Now that was a year Mark Zuckerberg will never forget -- even if he didn't celebrate each moment on Facebook, as he wants the rest of the world to do. Sure, he turned 28 and married longtime girlfriend, Priscilla Chan, in a backyard ceremony at the couple's home in Palo Alto, Calif. But that's the stuff of ordinary men. Make no mistake: 2012 will go down as the year in which Zuckerberg came out from under his hoodie and tried to prove himself as leader of one of the titans of consumer tech.
Is he succeeding? So far, sure, and more so as the year went on. While plenty of people like to complain about Facebook -- it's a time soak, a privacy nightmare -- plenty of others, as in hundreds of millions, clearly love it. Which is why Wall Street was in a tizzy when Facebook finally went public, an event that forever changed Facebook, making it far and away the most important development at Facebook this year.
1. Facebook's faceplant
Not since the Internet mania of the 1990s had we seen such hype and expectation over an IPO. And why not? This was Facebook, after all, a new kind of media company that had amassed hundreds of millions of passionate users and was already turning a profit on $4 billion in revenue by the time it filed to go public. This one was going to make armchair investors everywhere rich, and fast.
We all know what happened: The hype -- and the $100 billion-plus valuation Wall Street bankers awarded Facebook -- was all too much. Way too much. Sure, Facebook pulled off the biggest Internet IPO in history, which was great for Facebook, but then its shares began their speedy descent. Lawsuits were filed around the handling the IPO. Some even called for Zuckerberg's head, although Zuckerberg structured the company in way that makes firing him impossible. And the whole mess quashed hopes of a return to 1999-style Internet mania.
The upshot: Facebook's botched IPO sent fears across startup land and even now venture capitalists are cutting fewer checks to Zuckerberg wannabes since the possibility of a big IPO exit -- at least for consumer Internet companies -- is grim for now. (To be fair, IPO duds Groupon and Zynga also played a big role on this front). Despite all this, Facebook's stock, while still far from its IPO price of $38 a share, ended the year on a tear as Zuckerberg and team began to show they were serious about making money, especially from mobile.
2. Zuckerberg buys Instagram
Almost everything we hear about from Facebook these days has to do with mobile, and how the company has been restructured to emphasis "mobile first." And nothing shows just how concerned Zuckerberg was about the great mobile migration then when he singlehandedly struck a deal with Instagram cofounder Kevin Systrom to buy his two-year-old startup in a stock-and-cash deal worth $1 billion. Istagram had amassed 33 million users, and Zuckerberg knew that it was both a threat and the future. So he pounced -- just a month before Facebook's May IPO.
The critics pounced. Why spend $1 billion for a money losing startup without a business model? But Zuckerberg didn't care. And when Facebook amended its IPO filing with the SEC -- just over a week before the IPO -- to emphasize how the shift of its users to mobile devices was threatening its long-term ad revenue, it all all started to make sense. Zuckerberg needed more mobile juice, at any cost. By the time the Instagram deal finally closed in October, the price came in at $715 million due to Facebook's sagging stock. Instagram is still on fire. It reached 100 million users in September, and, by one account, people are spending more time on it than on Twitter.
Then -- and this arguably deserves its own entry among top stories for 2012 -- management blundered badly in mid-December when it unveiled Instagram's new terms of service, which said that the company could sell your photos or use them in advertisements. You have to wonder who signed off on this one. Unsurprisingly, the backlash was swift. Instagram co-founder and chief executive Kevin Systrom apologized, backpedaled and said the company is "working on updated language."
3. Speaking of a billion...
This was the year when, with great fanfare, Facebook crossed the billion member mark. No consumer Internet company -- heck, no company, period -- has ever done that. Not bad for what began as a side project in Zuckerberg's Harvard dorm room eight years earlier. It's worth pointing out that these are "monthly active users," measured as people who log on to Facebook at least once a month. Still, that's one seventh of the entire world population. And Facebook's daily active user number is hardly shabby. That metric averaged 584 million in September, a 28 percent jump from the period year. As for mobile? Monthly active mobile users soared 61 percent to 604 million.
Zuckerberg and his team aren't satisfied with one billion, of course. Around five billion people are expected to be online by the end of the decade -- largely via phones -- and Facebook wants all of them conducting their Internet lives through Facebook. Growth has slowed in the U.S, but the company has its sights on all pockets of the globe, as evidenced by its reworked instant messenger app released in early December.
The rap against Zuckerberg, at least from Wall Street, had been that he didn't care about the money side of the business. In September, he sat for his first live interview (at the TechCrunch Distrupt conference) since the IPO and worked hard to disabuse the world that notion, arguing that Facebook can be a great place for users and can make a ton of money. This will go down as the day Zuckberg took control of the narrative and his messaging to Wall Street. This was also when he began preaching that mobile wasn't a problem for Facebook, but an opportunity -- a talking point that clearly went out to all Facebook execs, who now love talking about mobile, mobile and more mobile.
In September, Zuckerberg started talking about the huge mobile opportunity
(Credit:
Daniel Terdiman/CNET)
Soon after that, Zuckerberg showed it was more than talk. Facebook started inserting ads -- called "Sponsored Stories" -- on its mobile apps in March, its first effort to make money from mobile. And the results started to show up this fall. When Facebook reported its third-quarter earnings, it said that mobile ads made up 14 percent of its total ad revenue -- largely putting to an end to the biggest worry among Wall Street since Facebook went public.
5. Buy your friend a drink
It's hard to pinpoint one money-making tactic that Facebook launched in 2012 as most important. The company did go all out in this regard. A few examples: It launched Facebook Exchange, an ad-bidding system that lets advertisers better target users on Facebook by tracking what else they do across the Web; it started letting users pay $7 to promote a post to ensure it'll land in a lot of News Feeds; it began charging business for Facebook Offers, a way for merchants to send Groupon-like deals to your News Feed.
But here's one that's unlike the others: The launch of Facebook Gifts, which lets you easily buy a Facebook friend a gift -- from an
iTunes gift card, to an item from Baby Gap or even a bottle of wine that gets shipped to your home. This is a huge move. It helps Facebook get credit card numbers on files -- important for future products -- and marks Facebook's march into commerce. Arguably, Facebook Gifts isn't yet about the money -- it's more about keeping people using Facebook -- but that'll change quickly.
And when that happens, that will certainly give Zuckerberg and his team something they can all drink to.
Facebook in 2012: 5 ways its IPO changed the social giant
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Facebook in 2012: 5 ways its IPO changed the social giant
