"We're holding off on the expanded registration launch, which lets people join regional networks," a company spokeswoman said. "We learned last week we have to do a better job of keeping our community informed, and help people understand the privacy they have on Facebook."
500 regional networks
Once the exclusive domain of Harvard undergrads, 2-year-old Facebook has slowly opened its doors first to other universities, and then to high schools and select corporations such as Apple and Microsoft. Next week, people will be able to join through roughly 500 regional networks, a number that Facebook expects to grow with time.
Facebook members can still restrict their networks by adjusting their privacy settings, but, as the spokeswoman admitted, the change will likely come as a shock to existing members. "Whenever we've opened our network, our existing members have reacted negatively, even though they've always adjusted," she said. "We're sure this will be no different, but we think it's in the best interest of the community."
Analysts say the move might be necessary to sustain healthy growth, but question how Facebook can preserve its unique identity among a sea of competitors. "It's a risky move," said Greg Sterling, principal analyst of Sterling Marketing Intelligence. "What's Facebook without its exclusivity? What's going to set it apart from MySpace?"
Indeed, Facebook stood out early because of its inherent selectivity, the level of which is determined by each user. In some instances, members only accept messages from others enrolled in their schools. Some users only make themselves and their profile available to those who can prove they are a friend of someone on their friends list. And while the Facebook spokeswoman insists that members will still have control over their networks, last week proved how member perception -- or misperception --can be more important than reality.
On Sept. 5 Facebook added News Feed and Mini-Feed features, which keep members posted on the latest doings of their Facebook friends. For example, if members change their relationship status, all of their friends -- a term that applies loosely in social-networking circles -- will be alerted to the fact immediately.
The next day hundreds of thousands of Facebook members had e-mailed the company and formed virtual protest groups in opposition to the changes. The mission statement from the largest protest group, "Students Against Facebook Newsfeed," read, in part: "Very few of us want everyone automatically knowing what we update. We want to feel just a LITTLE bit of privacy, even if it is facebook. News Feed is just too creepy, too stalker-esque, and a feature that has to go."
Yielding to the backlash, Facebook late Sept. 8 said it would modify the new features. "We have engineered new functionality that gives users additional controls in News Feed and Mini-Feed," read a statement released by the company.
The company with the most at stake is Microsoft, who just aligned itself with Facebook as the social network's exclusive provider of banner advertising and sponsored links. The partnership, which will go into effect this fall, is expected to give a huge boost to Microsoft's AdCenter Web ad platform, which has struggled to secure major distribution deals since its launch last year. But Microsoft can only benefit from the deal if Facebook can preserve its community.
In two years, Facebook has attracted more than 9 million registered users, according to ComScore's MediaMetrix, and ranks as the seventh-most trafficked site in the U.S. with 6.1 billion page views in July.
Not long after its founding in February 2004 by Harvard University undergraduate Mark Zuckerberg, acquisition rumors surfaced and to this day have yet to abate. Earlier this year, Facebook reportedly turned down a $750 million bid, in return asking for a whopping $2 billion.
Rather than cash out, however, the founders have opted to grow independently. In April, they secured $25 million in a financing round led by Greylock Partners. Also participating in the funding round were Meritech Capital Partners, as well as current Facebook investors Accel Partners and Peter Thiel. Facebook also recently received a strategic investment from the Interpublic Group of Cos., which guarantees the ad agency holding company will buy at least $10 million of advertising on network.
The Microsoft/Facebook deal came on the heels of a similar agreement between MySpace and search giant Google. On Aug. 7, News Corp.'s Fox Interactive Media and Google signed a multiyear search and advertising deal covering MySpace and other Fox properties. Google is expected to pay Fox at least $900 million in revenue share payments for that privilege. Despite being acquired by News Corp. and press reports of sexual predators on the site, MySpace has yet to suffer a major exodus of members.