Mark Zuckerberg founded "The Facebook" in February 2004, while attending Harvard University, with support from Andrew McCollum and Eduardo Saverin. By the end of the month, more than half of the undergraduate population at Harvard were registered on the service. At that time, Zuckerberg was joined by Dustin Moskovitz and Chris Hughes for site promotion and Facebook expanded to MIT, Boston University, and Boston College. This expansion continued in April of 2004 when it expanded to the rest of Ivy League and a few other schools. The following month, Zuckerberg, McCollum and Moskovitz moved to Palo Alto, California, to continue work on Facebook's development with additional help from Adam D'Angelo and Sean Parker. In September, Divya Narendra, Cameron Winklevoss and Tyler Winklevoss, the owners of the social networking website ConnectU, filed a lawsuit against Facebook, alleging that Zuckerberg had illegally used source code intended for a website they asked him to build for them. Also at that time, Facebook received approximately $500,000 from PayPal co-founder Peter Thiel in an angel round. By December, Facebook's user base had exceeded one million.
In May 2005, Facebook raised $12.7 million in venture capital from Accel Partners. On August 23, 2005, Facebook bought the domain name facebook.com from the Aboutface Corporation for $200,000 and dropped "the" from its name. At that time the site was overhauled, a change intended to make profile pages more user-friendly, according to Zuckerberg. Also that month McCollum went back to Harvard although he continued to serve as a consultant and returned to work on staff during the summers. As before, Hughes remained in Cambridge while he performed his duties as company spokesperson. Then, on September 2, 2005, Zuckerberg launched the high school iteration of Facebook, calling it the next logical thing to do. While initially described as separate "communities" to which users needed to be invited to participate, within only fifteen days most high school networks did not require a password to join (although registration with Facebook was still necessary.) By October, Facebook's expansion had trickled down to most small universities and junior colleges in the United States, Canada, and the UK, in addition to having expanded to twenty-one universities in the United Kingdom, the entire Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM) system in Mexico, the entire University of Puerto Rico network in Puerto Rico, and the whole University of the Virgin Islands network in the U.S. Virgin Islands. On December 11, 2005, universities in Australia and New Zealand were added to the Facebook network, bringing its size to more than 2,000 colleges and more than 25,000 high schools throughout the United States, Canada, Mexico, the United Kingdom, Australia, New Zealand, and Ireland.
On February 27, 2006, Facebook began allowing college students to add high school students as friends due to requests from users. About a month later, on March 28, 2006, BusinessWeek reported that a potential acquisition of the site was under negotiation. Facebook reportedly declined an offer of $750 million, and it was rumored that the asking price was as high as $2 billion. In April, Peter Thiel, Greylock Partners, and Meritech Capital Partners invested an additional $25 million in the site. In May, Facebook's network extended into India, at Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs). The following month Facebook threatened to seek costs of up to $100,000 from Quizsender.com for copyright infringement for allegedly copying the "look and feel" of Facebook. On July 25, new services were offered in the site that would potentially produce additional revenue. A promotion was arranged between Facebook and iTunes, in which members of the Apple Students group would receive a free 25 song sampler each week until September 30 in various music genres. The promotion's purpose was to make students more familiar with and enthusiastic about each service as fall classes approached. In the early half of August, Facebook added universities in Germany and high schools in Israel, (Haifa, Jerusalem, and Qiryat Gat) to its network. On the 22nd of that month, Facebook introduced Facebook Notes, a blogging feature with tagging, embedded images, and other features, also allowing the importation of blogs from Xanga, LiveJournal, Blogger, and other blogging services. This newly added feature also included the common blog feature of allowing readers to comment on users' entries. On September 11, 2006, Facebook became open to all users of the Internet, prompting protest from its existing user base. Two weeks later, Facebook opened registration to anyone with a valid e-mail address.
On May 10, 2007 Facebook announced a plan to add free classified advertisements to its website, making it a competitor with established online companies such as Craigslist. This feature, known as Facebook Marketplace, went live on May 14, 2007. On May 24, 2007, Facebook launched an API that allows the development of applications to be used on the site, known as Facebook Platform. In June, the partnership begun the previous year between iTunes and Facebook continued, with the download service again offering free music samplers through the Apple Students group. In July, Facebook announced its first acquisition, purchasing Parakey, Inc. from Blake Ross and Joe Hewitt. In August, the company was featured in a Newsweek cover story by Steven Levy in the magazine's annual college edition.
Facebook hired YouTube's former CFO Gideon Yu on July 24, 2007. Gideon Yu succeeded Michael Sheridan.