I think you make a good point about the conflict between user and customer that Facebook struggles with, but I doubt think it boils down to Sandberg. I think you can probably expand further on that conflict in terms of choices they make about their product.
So, by quoting a 2-year old book on Facebook and displaying one stock graph, the author of this post arrives at the following concluding graf:
Sandberg should start an ad agency on the East Coast. Miami is nice. That’s a job she’s qualified to do. Her rampant lack of business creativity should have no place in centers of innovation.
I found this piece superficial and, by the end, a little bit creepy.
Blaming the top management at Facebook for building a business on advertising is a little like blaming scientists for gravity. Who's bidding more for Facebook's functionality? The end users, who appear to be willing to pay $0.00, or the advertisers, who in the aggregate are demonstrably willing to pay billions?
Yeah, I found the tone of the article to be vaguely sexist. It depicts Sandberg as "charming" a hapless Zuckerberg, then suggests that Sandberg should move to Miami (because it's "nice") and start an ad agency because "that’s a job she’s qualified to do."
Yeah, I wouldn't normally care about stories sniping at Facebook, but those passages were exactly what set me off; a second read shows that the whole thing is cribbed opportunistically from a book that predates even Facebook's S-1.
I would agree that it is a poor article with little reasoning behind it, but I have no idea what sex the author is nor do I think it is sexist.
If anything it seemed like the author was discrediting her because her strategy included locking out developer. I'll meet you half way on the Miami sentence on agreeing that it was tacky. However, I think you are taking it out of context. It is apparent that the author doesn't like her, but no where does the article mention that she is not qualified because she is woman or anything remotely to that effect.
Please enlighten me. Did I miss a whole paragraph somewhere?
I'll have to apologize if I came off as sexist. I'm not even completely anti-Sandberg. I had hoped this bit would cover that:
At Google she had excelled at selling online advertisements and growing Google into a cash gushing behemoth.
Any sniping I do at her in the rest of the piece, if you could call it that, couldn't offset praise as high as this.
The point of the article is not that Sandberg herself screwed up. I'd say she's responsible for almost every dollar of revenue Facebook has earned. The point of the article was that Zuckerberg and Facebook screwed up by hiring her, and the should rectify it by firing her and apologizing with a big severance package.
It does come across as sexist, sorry, but also as an ad hominem attack.
The point you are making about advertising at Facebook can be made without pointing the finger at one person. It would be a lot clearer, and the gaps in logic more obvious.
Even if one person is at fault (I'm not arguing that), in business, as in all things, it's generally better to focus on fixing the problem rather than giving up on the person.
If we fired people every time they made a mistake then we'd all be unrmployed.
The part you quote are the last sentences; obviously it shouldn't be taken 100% seriously and I am surprise you did, since he obviously joked, as there are many other places than Miami that are nice to live, something I am pretty sure you are aware of.
Of course blaming top management is a way to go. That's the major difference between junior, senior and executives; in first two instances for your failures, up to some degree can be blamed rightfully anyway you want to: on a weather, on other emps unwillingness to work hard, etc. But when you are that high in hierarchy as an executive who can hire or fire thousands of emps at once, and should have broad insights into every company's corner, there are no more excuses available to you: you either did your job and succeed, or you did your job miserably and failed. There is just too much power all the way on the top to blame weather or junior emps for your own failures.
Said that, this article is quite frankly right on spot. Other than obviously the author is not a stock market researcher and may not know the numbers behind this stock (P/E f.e.) cannot help but push it down to a reasonable levels, he is right that CEO and COO had entirely different approach to making money.
No part of this comment responds to mine. Let me simplify my comment, which was simultaneously prolix and a little dashed off. I have 2 points:
1. The source material for this whole article, which concludes by suggesting that Sandberg should move to "nice" Miami to start an ad agency, is a book that was published in June '10.
2. The core critique of the article is that Facebook derives most of its income from advertising, when it (somehow?) might have done something different. The author never specifies what. The most damning thing the author appears to be able to say about that decision is, the entire Facebook upper management team agreed with Sandberg about this.
Aside from that: what's "creepy" about my response? I wasn't explicit about this, but what was "creepy" to me about the story was the way it pitted nerdy male Zuckerberg against "nice" female Sandberg.
I don't know, just the way it sounded creepy to me.
I guess the guy wrote the article trying to explain how Zuck had this idea about network where eventually revenue will come from API/graph/developers and at the end he throw a sentence that Sandberg should move to Miami. I am not sure if being focused on this one last sentence was his goal and you made it sound like it did.
As of "nerdy male Zuck" vs. "nice female Sandberg", sorry but that did not cross my mind even once.
Well, it crossed my mind immediately, and then crossed it again, then walked into the middle of it and started jumping up and down. So I wrote a comment.
I think the word you meant to use, regarding my comment, was "obnoxious". All pejoratives are not created equal. Singling one person out in a blog post and lobbying that they be fired with no evidence other than what was written years ago in a mass market book, and that they should go to a "nice" city and start an ad agency? I found that creepy. Yelling on HN about that point of view? You found that obnoxious, I'm betting.
1. And with that, an entire industry was born. But two years later, Sandberg promptly killed it.
What did Sandberg actually kill here? Isn't the "operating system" referred to in the quote the overall Facebook platform, which still exists?
2. Is app.net really a success just because the kickstarter was funded? That's a bit hyperactive. Let's hold off judgment until a year or two and see if their revenues are larger than their costs.
3. The article author makes the naive assumption that a falling stock price can be interpreted as a business failure without actually looking at or mentioning Facebook's actual financials.
1. I thought that the Dalton Caldwell quote I used explained that:
If you are building an advertising/media business, it would then follow that you need to own all of the screen real-estate that users see. The next logical step would be to kill all 3rd-party clients, and lock down the data in the global firehose in order to control the “content”. - Dalton Caldwell
Sorry if it was unclear.
2. I don't think app.net is a success yet. I'm not sure it can be. I don't think users want to pay for access to Twitter or Facebook, but I do think there is a place for charging developers for access to a social API.
3. I guess I figured Facebook's first earnings report as a public company would be common knowledge on a site like Hacker News. Here's an article that breaks Facebook down post-IPO: http://www.msnbc.msn.com/id/48770049/ns/business-us_business... From the article:
In its first earnings report as a public company, Facebook says revenue grew 32 percent to $1.18 billion in the second quarter, slightly above analyst expectations. It had a net loss of 8 cents per share, mainly due to stock compensation expenses following its IPO. Adjusted earnings of 12 cents per share matched Wall Street's expectations. Investors weren't impressed, though, and its stock fell in trading.
For a company with growth and expectations like Facebook - something that's supposed to be as formidable or more so than Google - this couldn't be seen as anything but a disappointment.
"However, I’m convinced Mark Zuckerberg already had it figured out, but he stopped short and hired an advertising incumbent to deal with the problem while he went off to an ashram in India."
I think this puts wayy too much responsibility on Sandberg's shoulders. It's not like Zuckerberg was on a sabbatical for a year and came back to see everything changed. If he disagreed with Sandberg then he was in every position to make a different decision. He didn't. If there is "blame" to be assigned (I'm not convinced there is), it sits squarely on Zuckerberg's shoulders.
This post is extremely misinformed. The reason both Facebook and Twitter decided to go with ads instead of selling access to the platform is that they ran the numbers.
By the time they picked their business models they had already taken in hundreds of millions in funding. The dollar size of the developer market is tiny compared to the ad market, so they could never justify their valuations by selling to developers. The middle ground the author proposes just doesn't make any sense.
app.net has only taken $5M in funding, so if they manage to make a couple of million a year that could be considered a success.
Can Facebook or Twitter make hundreds of millions of dollars a year by selling access to the API? Even if they did, could they do it without competing with their customers? Very doubtful.
You make a good point. There's a lot of things that are unanswerable about what-ifs in the early days of Facebook. The biggest what-if I'm wondering about is this: what if Facebook focused on becoming the first large social media company to offer its API as its core money-maker?
Zynga, presently, is worth ~2.5B. How many Zynga-like companies would there be if Facebook was focused on creating the best possible experience for their developers? The moving-target, locked-down API they peddle instead is a poor alternative motivated entirely by their focus on the advertising business model.
It's a big what-if, and the premise of my article is really that they should have found out before they settled on advertising. It was a mistake to hire Sandberg when they did, because once they made her the COO the company had no other monetization options then advertising.
Imagine if Google found someone more creative to figure out their business model, which is also advertising. Think of what could have been!
Maybe they could have focused on developers. Then, they'd definitely have better APIs; maybe developers could easily build products that leveraged Google's search index! Great APIs, and also tens of billions fewer dollars.
Google could absolutely use more creativity in their executives. The graveyard of failed Google products is vast, and its only because they indeed did choose the best business model in advertising for their search service that they have been able to survive and thrive through so many failures.
And giving credit were credit is definitely due, Sheryl Sandberg played an extremely important role in making that business what it is today. Her mistake, and Facebook's mistake, was thinking that it could be repeated - that somehow the data that Facebook was leveraging was as valuable to advertisers and as unobtrusive to users as the data that Google was leveraging. This is not going to turn out to be the case - you will simply never see Facebook doing $30B per year in advertising revenue like Google does. Their traffic numbers are already similar, there is no reason to believe Facebook will be able to 10x their revenue when their traffic is already peaking.
I get a weird recursive sense reading this. If you build a social network and then establish your business model as charging developers to build apps on top of that network, what's the business model those developers use to justify the cost? Are they going to sell ads? If the value of the service to the end-users is "all the third party apps", and those third party apps are all ad-driven, how does the underyling social network prefer that model, getting paid by developers who get paid by ads, over just selling ads and creating a small number of "apps" (like photo sharing) itself?
This is why I get so amped up about this entire discussion. One of the things that's so great about an API-centered business model is that there are a ton of creative decisions that have to be made in order to monetize it.
Do you sell per request? Per user? Do you charge a monthly fee and throttle the developers feed? Do you make some parts of the API, like user names and network names, freely available, while other parts are more expensive, like the edges of the social graph or individual interests?
These questions are so much fun. Finding the answers to them would be even more fun, and ultimately profitable, even if the answer to the question ends up being, "None of them work, let's go to advertising."
When Facebook jumped headfirst into advertising by hiring Sheryl Sandberg in 2008, they made it impossible to ask these questions.
Why do you single out and blame Sheryl Sandberg for this? Everyone making money on the consumer web agrees with her. If you aren't a selling hardware or consumables, you sell ads.
The point of the article is not that she's incompetent or bad at her job. The point of the article is that once Facebook hired her to help them come up with a business model, ads were a foregone conclusion. She led the charge on the monetization problem. There was never any serious consideration of real, creative alternatives.
I don't think she's done a bad job at Facebook. She's actually done a great job at selling ads - that's something she's been doing very well for 11 years now.
But a company like Facebook doesn't come along often, and when you're the COO of Facebook you owe it to your employees, your investors, your industry, and the world to attempt to create entirely new ways of doing things. There was no real creativity in the Facebook monetization solution - which sucks because up to that point Facebook was one of the most creative technology companies.
But blaming Sandberg for selling advertising is like blaming Elton John for selling music. It's what she does. Sandberg didn't make any real mistakes - she did the job she was hired to do. Facebook made the mistakes by letting her decide how to monetize.
Companies face entirely disparate problems at different scales. Let's charitably give App.net a valuation of $20M, and take FB's valuation as the approximately $42B the market says it's worth. This isn't even apples to oranges - it's 1 apple to 2100 oranges.
>“So why were photos and events so good?” he asked. “It was because despite all their shortcomings they had one thing no one else had. And that was integration with the social graph.”
You know, it's funny. The social graph is helpful, it means I can restrict who can see my photos. On the other hand, most of the photos I choose to share I'd be happy to have on the public Internet. I mainly keep them on Facebook so I don't have to pay for bandwidth or manage anything.
Honestly, though, if someone could provide the UI Facebook provided a few years ago (clean, uncluttered, with a good tagging mechanism) I would pay for it. I would have paid Facebook $5-10 a month if they had quit iterating a few years ago and focused on reliability and having a very clear privacy model that doesn't get broken by data model changes.
They should really adopt the Github model, with privacy being something you pay for. They might have to grandfather in some data, but they could stand to make a ton of money this way and restore customer trust.
You mean like dotMac? $100 pet year, much better than facebook photos, mildly popular, and crushed by free ad-supported, like every other piece of consumer software that isn't controlled by a platform monopoly gatekeeper.
Dotmac's problem is that it was an extension of the Apple platform, and not seriously optimized for when you are using a non-Apple machine.
Also, I'm talking about a freemium model. I wasn't aware dotmac had a free tier. I thought it was a premium product that's one of the things built into the large profit margins Apple takes on devices.
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[ 5.8 ms ] story [ 73.0 ms ] threadSandberg should start an ad agency on the East Coast. Miami is nice. That’s a job she’s qualified to do. Her rampant lack of business creativity should have no place in centers of innovation.
I found this piece superficial and, by the end, a little bit creepy.
Blaming the top management at Facebook for building a business on advertising is a little like blaming scientists for gravity. Who's bidding more for Facebook's functionality? The end users, who appear to be willing to pay $0.00, or the advertisers, who in the aggregate are demonstrably willing to pay billions?
I would agree that it is a poor article with little reasoning behind it, but I have no idea what sex the author is nor do I think it is sexist.
If anything it seemed like the author was discrediting her because her strategy included locking out developer. I'll meet you half way on the Miami sentence on agreeing that it was tacky. However, I think you are taking it out of context. It is apparent that the author doesn't like her, but no where does the article mention that she is not qualified because she is woman or anything remotely to that effect.
Please enlighten me. Did I miss a whole paragraph somewhere?
At Google she had excelled at selling online advertisements and growing Google into a cash gushing behemoth.
Any sniping I do at her in the rest of the piece, if you could call it that, couldn't offset praise as high as this.
The point of the article is not that Sandberg herself screwed up. I'd say she's responsible for almost every dollar of revenue Facebook has earned. The point of the article was that Zuckerberg and Facebook screwed up by hiring her, and the should rectify it by firing her and apologizing with a big severance package.
The point you are making about advertising at Facebook can be made without pointing the finger at one person. It would be a lot clearer, and the gaps in logic more obvious.
Even if one person is at fault (I'm not arguing that), in business, as in all things, it's generally better to focus on fixing the problem rather than giving up on the person. If we fired people every time they made a mistake then we'd all be unrmployed.
The part you quote are the last sentences; obviously it shouldn't be taken 100% seriously and I am surprise you did, since he obviously joked, as there are many other places than Miami that are nice to live, something I am pretty sure you are aware of.
Of course blaming top management is a way to go. That's the major difference between junior, senior and executives; in first two instances for your failures, up to some degree can be blamed rightfully anyway you want to: on a weather, on other emps unwillingness to work hard, etc. But when you are that high in hierarchy as an executive who can hire or fire thousands of emps at once, and should have broad insights into every company's corner, there are no more excuses available to you: you either did your job and succeed, or you did your job miserably and failed. There is just too much power all the way on the top to blame weather or junior emps for your own failures.
Said that, this article is quite frankly right on spot. Other than obviously the author is not a stock market researcher and may not know the numbers behind this stock (P/E f.e.) cannot help but push it down to a reasonable levels, he is right that CEO and COO had entirely different approach to making money.
1. The source material for this whole article, which concludes by suggesting that Sandberg should move to "nice" Miami to start an ad agency, is a book that was published in June '10.
2. The core critique of the article is that Facebook derives most of its income from advertising, when it (somehow?) might have done something different. The author never specifies what. The most damning thing the author appears to be able to say about that decision is, the entire Facebook upper management team agreed with Sandberg about this.
Aside from that: what's "creepy" about my response? I wasn't explicit about this, but what was "creepy" to me about the story was the way it pitted nerdy male Zuckerberg against "nice" female Sandberg.
I guess the guy wrote the article trying to explain how Zuck had this idea about network where eventually revenue will come from API/graph/developers and at the end he throw a sentence that Sandberg should move to Miami. I am not sure if being focused on this one last sentence was his goal and you made it sound like it did.
As of "nerdy male Zuck" vs. "nice female Sandberg", sorry but that did not cross my mind even once.
I think the word you meant to use, regarding my comment, was "obnoxious". All pejoratives are not created equal. Singling one person out in a blog post and lobbying that they be fired with no evidence other than what was written years ago in a mass market book, and that they should go to a "nice" city and start an ad agency? I found that creepy. Yelling on HN about that point of view? You found that obnoxious, I'm betting.
What did Sandberg actually kill here? Isn't the "operating system" referred to in the quote the overall Facebook platform, which still exists?
2. Is app.net really a success just because the kickstarter was funded? That's a bit hyperactive. Let's hold off judgment until a year or two and see if their revenues are larger than their costs.
3. The article author makes the naive assumption that a falling stock price can be interpreted as a business failure without actually looking at or mentioning Facebook's actual financials.
If you are building an advertising/media business, it would then follow that you need to own all of the screen real-estate that users see. The next logical step would be to kill all 3rd-party clients, and lock down the data in the global firehose in order to control the “content”. - Dalton Caldwell
Sorry if it was unclear.
2. I don't think app.net is a success yet. I'm not sure it can be. I don't think users want to pay for access to Twitter or Facebook, but I do think there is a place for charging developers for access to a social API.
3. I guess I figured Facebook's first earnings report as a public company would be common knowledge on a site like Hacker News. Here's an article that breaks Facebook down post-IPO: http://www.msnbc.msn.com/id/48770049/ns/business-us_business... From the article:
In its first earnings report as a public company, Facebook says revenue grew 32 percent to $1.18 billion in the second quarter, slightly above analyst expectations. It had a net loss of 8 cents per share, mainly due to stock compensation expenses following its IPO. Adjusted earnings of 12 cents per share matched Wall Street's expectations. Investors weren't impressed, though, and its stock fell in trading.
For a company with growth and expectations like Facebook - something that's supposed to be as formidable or more so than Google - this couldn't be seen as anything but a disappointment.
I think this puts wayy too much responsibility on Sandberg's shoulders. It's not like Zuckerberg was on a sabbatical for a year and came back to see everything changed. If he disagreed with Sandberg then he was in every position to make a different decision. He didn't. If there is "blame" to be assigned (I'm not convinced there is), it sits squarely on Zuckerberg's shoulders.
By the time they picked their business models they had already taken in hundreds of millions in funding. The dollar size of the developer market is tiny compared to the ad market, so they could never justify their valuations by selling to developers. The middle ground the author proposes just doesn't make any sense.
app.net has only taken $5M in funding, so if they manage to make a couple of million a year that could be considered a success.
Can Facebook or Twitter make hundreds of millions of dollars a year by selling access to the API? Even if they did, could they do it without competing with their customers? Very doubtful.
Zynga, presently, is worth ~2.5B. How many Zynga-like companies would there be if Facebook was focused on creating the best possible experience for their developers? The moving-target, locked-down API they peddle instead is a poor alternative motivated entirely by their focus on the advertising business model.
It's a big what-if, and the premise of my article is really that they should have found out before they settled on advertising. It was a mistake to hire Sandberg when they did, because once they made her the COO the company had no other monetization options then advertising.
Maybe they could have focused on developers. Then, they'd definitely have better APIs; maybe developers could easily build products that leveraged Google's search index! Great APIs, and also tens of billions fewer dollars.
And giving credit were credit is definitely due, Sheryl Sandberg played an extremely important role in making that business what it is today. Her mistake, and Facebook's mistake, was thinking that it could be repeated - that somehow the data that Facebook was leveraging was as valuable to advertisers and as unobtrusive to users as the data that Google was leveraging. This is not going to turn out to be the case - you will simply never see Facebook doing $30B per year in advertising revenue like Google does. Their traffic numbers are already similar, there is no reason to believe Facebook will be able to 10x their revenue when their traffic is already peaking.
Do you sell per request? Per user? Do you charge a monthly fee and throttle the developers feed? Do you make some parts of the API, like user names and network names, freely available, while other parts are more expensive, like the edges of the social graph or individual interests?
These questions are so much fun. Finding the answers to them would be even more fun, and ultimately profitable, even if the answer to the question ends up being, "None of them work, let's go to advertising."
When Facebook jumped headfirst into advertising by hiring Sheryl Sandberg in 2008, they made it impossible to ask these questions.
I don't think she's done a bad job at Facebook. She's actually done a great job at selling ads - that's something she's been doing very well for 11 years now.
But a company like Facebook doesn't come along often, and when you're the COO of Facebook you owe it to your employees, your investors, your industry, and the world to attempt to create entirely new ways of doing things. There was no real creativity in the Facebook monetization solution - which sucks because up to that point Facebook was one of the most creative technology companies.
But blaming Sandberg for selling advertising is like blaming Elton John for selling music. It's what she does. Sandberg didn't make any real mistakes - she did the job she was hired to do. Facebook made the mistakes by letting her decide how to monetize.
I suspect foul play by members of FB executive team / board.
You know, it's funny. The social graph is helpful, it means I can restrict who can see my photos. On the other hand, most of the photos I choose to share I'd be happy to have on the public Internet. I mainly keep them on Facebook so I don't have to pay for bandwidth or manage anything.
Honestly, though, if someone could provide the UI Facebook provided a few years ago (clean, uncluttered, with a good tagging mechanism) I would pay for it. I would have paid Facebook $5-10 a month if they had quit iterating a few years ago and focused on reliability and having a very clear privacy model that doesn't get broken by data model changes.
They should really adopt the Github model, with privacy being something you pay for. They might have to grandfather in some data, but they could stand to make a ton of money this way and restore customer trust.
Also, I'm talking about a freemium model. I wasn't aware dotmac had a free tier. I thought it was a premium product that's one of the things built into the large profit margins Apple takes on devices.