A Cautionary Tale

Rumors of Facebook's refusal to sell to Yahoo set off a chorus of predictions that it would repeat Friendster's fall from grace.

“People said I started the site just to meet girls," says Jonathan Abrams, founder of Friendster, one of the earliest social-networking companies. "But if I wanted to do that, I'd have opened a bar or started a rock group." Now the poster child for missed opportunities, he was the belle of the ball for a while: The site went live in March 2003 and with virtually no marketing had more than 3 million users by the fall. Every publication from Time to Vanity Fair was writing about him; he even made an appearance on late-night talk show Jimmy Kimmel Live. Google reportedly came calling, offering some $30 million for the site. Instead, Abrams went the venture route, taking $13 million from Kleiner Perkins Caulfield & Byers and Benchmark Capital—and that, he says, is where his troubles began. "I had basically made a prototype which worked fine for a couple of million users," he says. "But we needed to really rebuild things if we were going to scale." He says his board and investors "didn't get Friendster and wouldn't focus on something boring like fixing the technology." He was replaced as CEO and watched as a succession of marketing deals failed and a parade of CEOs followed—three in one 12-month period. By fall of 2005, Abrams was gone. "I'm never going to make a ton of money off of Friendster like Mark [Zuckerberg] will probably make from Facebook," he says. "But I've learned a lot."

Today, Abrams, 37, owns a bar (but has a girlfriend) and is starting a new networking site, Socializr, which will be a cross between a networking site like Friendster and an events-management site like Evite. He has raised about $1 million, some from former Friendster investors. And he's keeping things small until he knows the technology works. "I plan to make it scalable and well designed from the get-go." As for Facebook, he says, "Clearly, Mark has already done a lot of smart things." Keeping control and having a board he can work with are the critical issues. "Everyone hopes for a story like Facebook," Abrams says, but most stories are about entrepreneurs persistently failing before they find success. What's happened to Facebook is "like winning the lottery."

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