Internet: Mark Zuckerberg has one friend – but he's worth $500m

Microsoft offers to spend half a billion for 5% of Facebook. With predators like these, who needs friends?
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The Independent Online

An internet entrepreneur has to know things are going well if, in the same week, Microsoft offers as much as $500m for a 5 per cent stake in the company and the attorney general of New York tosses out high-profile subpoenas complaining about too many paedophiles on his website.

Mark Zuckerberg, 23, the founder of Facebook, no doubt regards the paedophiles as just a bump in the road, an unintended consequence of presiding over the fastest-growing social networking site on the web.

The fact that Andrew Cuomo, New York's top law enforcement official, is gunning for him alongside the attorneys general of Connecticut and a handful of other states, probably says more about the publicity opportunities Facebook presents than any long-term concern about the safety of the nation's children.

As for Microsoft's courtship, he's seen it all before. Last year, Yahoo's chief executive offered him a cool $1bn, even though Facebook's revenues are still growing and expected to reach no more than $150m in 2007. Zuckerberg turned him down.

Facebook isn't just a financial success, the latest superstar internet company following in the footsteps of Google and YouTube. It has become a worldwide craze, the trigger for changes in social behaviour as significant as the advent of the iPod or the PC.

Facebook is emerging as the social networking site to beat all others – even MySpace, its keenest competitor which was snapped up by Rupert Murdoch for $580m in 2005.

MySpace still boasts more members than Facebook – about 200 million compared with Facebook's 43 million – but that could be about to change. The latest Nielsen/NetRatings, out last week, show that Facebook is the most popular social networking site in Britain, with 6.5 million users against MySpace's 6.3 million.

That's largely due to a staggering rate of growth – a sixfold increase in users since the beginning of the year, compared with MySpace's 20 per cent.

The pattern is similar across the rest of the English-speaking world, most notably Canada, where it has been number one for a while.

The reason is, perhaps, that Facebook has all the right ingredients to appeal to just about anybody. Its interface is much cleaner and easier to negotiate than MySpace's anything-goes design ethos. So it has attracted professionals and older people as well as students and university faculty members.

Friends can follow each other's activities, share photographs and send each other virtual "gifts". Work colleagues can hook up with contacts old and new and share as much of their professional and personal lives as they want.

Facebook's seminal moment probably came last September, when Zuckerberg opened the site up to anyone, not just students. The old core of campus users didn't like the idea, but it has taken off like a rocket.

LinkedIn, previously the most popular professional networking site, has been left in the dust. Facebook is now launching a classified advertising service, in a challenge to Craigslist, up to now the industry leader.

Zuckerberg was just 19 when he launched Facebook as a campus service at Harvard. When, in 2005, he scored his first major injection of venture capital – $12m from Accel Partners in Silicon Valley – he couldn't join in the celebratory drink because he was still under age.

Still, he has consistently impressed investors with his mix of technical and managerial skills, and they don't dispute his claim that Facebook should be valued at $8bn-$10bn based on projections of future revenues.

Zuckerberg wants to keep the company independent for as long as possible, eyeing a possible public share offering in a couple of years.

Peter Thiel, the Accel Partners pointman who sits on Facebook's board, thinks the company is roughly comparable to MTV in terms of influence and desirability among young people. The only difference being that MTV, which he values at $7bn-$8bn, is not nearly as attractive a proposition.