The Battle For Facebook

Parker didn't need to worry — Zuckerberg wasn't going to let that happen. In July, Zuckerberg and Saverin had a mysterious falling out. Zuckerberg has filed a lawsuit, claiming Saverin jeopardized the company by freezing Facebook's bank accounts. Saverin countersued, claiming that Zuckerberg never matched his $20,000 in seed money and, further, used that money for personal expenses. That summer, Zuckerberg transferred all intellectual-property rights and membership interests to a new version of the company in Delaware. The value of Saverin's stock was unhinged from any further growth of Facebook, and Saverin was expunged as an employee.

Not long after the incident, Cameron Winklevoss ran into Saverin in a bar in New York. Saverin, Winklevoss said in a deposition, apologized to him.

"Sorry that he screwed you," Saverin allegedly said. "Mark screwed me, too."

The lesson to those around Zuckerberg was clear: Nobody, not even the college roommate who had once been his closest confidant, was going to stand in his way. "It seemed like in all his dealings, it was a big deal to him that he be the CEO when he got the first round of financing, and that he maintain control of the company," says Haggerty. "He knows where he wants to go: Facebook everywhere."

By December 2004, Facebook was well on its way to everywhere. Only 10 months after its launch, the site had 1 million users. Back at Harvard, Lawrence Summers told entering freshmen that he had gotten to know them through their profiles on Facebook. The student who had once been threatened with expulsion for posting pirated photos of fellow students had succeeded in altering Harvard's entire culture.

At the start of 2005, Zuckerberg appointed Sean Parker president of Facebook, hoping to bank on his friend's Silicon Valley connections. But once again, things fell apart between Zuckerberg and a friend. That October, after Parker was arrested at a party, he abruptly resigned. Although Parker was never charged and denies possessing any narcotics, Zuckerberg told a courtroom Parker was busted for cocaine possession and was lousy at running a business. "He freaked people out," Zuckerberg testified. Even the co-founder of Napster wasn't good enough for the upstart kid from Harvard.

Despite the management shake-ups, users still flocked to the site. In the spring of 2005, real money started flowing into Facebook: A venture-capital firm invested $12.7 million in the site. Facebook also opened itself up to high school students; within months, it was rewarded with 5.5 million users. But Zuckerberg, now one of the wealthiest twentysomethings in the world, continued to play the part of the college kid. He carried two business cards: a plain one with just his name and another that read "I'm CEO...Bitch." He insisted to anyone who would listen that he wasn't in it for the money. "I'm in this to build something cool," he told Fortune, "not to get bought."

But that didn't stop Zuckerberg from pursuing his vision of Facebook as a one-stop social utility with global domination of the marketplace. Last November, he presented advertisers with a new program called Beacon that would enable large retailers to access a shopper's Facebook page. Suddenly, a purchase of budget furniture on Overstock.com would show up as part of a user's Facebook identity. For the first time, Zuckerberg told those assembled, advertising would become an integral part of social interaction online. His goal, he told them, was simple: to start a revolution.

"Once every hundred years, media changes," Zuckerberg said. "The last hundred years have been defined by the mass media. In the next hundred years, information won't be just pushed out to people: It will be shared among the millions of connections people have." Tapping those connections, he added, was the key to advertising's future. "Nothing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising."

Beacon's glory was fleeting, however. Users revolted, protesting the invasion of privacy, and Zuckerberg apologized. Still, his bold plans persuaded Microsoft to invest $240 million in Facebook, valuing the company at $15 billion — a staggering figure, considering that the site's total revenues last year were only $150 million. "On the surface, it seems insane," says Charlene Li, a technology analyst who has co-authored a book on social networking. "Why would Microsoft pay so much for such a small piece of a company? But whether it was $1 billion or $15 billion, it doesn't matter. By making it $15 billion, it assures that no one would come near it. The only one who could now buy it is Microsoft."