Facebook now sits squarely at the center of a fundamental realignment of capitalism. Mark Zuckerberg, as a man of his generation, has understood this intuitively since he launched Facebook at Harvard. Marketing cannot be about companies shoving advertising in people’s faces, not because it’s wrong but because it doesn’t work anymore. The word advertising is no longer really the right word for what’s going on at Facebook. It is merely a useful shorthand, as in the Sandberg sessions, to refer to a process in which companies spend money to get people more interested in their products.
But marketers can no longer control the conversation. It first became evident that consumers were becoming publishers when blogs emerged in 2001 and 2002. The audience was starting to create the media. Now Facebook is enabling that trend to broaden to even the least tech-savvy “consumer.” Users get their own home pages and the tools to send messages and create and forward content. Much of that content is about commercial products and services. Anyone can also now create a Facebook page for any purpose.
Consumer spending is the engine that drives every modern economy. But “the consumer” no longer just consumes, as Facebook makes evident. Increasingly the people are in control.
“Brands are already on Facebook whether they like it or not,” says Tom Bedecarre, who heads San Francisco’s AKQA, the largest independent digital advertising agency, and an ardent fan of Facebook. “Whatever people hate or love they will start groups or pages about, and post messages about.” One marketing tool often used by Facebook ad sales boss Mike Murphy is to search Facebook’s database when he’s trying to sell ads to a company, so he can demonstrate how enmeshed it already is on Facebook. For a well-known company like McDonald’s, for instance, the number of mentions is in the millions.
Some companies make ill-fated attempts to squash consumer sentiment. Canadian coffee-shop chain Tim Hortons responded to Facebook groups that criticized the company by having lawyers send members cease-and-desist letters. That had little effect. No lawyer can prevent someone on Facebook from criticizing or insulting a brand or product. As Randall Rothenberg, president of the trade group Interactive Advertising Bureau, puts it, “Conversations cannot be controlled. They can only be joined.”
Rather than interrupting the conversation, the companies formerly known as advertisers now have to figure out how to create the conversation on Facebook, or to be part of it. Successful ones help users connect to each other and communicate. “It’s a new kind of exchange of value for marketers,” says Bedecarre. “I’ll give you value and you’ll have a better feeling.”
Mazda asked fans of its Facebook page to help it design a car for 2018. Design students from all over the world contributed ideas. Ben & Jerry’s ice cream let people tell the company what its next flavor ought to be. Each time those Mazda or Ben & Jerry’s fans write something on those pages, a message is posted on their profile that goes into friends’ News Feeds. Consumers are sending messages to their friends that benefit the marketer. That’s how the flavor program, developed by marketing firm Edelman Digital, enabled Ben & Jerry’s to increase its fans from 300,000 to a million in just six weeks. The campaign in both cases began with engagement ads on Facebook’s home page.
Facebook users often get something concrete as they’re being marketed to. In effect they are receiving some of the compensation that would otherwise have gone to a TV station or newspaper in the past. Starbucks has given away coupons for free cups of coffee. Ben & Jerry’s has given away ice-cream cones. Giveaways have worked for marketers seeking to reach business customers, as well. AKQA helped client Visa create the Visa Business Network for small businesses on Facebook. Visa gave each company that signed up $100 worth of Facebook advertising. Several hundred thousand did.
Some consumer-oriented companies now put less emphasis on their website and more on their Facebook page, where they can host a wide variety of Facebook applications and where actions of fans get virally projected to their friends. Vitamin Water, for example, has begun to direct consumers to Facebook.com/vitaminwater from its TV ads and from banners placed elsewhere around the Web. Gap displays the address of its Facebook page on billboards.
The relationship between people and companies will continue to evolve rapidly on Facebook, and will most likely yield some startling developments. There’s growing evidence that by enlisting consumers into the very process of conceiving, designing, and even building a product, companies can reduce their costs, create products people want, and engender customer loyalty. Facebook can be seen as a giant collaborative network. It is the perfect platform for such innovation. The competitions from Ben & Jerry’s and Mazda pointed the way, but in 2009 a small film company called Mass Animation, working closely with Facebook staffers, took the idea considerably further.
It produced an animated film created by the users of Facebook. The five-minute film, titled Live Music, includes segments contributed by fifty-one different people from seventeen countries, including Kazakhstan and Colombia. Some were as young as fourteen. Mass Animation created a storyline, soundtrack, and first scene, which established the film’s graphic style. Its Facebook page attracted 57,000 members, 17,000 of whom downloaded special software. Members of the page voted to determine which segments should be included in the film. Winning contributors received $500 and acknowledgment in the film, which Sony distributed to theaters in late 2009 as the opener for an animated feature. “Social networking is becoming social production,” says Don Tapscott, an author who wrote both Wikinomics, about new forms of business collaboration, and Grown Up Digital, about young people and technology. “This is not just about friendships. This is changing the way we orchestrate capabilities in society to innovate, and to create goods and services.”
Facebook is the most targetable medium in history. Advertisers want to show their ads to the people who are most likely to respond. On the Net, until Facebook came along they had to hire services to laboriously and expensively follow users’ digital footprints across the Internet, attempting to infer their gender, age, and interests by where they visited and what they clicked on. But on Facebook users are forthcoming with accurate data about themselves, because they are confident the only people who will look at it are those they approve as their friends. “Facebook has the richest data set by a mile,” says Josh James, CEO of Omniture, a big Internet ad-targeting service that works with Facebook. “It is the first place where consumers have ever said, ‘Here’s who I am and it’s okay for you to use it.’” Sandberg says, “We have better information than anyone else. We know gender, age, location, and it’s real data as opposed to the stuff other people infer.” The inferential targeting used by advertisers on the rest of the Web is frequently wrong, she says.
Users on Facebook do volunteer vast amounts of data about themselves, and then generate even more through their behavior on the site, by interacting with other users, on groups and with pages. Facebook tracks all this in its database and uses it to place advertisements. Facebook’s policy is not to look at any individual’s data except to ensure it does not violate the service’s rules. It says it never shares the actual data with advertisers. Facebook just lets advertisers use the aggregated data to select from a vast menu of parameters to target ads at precisely the type of person they are trying to reach.
Anybody can pick through endless combinations on Facebook’s self-service ad page. You can show your ad only to married women aged thirty-five and up who live in northern Ohio. Or display an ad only to employees of one company in a certain city on a certain day. (Employers aiming to cherry-pick people from a competitor do this all the time.) Customers for Facebook’s more expensive engagement ads can select from even more detailed choices—women who are parents, talk about diapers, listen to Coldplay and live in cities, for example. “That targeting pure and simple is the driver of what we’re able to do today, and why we’re growing,” says Facebook’s Rose.
I am a baby boomer and list many musicians I like on my profile. So I frequently see an
ad on Facebook for a USB turntable that converts old vinyl records to digital MP3 files. The advertiser targets music lovers my age because we’re likely to own a lot of records.
The knowledge Facebook has about its users enables it to help advertisers with market research. Say a company is deciding what music to use in a TV ad. Facebook can survey the profiles of all the people who are fans of that advertiser’s page and report what music they are most likely to listen to. If you buy an engagement ad, Facebook can tell you the exact demographic breakdown of the users who clicked on it. “I can tell an advertiser, for example, that while it thought its audience was eighteen-to-twenty-four-year-old women, they are actually nineteen-to-thirty-eight-year-old men,” says Facebook ad boss Mike Murphy, “and they like football and these are their three favorite movies. If you want to reach these guys, here are their favorite TV shows. You can build your entire media campaign around the data we provide you. It’s an asset you couldn’t buy anywhere else on the planet.” Now the company is working with a service called Nielsen Homescan to correlate data Nielsen collects about product purchases in thousands of American homes with the Facebook behavior of those residents. Advertisers will be able to see which ads Facebook users saw and which products they bought. That sort of data has existed for a long time for television. If Facebook can demonstrate it is at least as effective, advertisers will become more eager to be there.
Facebook’s ability to marshal all that user-reported data makes some believe it can make a lot of money. “Facebook has the opportunity that Google only wishes it had—the ability to build a credible proposition for the largest brand advertisers,” says Alan Gould, who runs ad-measurement firm Nielsen IAG. “Now Steve Ballmer’s valuation doesn’t look so silly.” “I believe Facebook is going to fundamentally change marketing and become a monster business,” says Mike Lazerow, CEO of Buddy Media, which builds promotional Facebook applications and pages for companies. “When you combine four hundred million people with data about not only where they live, but who their friends are, what they’re interested in, and what they do online—Facebook potentially has the Internet genome project.”
So far there has been little resistance among Facebook’s users to using their data to target ads to them. But it could be where the privacy challenge becomes greatest. It’s easy to imagine how some error of targeting or other clumsiness could lead to a major ad backlash that sullies the company’s reputation.
Not that there haven’t been problems. In this world of marketing centered on the likes and dislikes of actual people, the biggest danger so far has been that users would appear to endorse or to initiate the transmission of messages that they actually disapprove. One man named Peter Smith from Lynchburg, Virginia, noticed in July 2009 a Facebook ad reading “Hey Peter—Hot singles are waiting for you!!” Next to it was a photo of an attractive, smiling woman—who happened to be his wife. It turned out Cheryl Smith played games on Facebook. She had given a game permission to access her data, through the opaque process Facebook uses to connect users to applications. The game company used a third-party network, which displayed ads inside the game.
Apparently the ad network appropriated her picture from inside the game and affixed it to the dating ad. The ad network that stole the picture was violating Facebook’s rules and was banned. Facebook subsequently clarified its advertising guidelines to make clear that such sharing of user data is not allowed. But as people interact with applications and use Facebook in a larger variety of ways it has become increasingly harder for the company to police how user data is handled. More mistakes are bound to happen.
In the months after Sandberg arrived at Facebook, the company’s leadership went through a fundamental realignment. There was a string of departures. Owen Van Natta was the first to go, not surprisingly. It was obvious that no matter what happened, with Sandberg’s arrival he wasn’t going to get a shot at CEO. Within a year Van Natta became CEO of MySpace (though he lasted there less than a year).
As Sandberg settled in and refocused Facebook on its fundamental opportunity in advertising, Zuckerberg’s founding team—the young posse who had helped him create Facebook—also began to disperse. Matt Cohler, his “consigliere” since early 2005, left to join prestigious Benchmark Capital and become a venture capitalist, something he says he’d always wanted to do. He remains close to Zuckerberg. Adam D’Angelo, Zuckerberg’s Exeter chum who has come and gone from Facebook several times, left again to start a new company called Quora, and took top engineer Charlie Cheever with him.
But most striking was the departure of Dustin Moskovitz, Zuckerberg’s right-hand man since the very beginning, and still one of the company’s largest shareholders, with about 6 percent of the stock. Moskovitz, like D’Angelo, remains close to Zuckerberg. Moskovitz left to start his own Internet software company called Asana, an idea he’d been mulling for a long time. He aims to build Facebook-connected online productivity software for businesses, competing with Google Docs and Microsoft Office, among others. It’s a big and ambitious vision. He says he thought for a long time about whether he could stay at Facebook while pursuing this new idea, but concluded it would be a distraction for the company.
The influence Moskovitz wielded as the self-taught roommate-turned-CTO inevitably waned as the company passed one thousand employees and everything became more professional. There was a long time when he jointly controlled the direction of the company. But as it grew, Zuckerberg’s authority grew along with it, and Moskovitz’s diminished. Despite his large stockholdings he cannot have the impact he once did. “There are just disagreements about the direction the company goes in,” says one friend of both men, “and when you’ve got someone who has sole authority, those disagreements are irreconcilable.” It also made sense for Moskovitz to start Asana outside the company because Zuckerberg has repeatedly shown he has little interest in adding features that make Facebook more useful in the workplace.
In each case, Zuckerberg’s close friends—and they all still call themselves that—say they didn’t leave because of any fundamental conflict with Mark. D’Angelo says he is just not suited for large organizations where compromise is constantly required. He says he remains very attached to Facebook but got frustrated with the bureaucracy he had to deal with every day. Zuckerberg “just has a lot more tolerance for that than someone who doesn’t feel like it’s their company,” D’Angelo says.
Chris Hughes, the other co-founder, who had left the company earlier, is more blunt. He thinks Zuckerberg’s friends, most of whom he’s in touch with, have left in part because, like him, they got fed up. “Working with Mark is very challenging,” says Hughes. “You’re never sure if what you’re doing is something he likes or he doesn’t like. It’s so much better to be friends with Mark than to work with him.”
The CEO is a tad melancholy about the departure of his boys. He says he was upset when Moskovitz first told him he wanted to go, a year before he actually left. By the time it happened Zuckerberg was resigned to it. As for Cohler and D’Angelo, Zuckerberg says, “I wish we’d been able to figure out a way to continue finding them roles.”
Bringing in Sandberg as number two had little to do with this posse heading for the hills, but Moskovitz, for one, hasn’t signed on to the enthusiastic consensus that emerged from the Sandberg sessions. He responds with typical directness when I ask him about Sandberg’s impact on Facebook. “Positive overall for sure,” he starts out. Then he continues, equivocating. “It’s hard for me to be too positive, because I do feel like her role is in conflict with what I think the natural course of the company is. At the same time, I very much understand. But I am a huge believer in investing as much as possible into the product, do as little as possible to provide friction against more people joining or not liking the experience as much. And that can often be in direct conflict with the amount of advertising on the page, which is her job responsibility.” He says it’s good that she clarified how ads would work on Facebook, but adds, “I see that a
s just like a necessary evil, almost.” Then he backs off a bit and concedes, “It’s probably the right balance now.”
Despite the consensus that Facebook’s business is advertising, Zuckerberg continues regularly to declare that growing Facebook’s user base remains more important than monetizing it. And both Moskovitz and D’Angelo continue adamantly to agree with him. “You can make a dollar off a user today,” says Moskovitz, “but if you can get them to invite ten friends, then you’ll make eleven dollars. Facebook’s growth is so exponential that it’s really hard to say this is the point at which you start compromising.” D’Angelo also shows little enthusiasm for emphasizing ads now. “I’m on the growth side, personally,” he says. “I mean, if you think Facebook is going to be around for a long time, which I do, and you take this approach that we need to get this thing to be everywhere and get the whole world using it, then to me it’s obvious you will make a lot of money off of a product that the whole world is using every day.”
Zuckerberg’s top anti-ad, pro-growth allies have retreated, but he remains deeply committed to the long-term view. “It’s really important for people to understand that what we’re doing now is just the beginning,” he says. “The companies that succeed and have the best impact and are able to outcompete everyone else are the ones that have the longest time horizon.” Board member Peter Thiel has always been another strong believer in the need to continually emphasize growth. Even at some points in the company’s history when Zuckerberg was focusing on other matters, Thiel repeated his steady refrain: “Grow the user base. Grow the user base.”
Mike Murphy, Facebook veteran and hard-charging sales guy, concedes there has been ongoing tension over whether revenue mattered as much as growth, and that it drove him crazy after he arrived in early 2006. “My level of frustration has decreased dramatically,” he says now. “Mark has never missed a commitment he’s made about resources he would give us.” The company has about 260 people devoted exclusively to ad sales. Before Sandberg arrived, Facebook only had sales offices in Palo Alto, New York, and London, but in the year following the Sandberg sessions it opened offices in Atlanta, Detroit, Chicago, Dallas, Dublin, Los Angeles, Madrid, Milan, Paris, Sydney, Stockholm, Toronto, and Washington. Shortly the company plans to add more in Boston, Germany, Hong Kong, India, and Japan. Its international headquarters is in Dublin.
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