Every family handles this differently. We just had a tiny party. If you think about it, the first birthday is more for the adults and the pictures than the baby, because the little one won't remember it. We had some carrot cake which he had no clue what to do with it. He had more fun playing with the frosting than anything.
In fact, the more I think about it, I think we just had his first birthday with just our immediate family--my husband, me, our son. He didn't need anything because we still had plenty from his showers, Christmas, etc. His second birthday was the one where we invited more people to join in the fun. Even then, he was more interested in the wrapping paper than the presents, and the frosting than the cake itself.
Savor the day, whether it is with a bunch of people or just your immediate family. It's a special day.
One tradition that we do is to celebrate the actual day with our son, just the three of us. And he then has a family party on another day. And if a friend party is happening, that is on another day as well. Sometimes we mix the friends and family, but more often we don't. He'll turn 13 in just a few weeks and he loves this tradition. The actual day is saved for just us and he loves that! (This month, his birthday falls on a Saturday. When I suggested we have the family party on that day, he reminded me that it should be just us. He specifically requested that we keep it to just us for that day. : )