Growth, growing pains for social networking site

Chris O'Brien
San Jose Mercury News (MCT)

Lest anyone is inclined to declare 2007 the Year of Facebook, here's a clarification: The Facebook era actually started back in September 2006. At the time, few even noticed.

Back then, Facebook was mostly making headlines for rolling out a newsfeed feature that alerted everyone to any updates made by their friends. Privacy advocates howled, users by the thousands signed petitions, and founder Mark Zuckerberg issued a public apology and made the feature optional.

Also around then, people were distracted by Google's grand buyout of YouTube for $1.65 billion. With that valuation, rumors surfaced that Yahoo was about to buy Facebook for $1 billion. Ha!

So what did we miss? Facebook, which had previously been open only to college and high school students, quietly expanded registration in September 2006 so anyone could join.

And boy, did they join.

At the end of 2006, Facebook claimed 12 million active users. By October 2007 that number had jumped to 50 million.

Whether or not Facebook sustains its momentum, it has ignited a frenzy around social networking that may reshape the way almost everyone thinks of the Internet. And that, combined with the company's runaway hype, may provide the best arguments for why Facebook was the most important business or technology story in Silicon Valley in 2007.

But why Facebook? And why now?

There already were plenty of social networking sites available. MySpace had been a phenomenon for teens and musicians. LinkedIn created a more professional-oriented space.

Jeremiah Owyang, a Forrester Research analyst, said Facebook simply allows people to create networks that encompass any part of their life, rather than just a narrow part like their work or friends.

"Facebook is a platform that allows a lot of facets of your life to come together for the first time," Owyang said.

While MySpace once had a huge lead over Facebook, Owyang expects Facebook to surpass 200 million users in the fourth quarter of 2008 and overtake MySpace.

Part of the Facebook phenomenon was propelled by the launch of its Facebook platform in May, which let third-party developers write applications that allowed people to do everything from play games with each other to exchange virtual drinks. That move spawned a whole new industry of Facebook applications, with thousands having been created already.

By fall, the non-Yahoo deal was a dim memory. Microsoft took a $240 million stake in the company, giving Facebook an estimated valuation of $10 billion to $15 billion.

With Facebook threatening to become a juggernaut, Google responded by launching an Open Social initiative that would create an open-source standard for writing social networking applications. And over the past few months, just about every Internet company was trying to articulate its social networking strategy.

But beyond the Web, even traditional companies and marketers latched on to social networking as a way to change the way they related to their customers and employees.

Toward the end of 2007, Facebook found itself once again in the crosshairs of privacy advocates with the launch of a new advertising platform called Beacon that critics claimed tracked too much of its members' behavior.

This probably won't slow Facebook much in 2008. And the company and Zuckerberg clearly have the long term in mind. Speaking about Facebook applications, he recently said, "We're going to work on this for years," he said. "It might take 10 years before this is a mature platform."

That's in part why the far wider embrace of social networking by business and culture will likely affect the way Silicon Valley operates for years to come.

"Most marketers are now looking to incorporate social media in their markets," Owyang said. "So this is just getting started."

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