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In February 2004, Mark Zuckerberg and

a college roommate started the original

version of the Web site Facebook. They

wanted to create online social networks for

students. The two entrepreneurs created

an online forum and invited students to

join—for free. In just a few weeks, nearly

two-thirds of their school’s students had

joined. Within months, Facebook had

networks at thirty other universities.

That summer, Zuckerberg made contact

with venture capitalists—business people

who provide entrepreneurs with money

to start new companies. When one offered

them $500,000 to work on Facebook full

time, Zuckerberg and his colleague left

college and worked day and night writing

computer code. By the fall, Facebook

had a million members. Six months later,

Zuckerberg and his partner got $12.7

million more in funding, hired more

workers, and moved the company out

of the apartments where they lived and

worked and into offices.
Questions to Think About

1. Recall the three factors of production.

What land, labor, and capital did

Zuckerberg use in creating and

running Facebook?

it pay off? Why do you think so?

meet?
Members like Facebook because they

pay nothing to join and control what

information they publish and who can

see it. Advertisers love Facebook because

they can target their ads, which provide

Facebook its revenues.

To grow, Facebook added networks for

high schools and workplaces and began

attracting older members. By 2008,

the company had networks in several

countries and more than 70 million users

of its Web site.

With growth, Facebook had to keep

buying more computers and hiring more

software engineers, salespeople, and

customer service staff. Despite rising

costs, growing income made Zuckerberg

and other shareholders rich. Several

companies have offered to buy Facebook,

but Zuckerberg won’t sell. He wants to

continue to manage his company’s growth

himself.

4. What might prevent further growth of

Facebook?

enjoyed early success. Its head refused

to sell the company despite high offers.

Then the Web site lost popularity

and it became unattractive to future

buyers. In light of this example, if you

were Zuckerberg, would you have sold

Facebook? Explain.