Friendster: The Untold Story
Gary Rivlin at the New York Times finally wrote the untold story, here you have an extract:
Jonathan Abrams was in a spot. He could take the safe bet and accept the $30 million that Google was offering him for Friendster, the social networking Web start-up he began only a year earlier, in 2002. Saying yes to Google would provide a quick and stunning payout for relatively little work and instantly place the Friendster Web site in front of hundreds of millions of users across the globe.
But at the same time, some of the biggest names in Silicon Valley were lobbying Mr. Abrams, a computer programmer, to reject Google’s offer. America Online had offered the two founders of Yahoo a few million dollars each in the mid-90’s for their Web site — and both became billionaires because they said no. Sell us a stake in your company for $13 million, the advisers told Mr. Abrams, and we will help build Friendster into an online powerhouse worth hundreds of millions — if not billions — of dollars.
Go for it, he did. Mr. Abrams spurned Google’s advances and charted his own course. In retrospect, he should have taken the $30 million. If Google had paid him in stock, Mr. Abrams would easily be worth $1 billion today, according to one person close to Google. And with Google’s ample resources, Friendster might have solidified its position as the pioneering front-runner in social networking. Instead, Mr. Abrams has the distinction of founding a company that is shorthand for potential unmet.
As Friendster became more popular, its overwhelmed Web site became slower. Things would become so bad that a Friendster Web page took as long as 40 seconds to download. Yet, from where Mr. Lindstrom sat, technical difficulties proved too pedestrian for a board of this pedigree. The performance problems would come up, but the board devoted most of its time to talking about potential competitors and new features, such as the possibility of adding VoIP to the site.
People inside Friendster were closely monitoring MySpace, which was founded by a pair of Los Angeles music aficionados in the fall of 2003, inspired by Friendster’s early success. MySpace would have been hard to ignore, given its phenomenal traffic growth starting in early 2004.
“I was giving people regular updates on MySpace,” said Jim Scheinman, who served as Friendster’s head of business development from October 2003 until leaving in May 2005 to work at a social networking rival, Bebo.com. “But a lot of people refused to take them seriously.”
Many people working at Friendster sneered at MySpace. The holy grail at Friendster — and the cause of most of its technical problems — was its closed system: users at Friendster could view only the profiles of those on a relatively short chain of acquaintances. By contrast, MySpace was open, and therefore much simpler from a technological standpoint; anybody could look at anyone else’s profile.
The two companies also mirrored their founders: where Friendster reflected the ordered vision of its engineer-founder — early on, the company famously removed the profiles of people who put up joke pictures, like photographs of their dogs in place of themselves — MySpace was more L.A.-laid back. At MySpace, they rode the wave instead of fighting it, and encouraged users to do pretty much as they pleased.
Today, MySpace has more than 50 times the number of monthly domestic visitors as Friendster, according to comScore Media Metrix. The social networking offerings of Yahoo and Google are also tiny when their American audiences are compared with that of the market leader: MySpace’s audience is 10 times as big as Yahoo 360, and 200 times that of Orkut, Google’s answer to Friendster.
Last fall, Friendster hired an investment banker to shop the company around. In part, the board was inspired by the $580 million that Rupert Murdoch’s News Corporation agreed in July 2005 to pay for Intermix Media and its primary asset, MySpace. In the end, though, the investors failed to find a suitor willing to pay even $20 million for the company.
“Friendster missed the chance to become a multibillion-dollar company,” said Mr. Thiel, the PayPal co-founder who has continued to invest in Friendster. “But I still see a lot of opportunity here.”
Mr. Doerr added: “There are plenty of second acts in American business.”
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