Facebook, Inc.: The world’s most popular social media network

written on August 28, 2020

From a Harvard social networking website to a global internet phenomenon, Facebook’s rise has been remarkable, having become one of the most important and influential tech firms in history.

Despite the many lows like controversies involving user privacy such as the Cambridge Analytica data scandal, political manipulation as with the 2016 US elections fiasco and content like fake news, hate speech, conspiracy theories and copyright infringement, Facebook has pushed forward weathering its crisis of confidence and trust to trailblaze the social network industry and knock users’ socks off.

With everyone and their mother having a Facebook profile, the company reported a revenue of $17.7. billion in the first quarter of 2020 - an increase of 18% from last year - at a time when many conglomerates across the globe bore the brunt of the COVID-19 pandemic.

A brief history of Facebook

In 2004 at just 20 years old, Mark Zuckerberg launched Facebook from his Harvard dormitory room along with fellow classmates Eduardo Saverin, Dustin Moscovitz and Chris Hughes. A computer programming prodigy, Zuckerberg had already developed a number of social networking websites for students including Coursematch and others.

Thefacebook.com as it was known at the time was named after the directories handed out to students that helped them to get to know one another better and membership was initially restricted to Harvard students alone. Within 24 hours, close to 1,200 students had signed up and after just one month, over half of the undergraduate population had a profile. Over time the website grew to include additional universities like Boston, the Ivy League and eventually, all US universities.

In 2005, the company dropped the ‘The’ from its name after the domain name facebook.com was purchased for $200,000. In the same year, US high schools could sign up, after which it began to spread worldwide, promptly reaching UK universities. By December, it had 6 million active users.

The following year, Facebook announced that anyone with a valid email address and who was at least 13 years old could join the network. Wanting to move beyond personal profiles and attract businesses so that they too could use the website, the company launched Pages for Business and by the end of 2007 over 100,000 companies had signed up, while it made advertising in the platform accessible to even the smallest of businesses.

The company has rolled out a series of features along the years including the ability to tag friends in photos and like comments, the launch of Facebook chat, community pages, the Look Back videos and Marketplace, as well as the use of various embedded apps amongst other things, while it has made a number of tweaks to its interface.

Fun fact:

Facebook’s predecessor Facemash was used to compare two student photos side-by-side and vote whether the person was hot or not. Zuckerberg had hacked into Harvard’s security network so that he could copy the student ID images and used them to populate his website. Needless to say, a few days later, Harvard execs forced Zuckerberg to shut the website down, while he was accused of violating individual privacy, breaching security and violating copyrights.

Facebook goes public

The social network went public in May 2012, launching its Initial Public Offering (IPO) at $38 and trading on the Nasdaq. It was the largest technology IPO in US history at the time, so expectations surrounding it were towering, however, the results left a lot to be desired. The stock fell, bottoming out at $17.73 in September 2012, before rising sharply in 2013. Facebook offered 421,233,615 shares, eventually raising $16 billion.

If you had purchased $10,000 worth of shares, your investment would be worth $53,540 as of May 2020, marking a compound annual growth rate of 23.3%. On the other hand, if you had waited a little longer and made an initial investment of the same amount at the company’s all-time low, you would have netted an annual rate of return of 37.6% for the same period, while your investment would be worth $116,480.

Facebook’s constant growth

Despite the IPO’s rocky start, the company managed to turn the tables, seeing significant growth ever since. Its massive user base has been the catalyst for its success, however, its primary source of revenue comes from advertising. The company has also made some strategic acquisitions, most notably the photo-sharing app Instagram and the messenger service WhatsApp which it bought for almost $20 billion.

Today, Facebook (FB) is one of the most popular technology stocks available on the public area, with a market cap of $589.2 billion, making it one of the largest companies in the world by market capitalisation. The stock continues to trade on the Nasdaq and forms part of the FAANG stocks – Faceboook, Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOG), which together reach a market cap of more than $4 trillion, making up a significant chunk of the S&P 500.

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Figures quoted relate to past performance and are not indicative of future performance. Performance figures are indicative as sourced from Bloomberg. Moneybase Invest is brought to you by Calamatta Cuschieri and is licensed by the MFSA. C13729. Moneybase Invest offers direct market access and speed of execution and is intended for knowledgeable and experienced individuals taking their own investment decisions. The value of investments may go up and down and currency fluctuations may also affect investment performance.

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