Sandberg says that a focus on growth does not conflict with a mandate to raise revenues. “Our goals are, in order: How much does the world share information? Then, of equal importance, How many users do we have? And revenue. Those are all really really important drivers of the whole mission. But you can’t do one without the other.”
The ad industry is shifting its focus toward Facebook. The number of advertisers using its self-service online ads tripled from 2008 to 2009. A 2009 study by the Association of National Advertisers found that 66 percent of all marketers now use social media in some way, compared to only 20 percent in 2007. Today that mostly means Facebook. The vast majority of the biggest advertisers in the United States have begun advertising there. Big clients include PepsiCo, Procter & Gamble, Sears, and Unilever. And Facebook users are embracing the growing commercial presence on the site. Pages had about 5.3 billion fans as of February 2010 and about twenty million users become new fans of Pages every day. Pages with more than 3 million fans include Coca-Cola, Disney, Nutella, Skittles, Starbucks, and YouTube.
The mood inside the company about Facebook’s financial prospects is bright. Marc Andreessen, whom Zuckerberg asked to join the company’s board of directors in early 2008 (to fill one of the empty seats), cannot say enough about how big Facebook’s business can be. “Facebook has a springboard to monetization that is as clear as anything I’ve ever seen,” he says. “Like night follows day. With TV, radio, magazines, and newspaper revenues dropping, there’s $200 billion of ad spending up for grabs. That money has to go online. And Facebook’s just going to have all this data as a consequence of all the user activity, and it’s going to be able to target against that.” Television became the recipient of the lion’t share of ad dollars because that’s where consumer attention was focused. If that attention is slowly shifting to a new medium, as the data suggests, so will the money.
Sandberg was surprised that Facebook’s business did so well during the recent economic downturn. In the fall of 2008 the company significantly reduced its goals for growth and cut planned spending. “The world looked like it was melting down, and I was nervous,” says Sandberg. It seemed inevitable the global recession would hurt Facebook. It didn’t. In an interview in mid-2009, she said, “Our ad rates are basically holding, in an era when everyone else is dramatically decreasing theirs. We’re just doing better and better and better.” The measurement firm comScore reports that U.S. online advertising is moving to social networks—they now garner 23 percent of total ads—and that Facebook displayed 53 billion ads in December 2009, or 14 percent of all online ads.
Sandberg’s efforts to bring clarity to Facebook’s business model are paying off. She has found her place in this youthful culture. Other top managers both on and off the record express admiration for how well she runs the organization, interacts with people, and gets things done. Now Facebook’s numbers are rising rapidly. While Facebook does not disclose its financials, overall revenues were, according to well-informed sources, more than $550 million for 2009—up from less than $300 million in 2008. That represents a stunning growth rate of almost 100 percent. The same sources say that the company could exceed $1 billion in revenue in 2010.
Facebook’s improving numbers are fueled especially by its highly targeted online self-service ads, sold mostly to smaller advertisers, for all the efforts devoted to larger advertisers are still the lion’s share of revenue. Between $300 million and $400 million came from those in 2009. While the prices Facebook can charge for such ads remain very low on average, the company displays so many of them that it is becoming an increasingly good business. Says one well-informed company insider: “People dramatically underestimate the impact on our revenue of two interrelated factors—the growth in the number of users and the growth in usage.” Research firm comScore calculated in late 2009 that the average Facebook user in the U.S.—and there are almost 110 million of them—spends six hours per month on the service.
The next largest category is engagement ads and other brand advertising sold directly by Facebook, which probably amounted to about $100 million. Ads sold by Microsoft represent another chunk—more than $50 million. Finally, virtual goods and other miscellaneous revenue accounts for between $30 million and $50 million.
“There has been this myth that everyone’s waiting for our revenue model,” says Sandberg. “But we have the revenue model. The revenue model is advertising. This is the business we’re in, and it’s working.” Few at Facebook disagree with her now.
14
Facebook and the World
“Making the world more open is not an overnight thing.”
Mark Zuckerberg is in a large van on the campus of the prestigious University of Navarra in Pamplona, Spain. It’s October 2008 and he’s just finished speaking for an hour in the school’s largest lecture hall. The hall seats only about four hundred, but at least six hundred students had crammed inside. Before the van can move, a crowd gathers, all of them waving frantically and straining to catch Zuckerberg’s eye. As the van pulls away, a group of five or six girls runs ahead. When he gets out at his next destination, the president’s office—the girls are there again. Zuckerberg amenably agrees to pose with them for a photo (to be posted on Facebook, of course). Then the group dissolves into elated giggles, still casting sidelong glances, not believing their good fortune. “You’re a rock star now,” says Anikka Fragodt, Zuckerberg’s trusted personal assistant (since February 2006), who with three other Facebook employees (and me) has joined him for a promotional swing through Europe.
An epochal change on the Internet was announced in March 2009 by the Nielsen Company research firm. Time spent on social networks by Internet users worldwide had for the first time exceeded the amount of time Internet users spent on email. A new form of communication had gone mainstream. Total time spent on social networks grew a healthy 63 percent in 2008 around the world. Facebook, however, was in another league. It outdistanced every other service Nielsen measured. Time spent on Facebook had increased 566 percent in a year, to 20.5 billion minutes.
The scale of Facebook’s global growth in recent years is difficult to grasp. From the moment it opened to nonstudent users in fall 2006, English-speakers around the world began to stream on board. In early 2008, Facebook inaugurated a novel translation project, and by the end of 2008 it could be used in thirty-five languages. But even then, with the internationalization project still in its early phases, 70 percent of Facebook’s then 145 million active users were already outside the United States. Nielsen calculated at that point that fully 30 percent of the world’s Internet users were on Facebook, up from 11.1 percent a year earlier. The only service with more users is Google.
The company’s own expectations continue to be surpassed. Its ambitious confidential internal goal at the beginning of 2009 was to reach 275 million active users by the end of that year. Few at the company thought it attainable. But it reached the goal by August and by the end of the year had more than 350 million users and was growing about a million new users per day in 180 countries.
Improbable statistics continue accumulating. In seventeen countries around the world, more than 30 percent of all citizens—not Internet users but citizens—are on Facebook, according to the Facebook Global Monitor. They include Norway (46 percent), Canada (42 percent), Hong Kong (40.5 percent), the United Kingdom (40 percent), Chile (35 percent), Israel (32.5 percent), Qatar (32 percent), and the Bahamas (30.5 percent). In tiny Iceland, 53 percent of people are on the service. Facebook is the number-one social network in Brunei, Cambodia, Malaysia, and Singapore, among other countries. It surpassed MySpace in global visitors in May 2008, according to comScore. And in mid-2008 the word Facebook passed sex in frequency as a search term on Google worldwide.
It’s been a joke around the Facebook offices for years that the company seeks “total domination.” But the reason it’s funny is that it evokes a surprising truth. Zuckerberg realized a long time ago that most users are not going to take the time
to create multiple profiles for themselves on multiple social networks. He also knew from his endless bull sessions at Harvard and in Palo Alto about “network effects” that once consolidation begins on a communications platform it can accelerate and become a winner-take-all market. People will join and use the communications tool that the largest number of other people already use. He therefore made it a goal to create a tool not for the United States but for the world. The objective was to overwhelm all other social networks wherever they are—to win their users and become the de facto standard. In his view it was either that or disappear.
Other social networks have more users than Facebook in a number of key countries, including Brazil, China, Japan, Korea, Russia, and a few other places. In most of those countries a local player commands the market. For Zuckerberg it is a strategic imperative to whittle away at the dominance of these services. As Zuckerberg told a Madrid audience on his Spanish trip, “Making the world more open is not an overnight thing. It’s a ten-to-fifteen-year thing.”
But how did Facebook get so big so fast? It wasn’t long after he moved to California that Zuckerberg began thinking about Facebook’s potential to be a global phenomenon. Influenced by the ambitious Sean Parker, Zuckerberg began to think that if he managed his service well it could grow into an international colossus. He did a lot of things right that set the groundwork for the vast global growth that followed. For one thing, Zuckerberg kept Facebook’s interface simple, clean, and uncluttered. Like Google, an elementary look successfully masked an enormously complex set of technologies behind the curtain and made a wide variety of people feel welcome. At one of his stops in Spain, Zuckerberg summarized his international strategy: “It’s just to build the best, simplest product that lets people share information as easily as they can.”
Facebook also has a fundamental characteristic that has proven key to its appeal in country after country—you only see friends there. It is Facebook’s identity-based nature that differentiated it from the beginning from most other social networks and enabled it to become a unique global phenomenon. Around the world this is the least American-feeling of American services. Italy’s Facebook-using hordes, for example, could grow to many millions without often seeing anyone who wasn’t Italian. The values, interests, tone, and behavior that users in Turkey or Chile or the Philippines experience inside Facebook are the same ones they are familiar with every day in the offline world.
And, critically, the language people speak on Facebook is increasingly the one they speak offline as well. The translation tool Facebook made available after early 2008 was among the company’s greatest product innovations and had huge impact on its global growth. By early 2010 Facebook operated in seventy-five languages, representing 98 percent of the world’s population.
Facebook’s translation tool adopted a novel approach that took advantage of the rabid enthusiasm of users around the world. Rather than ask its own employees or contractors to spend precious years translating the site’s three hundred thousand words and phrases into numerous other languages, Facebook turned the task over to the crowd and found an enormous amount of wisdom there.
To create a version in each new language, Facebook’s software presents users with the list of words to be translated. Anyone, while using the site, can tackle the Spanish or German or Swahili or Tagalog translation for just one word or as many as they choose. Each word is translated by many users. Then the software asks speakers of that language to vote on the best word or phrase to fill each slot.
The tool was first used for Spanish in January 2008, since Facebook at that point already had 2.8 million users in Spanish-speaking countries using it in English. Within four weeks, 1,500 Spanish speakers from around the world had created a full version. Facebook engineers just plugged in their conclusions and the Spanish Facebook launched on February 11. Next up was German. That took 2,000 people two weeks and began operating on March 3. The French version was completed by 4,000 users in less than two days. Adding new languages now costs Facebook virtually nothing. Users decided the idiosyncratic Facebookism poke should become dar un toque in Spanish, anklopfen in German, and envoyer un poke in French.
This is one project Zuckerberg didn’t oversee. “I’m proud that I wasn’t even involved,” he said around the time the translator launched. “This is what you hope for when you’re building an organization, right? That there will be people who will just build things that fit so well with the values of the company without you even having to say anything.”
Facebook’s platform strategy of letting outsiders build whatever applications they want on its platform also substantially benefited its international expansion. In July 2008 the company let developers start using the translation software for Facebook applications, so those too could be available in any language. By the fall of 2008, when Zuckerberg went to Spain, there were already over six thousand applications available in Spanish. Facebook in Spain—or Chile or Colombia—felt much like a Spanish service to its users there. Eight months after the debut of the translated version, Facebook’s Spanish-speaking population had more than quadrupled to 12 million. “We think we can get as much as thirty-to-forty percent of the population using it,” Zuckerberg told reporters in Madrid. (Spain alone has 46 million people.)
There’s almost a moral component to Zuckerberg’s globalization quest. In the packed, sweltering hall in Navarra he says Facebook is “for all people of all ages around the world.” Giving people more information about people around them “should create more empathy.” In this attribution to Facebook of a power to help people better understand one another, Zuckerberg has a surprising ally—his mentor and board member Peter Thiel. The hedge fund manager and venture capitalist thinks Facebook is a key tool for a world necessarily becoming much smaller. “People in a globalized world are going to be in closer proximity to each other,” he explains. “The key value in my mind will be more tolerance. What I like about the Facebook model is it’s centered on real human beings and it enables them to become friends with other people and build relationships not only in the context they’re already in, but in contexts outside of that as well. Globalization doesn’t necessarily mean you are friends with everybody in the world. But it somehow means that you’re open to a lot more people in a lot more contexts than you would have been before.” At another session in Spain, Zuckerberg answered a reporter’s question about why Facebook succeeded by saying, “If you give people a better way to share information it will change people’s lives.”
But Zuckerberg’s Facebook is resolutely American, even if it may not always seem so to its international users. Facebook’s Americanness is revealed not because some Azerbaijan teenager meets a kid from Oklahoma, but by its intrinsic assumptions about how people ought to behave. Zuckerberg’s values reflect the liberties of American discourse. Facebook carries those values around the world, and that’s having both positive and negative effects.
In the United States, people take a certain amount of transparency and freedom of speech for granted, but it comes at great cost in some other cultures. When a father in Saudi Arabia caught his daughter interacting with men on Facebook, he killed her. Users in the United Arab Emirates created protest groups with names like “Gulf Air Sucks,” and “Boycott Dubai’s Dolphinariums.” That was apparently within the bounds, but when groups there grew to include “Lesbians in Dubai,” with 138 members, the government attempted to ban Facebook altogether.
Governments around the world are struggling to figure out how to handle Facebook’s users when they take advantage of its freedoms. After Italian Facebook groups emerged praising imprisoned mafia bosses, a senator there introduced a bill that would force websites to take down content that “incites or justifies” criminal behavior. It did not pass. (Facebook’s own policies are more specific. It takes down content that advocates hate, violence, or breaking the law.)
In the West Bank, protesters directed their wrath at Facebook itself and drew it into delicate matters of internatio
nal politics. Jewish settlers in the occupied territory were outraged that Facebook required them to say they lived in Palestine. A group called “It’s not Palestine, it’s Israel” quickly acquired 13,800 members in March 2008. After a few days Facebook agreed to let residents of certain large settlements say they lived in Israel. Meanwhile, a group called “All Palestinians on Facebook” grew to 8,800 by complaining, among other things, that Palestinians living in East Jerusalem were forced by Facebook to say they lived in Israel, even though that country’s annexation of East Jerusalem has not been internationally accepted. Now Facebook users in the West Bank can say they live in either Israel or Palestine.
American values of transparency may not always translate well, but people in many cultures are embracing fuller disclosure about themselves. In the Philippines, it has become routine for middle-class people to post photos of their April and May summer vacations to Facebook, and to keep friends apprised about these trips with status updates. By late 2008, interacting on Facebook was so popular in Italy that Poste Italiane, the national postal service, started blocking access in its offices. (Employees of the city of Naples, however, were officially allowed to access Facebook for up to one hour per day.)
Cultural differences seem not to deter people in various countries from finding compelling uses for the service. Danish prime minister Anders Fogh Rasmussen had 12,000 supporters on his Facebook page in April 2008 and responded personally to every comment. Then he decided to set up a group jog with young people he met there. An aide called it a great way to connect with ordinary voters. Obscure Colombian rock bands like Koyi K Utho, which plays heavy-metal music inspired by Japanese anime cartoons, found an audience on Facebook to promote concerts and albums.
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