You are watching Kings! Every Saturday we tell the story of how big brands conquered the world. Welcome to ALUX.com! The place that future billionaires come to get inspired Hello, Aluxers, and welcome back to another video brought to you by our team here at Alux.com. Social media has taken over in a big way over the last 20 years. Millions of people have never known a world without it, and hundreds of millions more can’t remember what life was like before it. With the emergence of over a dozen ultra-successful social media sites in recent years, one claimed its spot at the top early and has refused to give up the title of king in the years since. Today we’re going to talk all about how Facebook became the king of social media, but first a little background. For 15 years, Facebook has led the way in the world of social media. It is not only the most dominant social media site but also one of the most valuable companies in the world. With a market cap of $552 billion in 2019 and a brand value of $88.9 billion, Facebook is ranked above prominent brands like Coca-Cola, Disney, and Samsung. Forbes has listed them as the 5th most valuable brand in the world behind Apple, Google, Microsoft, and Amazon. Its 2018 revenues totaled $55.8 billion. Facebook has about 40,000 employees and is headquartered in Menlo Park, California. The social media site is available worldwide with the exception of a few banned countries, including China and North Korea. You can find out more about that by clicking in the upper right-hand corner to watch our video of the 15 things you didn’t know about Facebook. But of course, Facebook wasn’t always a household name all around the world.
So let’s go back now to see how it started. Most people are familiar with the story of how Facebook began as “Thefacebook,” launched in 2004 by Harvard student Mark Zuckerberg. The site was at first only offered to Harvard students and then a few other colleges, but Facebook was involved in controversy from the very beginning. Just a few days after the launch, Zuckerberg was accused by Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra of stealing their idea for a Harvard social network. This led to a 10-year legal battle that ultimately ended with a $65 million settlement. But while such rocky beginnings might have caused other emerging companies to falter and fail, Zuckerberg remained focused on his goal. He dropped out of Harvard and directed all of his attention to Facebook. e moved to Palo Alto, California, to immerse himself in the Silicon Valley scene, and he soon secured a critical $500,000 investment from Peter Thiel. The fact is that Zuckerberg wasn’t the only person who developed and launched a social media app in the early 2000s. In fact, there were dozens of people who had the same idea. So why did Facebook rise to the top while others faded into obscurity? At the time of launch, his main competitors were Friendster and MySpace. But then Friendster self-destructed under the weight of its own popularity. Too many people were joining the site, but Friendster didn’t have the infrastructure to support it. Zuckerberg was careful not to fall into this trap. He strategically restricted registrations in the beginning and gradually opened up to new markets so that he could scale the business in a controlled way. He also made another critical choice, to put members in front of advertisers, which is something MySpace often failed to do. This is one of many reasons there was a mass migration from MySpace to Facebook in the 2000s. Putting the users first became a defining strategy of Facebook that would help them grow more popular. Initially, Zuckerberg’s strategy was to focus on building Facebook as the best possible product, not as a business. With plenty of investors backing him, he wasn’t worried about profitability or monetizing or shareholders. One hundred percent of his focus was on creating a site that would be useful, popular, and cool. Even as Facebook grew, Zuckerberg continually asserted that he was primarily concerned with the social mission of Facebook and the needs of its users rather than the business side of the company. He hired execs like Sheryl Sandberg to handle the business concerns, while he put his attention into the features and functionality of the site. He explained this philosophy in a letter to potential shareholders before going public in 2012. He stated, “We don’t build services to make money; we make money to build better services.” He also said that by focusing on that mission, and this by all accounts has been a winning strategy. After Peter Thiel’s initial investment, other investors came on board, which enabled Facebook to expand. The defining moment for the company is hard to pinpoint as it grew organically and rapidly, but you could argue that it was September 26, 2006, the first day that Facebook opened up to everyone 13 years and older. Others would argue that it was October 24, 2007, when Microsoft announced its purchase of 1.6% of the company for $240 million. Some might point to September 2009, when Facebook first became profitable. Its rise also coincided with the emergence of the smartphone, which only increased its success. In October 2012, it became the first social networking site to attain one billion active monthly users. But all of this growth has occurred despite some pretty significant scandals. Facebook always seems to be at the center of some controversy even dating back to its founding. There have been numerous scandals, most centered on privacy concerns, abuse of the platform, and how data is handled. One of the most recent and most significant scandals was tied to the 2016 US election. Prior to the election, a Russian researcher named Aleksandr Kogan was approved by Facebook to conduct a survey through an app on the site. About 300,000 users took the survey, and their data was collected along with the data of all of their friends on the site. This data was then sold to British voter profiling company Cambridge Analytica, who was hired by the Trump campaign, although they denied using this data for the campaign. Up to 87 million users were affected, which called into question how Facebook handles personal data and who accesses it. This was in addition to the criticism the site faced for spreading Russian propaganda and fake headlines. Zuckerberg has testified in front of the U.S. Congress multiple times about these issues, and he contends that these concerns are being addressed. While some have lost confidence in Facebook and have deleted their profiles, these controversies have yet to have a serious effect on usage of the site, and the company just keeps growing bigger and bigger. It seems like whenever a company might threaten its place at the top, Facebook simply buys it out. That certainly seems to be the case with Instagram, which Facebook bought in 2012 for one billion dollars. They paid 19 billion for WhatsApp Messenger in 2014. And remember Friendster? Facebook bought it in 2010 for $40 million. In fact, in its relatively short history, Facebook has acquired over 70 companies, many of which you’ve probably never heard of. One sale it missed out on was Snapchat, which it attempted to buy for 3 billion dollars in 2013, but the offer was turned down by CEO Evan Spiegel. That little Snapchat ghost is probably still haunting Zuckerberg’s dreams. One of its most significant acquisitions was Oculus VR in 2014 for $2 billion. This company is bound to play an important role in the site’s future as virtual reality is increasingly at the forefront of technology. But before we jump ahead to the future, let’s look at where Facebook stands now. Despite the controversies, Facebook remains the most used social media site worldwide with 1.4 billion daily active users and 2.3 billion monthly active users. Not only that, over 1.5 billion people regularly use WhatsApp, 1 billion use Instagram, and 1.3 billion use Facebook Messenger. Facebook users are spread throughout the world with the highest number located in India followed by the United States. Facebook is known for its innovative features that are introduced quickly and either refined or eliminated based on user feedback. Facebook offers just about everything other internet platforms can offer with the exception of search engines. It’s a source of news, videos, games, social interaction, sales, and much more. And it promises to become an even more integral part of daily life in the future if Mark Zuckerberg has anything to do with it. In 2016, Zuckerberg announced a 10-year plan for the company, which was focused on three main areas: artificial intelligence, virtual reality, and increased global connectivity. Think you’re addicted to Facebook now? The company has plans to make the platform even more immersive and integrated into everyday life. Zuckerberg believes that virtual reality will be the next major technology that people will use to interact with each other, which is why he acquired Oculus VR. He also has plans in the works to bring internet to the 4 billion people in the world who are not currently connected. One of his ideas is to fly drones over villages that can beam down data through a laser. Even though Zuckerberg does have ambitious plans for the future, he is approaching them in a meticulous and patient way, which ultimately could lead to more sustainable progress for the company. One reason why Facebook has continued to be so successful is because it has consistently found a way to scale its services without losing sight of its culture and fundamental purpose. Facebook could have easily gotten too comfortable at the top and stopped taking risks and pushing forward in new directions, but that has never been the case. Facebook is continually evolving, mostly in subtle ways so that its users don’t get too uncomfortable with the changes. The social media space is crowded, so who can compete with Facebook? In terms of active accounts, the next closest competitor is YouTube with 2 billion monthly active users. But YouTube’s functionality is limited compared to that of Facebook. Some think Twitter could be a competitor, but the reality is they aren’t even close right now with only 330 million active users. So, yes, there’s no question that Facebook is king of social media and will likely remain so for the foreseeable future. Now that we’re wrapping up this video, we’d like to know: Let us know in the comments. And, of course, since you’re still with us until the very end here’s your… Bonus! Facebook’s first major investor, Peter Thiel, has been handsomely rewarded for his good instincts and initial trust in Zuckerberg’s vision. When Facebook went public, he and his investment funds held more than 44 million shares of the company. During the IPO, he netted more than $640 million by selling 16.8 million of his shares. A few months later, he sold off 20 million more shares, worth a total of $395.8 million. This means he has already seen a return of over $1 billion from his initial investment, and he still retains about 5.6 million shares. 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