Facebook Opens Its Pages
As a Way to Fuel Growth

By VAUHINI VARA

Facebook Inc. has bucked the Silicon Valley acquisition trend, remaining independent of larger technology companies. Now the social-networking start-up is seeking ways to reach the big leagues on its own.

On Thursday, the Palo Alto, Calif., company will announce a new strategy to let other companies provide their services on special pages within its popular Web site. These companies will be able to link into Facebook users' networks of online friends, according to people familiar with the matter.

For instance, an online retailer could build a service in Facebook to let people recommend music or books to their friends, based on the relationships they've already established on the site. Or a media company could let groups of users share news articles with each other on a page inside Facebook.

Facebook CEO Mark Zuckerberg

Previously some companies have had pages within Facebook, but they didn't interact with the Web site's user networks. This move is significant because it could turn Facebook into a central hub for Web users, akin to an Internet portal like Yahoo Inc. Rather than using Facebook only to keep in touch with friends and going elsewhere for other content, users could now gain access to that content inside Facebook. That could keep people on Facebook for longer periods of time, which would also appeal to advertisers.

It's unclear how exactly Facebook plans to make money from the platform strategy, but one person familiar with the matter says the firm currently has no plans to share revenue with the companies that develop services to run on Facebook's platform. In that case, the main draw for companies that put their services on the site would be visibility and access to users of the Facebook site.

A Facebook spokeswoman declined to comment for this article. In a March interview, Facebook Chief Executive Mark Zuckerberg said, "We realize that we're not going to be able to build everything ourselves here, and it's not the most efficient thing for us to do that." He added that letting others build services to interact with Facebook is "definitely going to be a bigger part of our strategy."

The new platform is the latest step in Facebook's go-it-alone strategy. While other hot Internet start-ups in the current Web boom, such as YouTube and MySpace, have been scooped up by purchasers like Google Inc. and News Corp., Facebook has remained independent. Yahoo was interested last year in buying Facebook for close to $1 billion, but people familiar with the matter say the talks cooled months ago partly because Mr. Zuckerberg and Facebook's investors thought the company was worth more, and partly because Mr. Zuckerberg wanted to keep management control.

The 23-year-old Mr. Zuckerberg, who founded Facebook in 2004, and Facebook's venture-capital investors, which include Accel Partners and Greylock Partners, now believe it is unlikely they will sell the company, says one person familiar with the matter. Instead, they hope to keep Facebook private for as long as possible, eventually going public in about two years, this person says.

Facebook is taking its business beyond social networking, the hot Web phenomenon where people build online Web profiles with personal details and connect to each other through those profiles. Last fall, Facebook opened its site to anyone with an email address, rather than its original audience of only those people with university email addresses. That has helped it expand its number of users.

Facebook is lately finding new ways to make money from those users. Most of the company's revenue comes from a 2006 deal in which Microsoft Corp. brokers display ads on the site; the deal runs through 2011. But Facebook also controls other areas, such as a "news feed" section that shows up when a user logs in. It displays text ads alongside updates on the activities of that user's friends. In February, the company started selling virtual "gifts" like roses that users can send to each other for a fee. Earlier this month, it added classified advertising; while now free, that could eventually become a new revenue stream.

All of this has taken Facebook a long way from its early days, when Harvard University dropout Mr. Zuckerberg started the company. Facebook, which has raised more than $38 million in funding, is profitable and expects to generate close to $150 million in revenue this year, says one person familiar with the matter. Facebook says its user base has more than doubled to 23 million in the past six months, and it is adding 100,000 new users a day.

Mr. Zuckerberg in the past has acknowledged he has greater ambitions for Facebook. He has bristled at Facebook's "social networking" tag, instead calling the site a "social utility" that helps people share information, with their personal connections with each other as a backdrop. If others build services to take advantage of those connections, Facebook can become more useful for its users, he said in the March interview.

But Facebook faces challenges in trying to stay independent. Mr. Zuckerberg has little management experience, for instance, and is now managing some lieutenants who are Silicon Valley veterans twice his age. His main focus is on building interesting technology, say people familiar with the matter. A Facebook spokeswoman declined to comment on those characterizations.

There's also stiff competition. News Corp.'s MySpace is still the leader in social networking, with 57 million U.S. visitors in April, compared with Facebook's 14.4 million, even though Facebook has grown three times as fast as MySpace in the past year, according to Nielsen/NetRatings. And a handful of other companies are also riffing off the idea of using social-networking technology to build a broader platform, such as Ning Inc., co-founded by Netscape Communications Corp. founder Marc Andreessen. Ning lets groups build their own social networks.

Some Silicon Valley cognoscenti have compared Facebook to Google. Google faced similar challenges in the late 1990s, when its young, scrappy founders dealt with skepticism over their lack of experience, lateness to the search arena, and focus on technology over revenue. So Mr. Zuckerberg's moves are being closely watched as a barometer of whether a new generation of Web companies can remain independent yet grow very large.

Mr. Zuckerberg himself has compared Facebook to Google. Asked in March whether Facebook has an analog to Google's motto of "don't be evil," Mr. Zuckerberg said, "I don't know that we have a motto yet. Maybe it's, 'Make the world more open.' "