Thefacebook To Expand Social Network

Depending upon their social networking prowess, college students should either be delighted or dismayed to learn that Thefacebook plans today to announce an expansion that will encompass every campus in the United States. Made possible by a $12.2 million investment from venture capital firm Accel Partners, the social networking site will expand its reach beyond 800 existing colleges and universities to all 1400 of the nation's four-year schools by the start of the fall term.

Founded in February 2004 by Harvard University undergraduate Mark Zuckerberg, the site is free and accessible to anyone with a college e-mail account. Members of the network are encouraged to create a profile including pictures, interests, favorite quotes, class schedules, and even instant messenger screen names and phone numbers. Each member also has a "Wall" where users can post messages, and there's also a Groups section.

But what sets Thefacebook apart is its inherent selectivity--and its level is determined by each user. In some instances, members only accept messages from others enrolled in their schools. Many users will only make themselves and their profile available to those who can prove they are friends with someone on their friends list.

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Thefacebook also stands out because of its early success, as it has quickly established itself as a leader in the social networking space. The company claims over 2.8 million registered users, and estimates that about 80 percent of undergraduate students at participating universities are registered to the site.

"College students everywhere live and breathe Thefacebook," said Sean Parker, president of Thefacebook, who previously co-founded both Napster and a Web-based electronic address book known as Plaxo. "Because virtually every student at schools across the country uses Thefacebook, the site has become an essential tool for helping college students manage their social and campus life."

Visits to the site spiked 358 percent for the week ending Feb. 19, 2005 compared to six months prior, according to Hitwise. For the week ending May 21, the research firm found the site had an 8.49 percent market share--a distant second behind market leader MySpace, which had 84.46 percent of the market for the week.

Jim Breyer, managing partner at Accel, said his firm chose to invest in the site mainly because over 60 percent of the site's registered users visit Thefacebook at least once a day, generating billions of page views per month. "We've considered dozens of social networking sites in the past, but chose Thefacebook because of the passionate devotion that its members have shown," Breyer said.

Case in point--a student writing for The Daily Campus, the University of Connecticut's student newspaper, recently explored what she dubbed "Thefacebook addiction," writing: "It's hard to imagine something that has made its debut earlier this year has become such a fixture in everyday life. The facebook [sic] has become the source of social information as well as a new epidemic."

However, the site does have its campus critics, who would love to see Breyer and his partners at Accel fail to see a return on their investment. One columnist for Stanford University's daily online publication, stanforddaily.com, recently wrote: "... with its exclusive, invitation-only groups, thefacebook.com has allowed Stanford to crystallize the sort of cliquishness that we're supposed to leave behind when we graduate from high school ... if you want to be really cool, get off thefacebook.com altogether."

And while one would expect a target as divisive and polarizing as Thefacebook to attract malcontents, some analysts remain cautious over social networking sites and their ability to secure user loyalty. "Though we just went to bars when I was in college, I know kids will always be kids, and unpredictable tastes and impulsive decisions are all part of the equation," said Jupiter Research analyst Eric Peterson.

Breyer is not the first to gamble on networking sites. Seen as an early frontrunner in the field, Friendster received some $13 million in venture funding in October 2003 from Benchmark Capital and Kleiner Perkins Caufield & Byers. The site has since fallen out of fashion--attracting 975,000 unique visitors in March, according to comScore, while MySpace drew 11.3 million visitors and Thefacebook drew 4.1 million.

Social networking start-ups that have attracted significant investment--but do not compete directly with Thefacebook--include LinkedIn, a social networking site for business professionals with 2.5 million registered users, which received $10 million late last year from investing firm Greylock Partners. Another start-up, Tribe.net, which encourages its members to join "tribes" with matching interests, raised $6.3 million in venture funding at the end of 2003. The site drew 243,000 unique visitors in March, according to comScore Media Metrix.

And while sites like LinkedIn and Tribe.net are betting on capturing a small piece of the classified advertising market, Thefacebook and its investors are betting on advertisers who they believe will pay a premium to be associated with the site's intense social setting.

Breyer sees Thefacebook as a "next-generation media company that will provide people with an immersive and integrated experience, which will hopefully make ideas like trendiness less critical in the long run." He foresees great potential for monetization, but for now is choosing to focus on user retention.

Breyer added: "There may even be potential for an initial public offering in a year or so, but we'll have to take it one step at a time."

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