Facebook – growing up fast
July 1, 2009
Remember when Facebook was the scrappy kid on the social networking block, with its teenage boss (ok, he’s now old enough to order alcohol in most states), its devil-may-care attitude to money, and its apparently casual approach to grown-up issues like privacy and unsuitable content?
Just a year or so back, it was MySpace which seemed far more mature – it had a lucrative advertising deal with Google, a wise old parent in Rupert Murdoch, and employed dozens of consultants around the world to deal with the concerns of regulators and politicians.
But now MySpace is fading fast, shedding hundreds of jobs, closing offices around the world, and saying goodbye to its founders Chris De Wolfe, who has left, and Tom Anderson, who is reportedly being paid to stay at home, while still being the automatic “friend” of all new joiners.
By contrast, in London this week I came across evidence that Facebook is growing up very rapidly, meeting two new executives who appear to symobolise the company’s new-found respectability and confidence.
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I was in the company’s compact Soho Square premises – they’re moving round the corner to a bigger place in Carnaby Street next week – to interview the chief operating officer Sheryl Sandberg.
What exactly is a COO? I’m never sure – but at Facebook it seems to mean the person who runs the business while Mark Zuckerberg concentrates on the cool stuff. Sheryl Sandberg has one of those very scary CVs – a Harvard MBA, then a spell working as chief of staff to Bill Clinton’s treasury secretary Larry Summers, then a top job at Google before heading to Facebook.
And her message to me was not about some new way of sending friends virtual sheep or making your profile look really cool, but something far more surprising – Facebook is actually making money. Or at least is on course to be “cash-flow positive in 2010.”
Now a decade ago when every dotcom measured its worth in “eyeballs” on its site, and claimed it was on course to break even pretty soon, I’d have been quite sceptical about Ms Sandberg’s forecast. But back then the whole point was to race as fast as you could towards an IPO( a stock market float) or a takeover by a bigger business so that you could cash the huge cheque from gullible investors and go on making losses for years.
Facebook, by contrast, appears determined to stay independent, despite selling small stakes at astronomic valuations to both Microsoft and a Russian media firm, and rumours of an impending IPO sparked by the appointment this week of a new chief financial officer.
Yet it is obviously spending pretty freely – the cost of servicing 200 million users around the world who all want to upload photos and generally keep the servers humming is growing by the day.
I put it to Sheryl Sandberg that each new user, especially those in less lucrative advertising markets like India, must be costing the company money – but she insisted that wasn’t the case:
“Not only are we covering our current costs but we are making major investments in our growth all over the world and our revenue from advertising is covering those costs.”
I’ve been sceptical about the ability of any social network to make serious money from advertising – who wants soap powder messages in the middle of a conversation with friends – but Facebook says its revenue is up 70% year-on-year in the middle of the worst recession many in the advertising business can remember.
True, a 70% rise compared to a period when the company made small change from ads may not tell the full story – but Facebook appears confident that it’s cracked a way for advertisers to be part of the conversation rather than an intrusive annoyance.
And the other person I met at Facebook’s London office symbolised the firm’s determination to deal with its other challenge – regulation.
Richard Allan, a former Liberal Democrat MP and then director of European government affairs at Cisco, has been hired to lobby European regulators for Facebook.
With the EU mulling over tighter privacy rules for firms that share their users’ data, and with continuing concern from politicians about issues like cyber-bullying and hate-speak on social networks, there will be plenty on Mr Allan’s plate.
So, yes, Facebook suddenly looks like a mature business, poised for steady progress towards profitability and ready to engage in grown-up conversations about its place in society. Then again, so did MySpace a year ago, until it suddenly went out of fashion.
So Facebook now has to work out how to be both grown-up and cool at the same time – never an easy trick to pull off, as my children sometimes remind me.
From: http://www.bbc.co.uk/blogs/technology/rss.xml
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