the cure for boredom. It just so happened that it was on a desktop, and so when you were bored at your desk or bored at your home, mobile then opened that up to, like, "Hey, I'm bored anywhere."
- BGBen Gilbert
Right. And it gave Facebook, from a business perspective, it sort of gave them another stakeholder: "Hey, developers are someone who can keep people on the platform longer, so we can show them more ads. They might do their own advertising, so they might drive traffic to Facebook, that they could help grow the core platform itself. It gives us sort of more lock-in as people develop for us and as users seek out applications on us." They're hoping for sort of that Microsoft playbook of platforms get really epic lock-in.
- DRDavid Rosenthal
Yep. "Oh, and by the way, developers on the platform will probably have their own business models, where they'll make revenue, and especially if we ultimately introduce our own virtual currency, we can probably make revenue from their revenue, too." [chuckles]
- BGBen Gilbert
Yeah.
Episode duration: 6:22:40
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