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Blodget on Zuckerberg

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Disgraced Wall Street broker Henry Blodget has a new game: running the website Business Insider. One of his targets is Mark Zuckerberg. Too bad for Zuckerberg. Too bad for Blodget.


BI's Nicholas Carlson tells the story of how Facebook came to be. 'The stories are based on a long investigation into the origins of Facebook that included interviews with more than a dozen sources familiar with aspects of what happened, as well as what we believe to be relevant IMs and emails from the period. Much of the information has never been reported', writes Carlson.

'The stories detail some troubling behaviour by Mark Zuckerberg, including using members' Facebook login information to break into members' private email accounts and hacking into a competitor's site and changing user profiles.'

thefacebook.com was launched on 4 February 2004. The site was an instant hit. But already a week after launch, three of Zuckerberg's classmates - who'd proposed the idea to him as HarvardConnection.com - accused him of stealing their idea. They were later to get $65,000,000 in a settlement from Zuckerberg and Facebook.

Zuck's IMs

Recent efforts to get data off Zuckerberg's hard drive at the time seem to have met with success, according to BI.

Zuckerberg continually stalled the Harvard Connection people, complaining of too much schoolwork, but was in fact plotting against them with early investor Eduardo Saverin. The following IM was sent by Zuckerberg to Saverin in December 2003 when the Harvard Connection people were waiting for Zuckerberg to resume work on their site.

Zuck: Check this site out: www.harvardconnection.com and then go to harvardconnection.com/datehome.php. Someone is already trying to make a dating site. But they made a mistake haha. They asked me to make it for them. So I'm like delaying it so it won't be ready until after the facebook thing comes out.

Zuckerberg met with the Harvard Connection people a few weeks after the first meeting but showed them no code. An IM exchange between Zuckerberg and Adam D'Angelo, former classmate at Phillips Exeter, later student at Cal Tech, then CTO at Facebook, reveals what he's up to.

Zuck: So you know how I'm making that dating site

Zuck: I wonder how similar that is to the Facebook thing

Zuck: Because they're probably going to be released around the same time

Zuck: Unless I fuck the dating site people over and quit on them right before I told them I'd have it done.

D'Angelo: haha

Zuck: Like I don't think people would sign up for the facebook thing if they knew it was for dating

Zuck: and I think people are skeptical about joining dating things too.

Zuck: But the guy doing the dating thing is going to promote it pretty well.

Zuck: I wonder what the ideal solution is.

Zuck: I think the Facebook thing by itself would draw many people, unless it were released at the same time as the dating thing.

Zuck: In which case both things would cancel each other out and nothing would win. Any ideas? Like is there a good way to consolidate the two.

D'Angelo: We could make it into a whole network like a friendster. haha. Stanford has something like that internally

Zuck: Well I was thinking of doing that for the facebook. The only thing that's different about theirs is that you like request dates with people or connections with the facebook you don't do that via the system.

D'Angelo: Yeah

Zuck: I also hate the fact that I'm doing it for other people haha. Like I hate working under other people. I feel like the right thing to do is finish the facebook and wait until the last day before I'm supposed to have their thing ready and then be like 'look yours isn't as good as this so if you want to join mine you can... otherwise I can help you with yours later'. Or do you think that's too dick?

D'Angelo: I think you should just ditch them

Zuck: The thing is they have a programmer who could finish their thing and they have money to pour into advertising and stuff. Oh wait I have money too. My friend who wants to sponsor this is head of the investment society. Apparently insider trading isn't illegal in Brazil so he's rich lol.

D'Angelo: lol

Last Meeting

On 14 January 2004 Zuckerberg met with the Harvard Connection people for the last time. His site thefacebook.com wasn't complete but it was coming along nicely. Eduardo Saverin was paying for the servers. He'd made the decision to delay work on the Harvard Connection project and finish his 'facebook' instead. And his domain was already registered.

So should he tell the Harvard Connection people he was dropping out? Or should he string them along? Not much of a choice for the likes of Zuck.

Zuck: Yeah, I'm going to fuck them
Zuck: Probably in the year
Zuck: *ear

Zuckerberg told the Harvard Connection people he had doubts about the viability of their project. He told them he was very busy with personal projects and schoolwork and wouldn't be able to continue on their project for a while. He did not tell them he was actually working on his own project or that his intention was to not finish the HarvardConnection.com site.

Two weeks after the meeting (4 February) Zuckerberg opened thefacebook.com to Harvard students and a mere six days after that he received a letter from the Harvard Connection people accusing him of breaching his agreement and stealing their idea.

The Harvard Connection trio got their own site online by May, now calling it ConnectU. But Zuckerberg was already on his way to Palo Alto where he received $500,000 in further startup capital. The Harvard Connection people filed against Zuckerberg by September of the same year.

BI's Conclusions

Blodget's Business Insider writers don't regard any of the above as particularly incriminating - but they do cite his hacking into the Harvard Crimson and ConnectU as not entirely legit actions.

Zuckerberg's site reached 250,000 users by August 2004 and one million by the autumn, yet Zuckerberg seemed obsessed with the foundering ConnectU and appears to have hacked into the site and made changes to several user profiles, including that of one of the founders. He even created a phantom account in the same name - and then went on to change the privacy settings of members to make them invisible.

Zuckerberg seems to have retained access to the ConnectU servers for some time.

Editors of the Harvard Crimson later addressed the issues with Zuckerberg who then broke into their servers to see what kind of story they were printing. He checked his own web logs for failed logins from Crimson editors. He guessed they'd used their Crimson passwords by mistake and was right in two cases.

From: Elisabeth Susan Theodore
To: Timothy John McGinn
Subject: Re: Follow-up

OK, he did seem very sleazy. And I thought some of his answers to the questions were not very direct or open. I also thought that his reaction to the website was very very weird. But, even if it's true so what? It's an [redacted] thing to do but it's not illegal, right?

'It is clear the events described above would be a direct violation of Facebook's current policy', comments Nicholas Carlson.

Dumb Fucks

Zuckerberg was evidently quite liberal about sharing private member info with his friends. The following exchange took place shortly after the site launch in 2004.

Zuck: Yeah so if you ever need info about anyone at Harvard
Zuck: Just ask.
Zuck: I have over 4,000 emails, pictures, addresses, SNS
[Name withheld]: What? How'd you manage that one?
Zuck: People just submitted it.
Zuck: I don't know why.
Zuck: They 'trust me'
Zuck: Dumb fucks.

'The company's attitude toward privacy as reflected in Zuckerberg's early emails and IMs, features like Beacon and Instant Personalisation, and the frequent changes to the privacy policy has been consistently aggressive: do something first, then we see how people react', writes Carlson.

All of which naïvely sidesteps the question of how Facebook would ever satisfy investors: that walled garden has to be opened once everyone's inside - otherwise the project is for naught. Any adult can see that.

Blodget's Pieces of Shit

Henry Blodget himself goes about whitewashing Zuckerberg after his editors chew him to pieces. 'Facebook's aggressiveness on the privacy front is a big reason for the site's success', writes Blodget.

But most people signed into Facebook don't know much about Henry Blodget.

Once Merrill Lynch's star Internet analyst, Blodget was charged in 2003 with securities fraud, paid $4 million in fines and fees, and today is barred from trading. Blodget inflated ratings of stocks so his buddies could sell out.

Could he be doing the same with Facebook today?

The Complaint alleges that during the Class Period, defendants' research reports and ratings on 24/7 were neither independent nor objective, but instead were biased and improperly influenced by Merrill Lynch's lucrative investment banking business relationships with this important client. In order to maintain and enhance Merrill Lynch's investment banking relationships with 24/7, defendants issued positive ratings on the Company which were materially misleading as they were inconsistent with their own contemporaneous, private adverse assessments of 24/7. For example, defendants were repeatedly issuing a short and long-term accumulate rating on 24/7 despite Blodget's internal description of 24/7 as a 'piece of shit'.

As a result of defendants' false and misleading statements, the market price of 24/7 common stock was artificially inflated, maintained or stabilised during the Class Period.

So who do you trust? Can you trust either of them?

One of Mark Zuckerberg's most valuable attributes as a CEO is his willingness to take heat and stay the course. So far, the course Mark has set has been so wildly successful that in only 6 years he has built the second most popular web site in the world. He and Facebook would be crazy to change this.
 - Henry Blodget

See Also
Washington Post: Who Blew the Dot-Com Bubble?
Pomerantz(Wayback): Current Cases (Real Media 24/7)
Radsoft: Fibergate - The Untouchables - Henry Blodget
BI: XX Amazing Things You Didn't Know About Facebook

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