Facebook: A Mark Zuckerberg Production

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A case study written by myself with a team of my classmates. We explored Mark Zuckerberg's leadership style and how his vision enabled young leaders in the Middle East to start a revolution.

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Facebook: A Mark Zuckerberg Production

  1. 1. 20001549402000200660FACEBOOK:An analysis of one leader who has enabled many leaders. At only 26 Mark Zuckerberg has achieved more wealth and influence than many people have ever dreamed. While building-up a $50 billion dollar company he has connected the world and enabled a revolution that has broken-down barriers. 6900096000FACEBOOK:An analysis of one leader who has enabled many leaders. At only 26 Mark Zuckerberg has achieved more wealth and influence than many people have ever dreamed. While building-up a $50 billion dollar company he has connected the world and enabled a revolution that has broken-down barriers. 730005673725centerA Mark Zuckerberg Production2420096000A Mark Zuckerberg Production<br />centertop<br />“Giving people the power to share and make the world more open and connected.”<br />- The Facebook Vision<br />INTRODUCTION:Although recently coronated “our new Caesar” in The Vanity Fair 100, a list of the most influential people of the time, 26-year-old Mark Zuckerberg is not without his critics.  Zuckerberg, who looks and dresses every bit his age, has been accused of being overly controlling and of making a huge mistake when he famously declined a number of credible offers from Yahoo, Microsoft, and others to buy Facebook. In these critical circles, he has been characterized as an ‘enfant terrible’ for past actions and his affected—and sometimes, downright rude—behavior.  His invention—Facebook—has been panned as trivial, “bad for the brain,” and a forum to promote narcissism.  His peccadillos, gloriously magnified in “The Social Network,” range from awkward to cutthroat. <br />Zuckerberg—with help from fellow Harvard classmates Eduardo Saverin, Dustin Moskovitz, and Chris Hughes—developed thefacebook.com on the heels of Facemash, a guerrilla “hot or not” style portrait  comparison tool.  The original concept was to provide a social networking tool for Harvard students who at the time lacked a formal printed facebook.  Within 4 hours, the site had 450 users generating more than 22,000 picture views and after only a month, more than half of Harvard’s undergraduates had signed up and were actively using The Facebook.  Zuckerberg and his team worked quickly to expand the site to other elite colleges—including Columbia, Yale, Stanford, BU, NYU, and MIT—before opening membership to all .edu email addresses, followed later by high school student users and then opening it up to the general public.<br />FACEBOOKIn her article, The Facebook Age, Sally Dennen describes the early and simplistic days of the website, “Facebook made it so that everyone’s page looked pretty much the same. In some ways, it was boring. That was an early complaint. Like, here’s the place where your picture goes and here’s where you post [a public message to all friends]. It looked sort of like an Amazon<br />page, a file folder.”  Although initial site functionality was primitive Facebook was the first social network to combine photo management, general profiles, status updates, and the wall into one site without requiring plug-ins or multiple user accounts such as Myspace and Friendster.  Over time, the site gained functionality and features, such as games, groups, the news feed, and Facebook Connect thus integrating a user’s entire web-experience with his Facebook preferences and usage.  To put Facebook Connect into perspective, over a million websites have integrated with Facebook, and more than 150 million people engage with Facebook on external websites every month. <br />While functionality has greatly increased as Facebook has matured, many of the site’s users still use Facebook largely for social purposes - instant messaging , photo sharing, updating their network of any and all mundane occurrences of daily life.  Critics contend that Facebook can have serious negative implications for students—the firm’s original target customer.  One Ohio State University study showed that GPAs for Facebook users were a full letter grade lower than those who did not use the site.  Additionally, non-users studied anywhere from six-to-fourteen times as much on a weekly basis. <br />Business professionals are struggling to prioritize their Facebook usage as well - 6.8% of all business Internet traffic goes to Facebook, which is double the amount of business traffic that goes to Google and nearly triple the amount that Yahoo gets. Facebook has become the fourth largest source of visits to news and media sites, after Google, Yahoo and MSN, accounting for 3.52 percent of all “upstream visits.” Ben Parr brings some perspective to the issue in his article, Facebook is the Web’s No. 1 Timesink, stating, “People now spend more time on Facebook than on all of these combined: Google, Yahoo, YouTube, Microsoft, Wikipedia and Amazon. <br />Other startling statistics that can be found on the Facebook website include:    <br /><ul><li>People spend over 700 billion minutes per month on Facebook.
  2. 2. Average user is connected to 80 community pages, groups and events.
  3. 3. More than 30 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each month.  
  4. 4. Average user creates 90 pieces of content each month. </li></ul>But while some people may be criticizing Facebook as a distraction others see it quite differently, "There isn't a shred of evidence that Facebook is bad for young people. On the contrary, it's a wonderful thing that, with balance, helps them grow, helps their mental abilities develop and it should be encouraged," said Tapscott, the author of "Grown Up Digital." CPG Brand leaders would argue the benefits of Facebook is that it has opened up a two-way conversation between consumers and major brands, allowing companies to not only respond to consumers, but incorporate their insights into the products they’re developing. <br />ZUCKERBERG’S LEADERSHIPFor many critics, Zuckerberg personifies exactly what they detest about Facebook—namely that he is self-absorbed, egomaniacal, and petulant. As Jose Antonio Vargas describes him in The New Yorker: <br />“His affect can be distant and disorienting, a strange mixture of shy and cocky…Sometimes he pauses so long before he answers it’s as if he were ignoring the question altogether. The typical complaint… is that he’s “a robot.” Indeed, he sometimes talks like an Instant Message—brusque, flat as a dial tone—and he can come off as flip and condescending, as if he always knew something that you didn’t.”  <br />Zuckerberg is famous for disengaging from conversation the moment he loses interest.  He has been dinged for resolutely refusing credible buyout offers from the likes of Viacom (three times), Google (twice), Yahoo (twice), and Microsoft amidst others.These charges are supported, at intervals, by miscalculations on the part of Zuckerberg and Facebook.  The IS architecture is notoriously cumbersome and expensive to scale.  “He’s made questionable management decisions…He’s fumbled the site’s redesign and botched the company’s terms of service agreement” and—contrary to popular opinion—not every swing for the fences results in a home run. Famous blunders have included, implementation of the Facebook Newsfeed spawned a group, “Students Against Facebook Newsfeed” that within days accumulated 750,000 members, at the time 10% of all Facebook users. Beacon—a program, which directs tailored advertisements to user’s newsfeeds—was widely panned by Facebookers before Zuckerberg pulled it.  These blunders are likely directly correlated to “the four values that [Zuckerberg] has made a key part of his company’s DNA: move fast, be bold, take risks, and don’t worry about getting everything right.” This begs the question:  does Zuckerberg always know what is best for his users and the company?With over 700K new subscribers each day, and a user base that doubles the current US population, Facebook blurs the line between a growth company and a mature firm.  In thinking on Zuckerberg’s leadership, one must be careful not to condemn or exonerate him too quickly.  Though he lacks many of the traditionally desired skills of a leader, Zuckerberg is humble (he drives an Acura and rents a small house near the office), generous (recently donated $100MM in Facebook stock to Newark, New Jersey schools), and a constant source of visionary change. <br />As far as the four core values he pushes, while they have led to mistakes, Zuckerberg does not fear making mistakes rather he sees them as learning opportunities. Marcy Swenson quotes Zuckerberg in her article, Zuckerberg on Making Mistakes, “‘I’ve made so many mistakes in running the company so far… Basically any mistake that you think you can make, I’ve probably made, or will make in the next few years.’ He goes on to describe that if you are building a product that people love, you can afford to make mistakes [in the name of improvement and growth], and people will forgive you. For instance in the case of the News Feed bungle Zuckerberg quelled the angry mob with an apology to the users and a personal note to the “Student’s Against Facebook Newsfeed” group’s creator asking how he can improve the user experience when launching major improvements to the site.<br />At 26, Zuckerberg, like his company is himself still in that grey area between growth and maturity, and some of his uncharacteristic behaviors may simply be a symptom of youth.  As Rooke and Torbert point out in their article, Seven Transformations of Leadership, we must, “Recognize that great leaders are differentiated not by their personality or philosophy but by their action logic.”  Mark Zuckerberg’s visionary leadership has not created merely a social network but a game-changer in the ways we connect and share information.  With seven complete overhauls of the Facebook design, features and functionality, and a recent project in which they redesigned computer servers to be more efficient and sustainable Zuckerberg seems capable and on his way to transforming from the visionary and unconventional Individualist action logic to the open, collaborative, shared-vision action logic of a Strategist. <br />FACEBOOK’S GROWTH036766500Facebook has experienced burgeoning growth at unprecedented levels since its inception in 2004. As shown in the graph above, total Facebook users increased from 5.5 million in 2005 to an estimated 600 million six years later. Analysts expect a total of 800 million users by the year 2012. Much of Facebook’s future growth will coincide with the internet growth in emerging economies. Moreover, internet is increasingly being accessed via mobile phones and this industry is another sector of the world economy that experts say will realize significant future growth. To put the mobile industry growth in perspective; an estimated 4.2billion people worldwide own a toothbrush compared to a total of 4.6billion people who have access to a mobile subscription. Additionally, more people own a cell phone than have access to running water in their homes. This growth is a significant growth factor for Facebook as; more than 200 million active users are currently accessing Facebook through their mobile devices. Additionally, people that use Facebook on their mobile devices are twice as active on Facebook than non-mobile users.Only nine months into 2010, Facebook generated an estimated $400 million in profit for the year. This level of profit after only six years of existence is unparalleled in the industry even for the industry leaders.  It took Microsoft eight years to reach $50 million, Oracle ten years, and Google six years.FACEBOOK EVOLUTIONIn 2004, Facebook was restricted to Harvard students but slowly began expanding access to other Ivy League schools such as Yale, Columbia, and Stanford. In 2006, two years later, Facebook would be open to any user with a valid email address. As Facebook’s total users increased, its total revenue would follow suit.0136779000From 2006-2010, Facebook’s total revenue experienced an eye-popping CAGR of 112%. The burning question that Wall Street and investors want to know is if these growth rates sustainable. Facebook’s future growth will be highly dependent on the adoption rate of emerging economies. Many of these economies lack the political environment that would allow Facebook to run freely with no restrictions and government regulations. Moreover, many of the consumers in these economies cannot afford a computer making internet access and Facebook adoption impossible. The chart below shows the adoption growth of Facebook in a few of these emerging economies (3/1/10-4/1/10). <br />Facebook generates revenue from a number of sources, most notably through advertising and Facebook Credits, a virtual market of good that sell through the site. An estimated $1.86BN in advertising dollars was invested on the site in 2010 and is anticipated to increase to $4BN this year. Facebook receives 30% of all Facebook Credit transactions, which account for a total market of $836MN. As the digital space changes rapidly and users can be fickle, there is some uncertainty of Facebook’s revenue growth and opportunity to expansion beyond these revenue streams. Facebook is trying to monetize a fraction of the rapid and growing success of online gaming industry through social media platforms.  Only time will tell if this becomes a viable business opportunity for Facebook.<br />SOCIAL REVOLUTIONIf you were to ask, “What is Facebook used for?” The answer to that question would be dramatically different depending on whom you ask and at what point in its history you asked. Many will say keeping in touch with friends, sharing photos, and finding out about events however, a student at American University might recall the time “when a blizzard hit this past winter, [and the] class improvised a virtual lecture on Facebook.” Another person may recall Facebook’s role in Senator Barack Obama’s 2008 Presidential Campaign in which he, “enlisted Facebook co-founder Chris Hughes, Zuckerberg’s former college roommate, to launch a strong social-media campaign, which played a significant part in his victory.” And if you asked Google executive Wael Ghonim, identified by Mubarak's government as the creator of that first Facebook page, he might say it was an essential organizational tool in the Egyptian Revolution. <br />Facebook has facilitated the creation of virtual online communities, which have come to mean as much, or more than our geographical communities do. Facebook, with other social media platforms, has allowed for the channeling of online information in such a way as to connect people, inspire them, give them courage - a means to organize, and a means to witness, in front of the world, the playing out of the revolution in a way that has never been possible before. The instantaneous nature of social media for self-broadcast ideas, free from the restrictions of publication deadlines and broadcast news slots, explains, in part, the speed at which the Egyptian and other “Social Revolutions” have unraveled, their spread across regions almost viral in nature.The Egyptian revolution, dubbed as the ‘Social Media Revolt,’ “started Jan. 25, with a call-to-action -- from a Facebook page dedicated to Khalid Said, an Egyptian businessman who was beaten to death by police last summer after threatening to expose police corruption. With a nudge from Ghonim’s aforementioned Facebook group more users turned to Facebook to help spur the revolts that toppled Egypt’s corrupt government. Activist groups also had been using the social network Twitter to call for reform and to support the efforts of Egypt’s own ‘digital revolutionaries.’ Although the Egyptian government cut off access to the internet during the revolution the stage for a revolt had already been set, people stepped out from behind their computer screens and took to the streets. Social networks, and in particular the Facebook groups, played a remarkable role in mobilizing protesters before the internet was cut off.The effective organization and perseverance of the young Egyptians who lead this revolution have made it necessary for President Mubarak to leave the presidency and for the army to step into authority to remove the old system. Inspired by the victory in Egypt, similar revolutions resulted in Tunisia and Libya. As the tension in the region continues to rise, Facebook continues to play a significant role in the escalation.Although Facebook has become a primary tool for activists, the social media giant does not want to be seen as picking sides for fear that some countries would restrict or more closely monitor its users. The significant role of social media in Egyptian revolution inevitably resulted in more fierce accessibility restrictions to Facebook in other countries vulnerable to similar social revolts. Libyan dictator Muammar Gaddafi had cautioned his citizens to limit their Facebook use when the revolution took place, and Libyan activists had to ask Egyptians to send their SIM cards across the border in order to communicate without being bugged. Facebook has been blocked intermittently in several countries including China, Vietnam, Iran, Uzbekistan, Pakistan, Syria, and Bangladesh on different bases. In addition to Facebook and Twitter, any information on the social revolution in Middle East has been blocked in China. In Dec 2010, just two months before the social revolution took place in Egypt, Mark Zuckerberg visited China. At the time, many investors and Chinese citizens were excitedly anticipating the launch of Facebook in China. With a population 1.3BN, the impact on Facebook’s growth would have been enormous. However, with the precedents in the Middle East, it is now next to impossible for Facebook to expand into China in the near-term. Until this time, the Chinese government, understanding the inherent need for humans to have social outlet to express personal views, has developed a similar networking site-renren.com with very strong control and censorship.Decision Rationale: Reject Sale and Conventional Wisdom<br />Americans do not typically picture an equipped leader of a multi-billion dollar company as an intellectual twenty-six year old in a hoodie and flip-flops. However, after tracing the development and growth of Facebook, it becomes clear that more attention should be paid to Zuckerberg’s leadership style and vision. When Mike Harvey asked in the Sunday Times, ‘What does leadership mean to you?” Zuckerberg responded, “Leadership is basically about creating focus. It is about ensuring we are focused on the right stuff and getting good people in to help build what we are trying to do.” <br />1968555562500When Yahoo initially offered to purchase Facebook in 2006 for $1billion, onlookers thought that Zuckerberg would be foolish to decline. After all, he had established a mere social networking website to share pictures and poke friends with no clear revenue stream in sight. Citing the stagnation of MySpace’s growth upon selling to a media conglomerate, Zuckerberg responded to his critics saying, “We really just believe in what we’re doing,” and “I really care about the mission, making the world open.” Zuckerberg continues saying, “The goal of the company is to help people to share more in order to make the world more open and to help promote understanding between people. The long-term belief is that if we can succeed in this mission then we also are able to build a pretty good business and everyone can be financially rewarded.” Five years later, even his biggest critics have changed their tune, as his clear vision for the company, and urging to for continued and rapid improvement regardless of mistakes have built a company that not only connects the world but has led to freedom of speech revolts in some of the worlds most regulated countries. <br />For the exact same reason, conventional wisdom from so-called industry leaders did not seem to apply. Wisdom typically comes from experience and knowledge, two attributes that were all but thrown out the window when it came to Facebook’s business model. There was no precedent for the growth in popularity or the potential market penetration of such a unique product. In only five years Facebook reached 175 million users, a growth rate that far exceeds other great inventions such as the telephone (89 years), television (38 year), and even the cell phone (14 years - see infographic). With such a lack of precedence and a clear vision of Facebook’s potential Zuckerberg, with his at the time Individualist action-logic, was perhaps wise to decline advice from outsiders in the early years and instead to rely on help from his friends and employees who had been with Facebook since its dorm room inception. Sally Dennen describes the company culture on a recent visit to the Facebook offices, “The goal is a high-energy culture [that] invites staffers to interact and weigh in on products for the ever-expanding functions of Facebook, which is based on the idea of sharing—such as sharing pictures, messages and video.” Zuckerberg, the article continues, used the word sharing a lot. Is Zuckerberg’s reliance on shared vision an indication that he is making that difficult transition to Strategist action logic? <br />Future Potential<br />Facebook reported 2010 earnings of nearly $2 billion and advertising sales are expected to double in 2011. Adoption rates have increased exponentially over the past seven years, adding 200 million new users in the past twelve months. Industry analysts have never seen growth rates of this magnitude, so the future of the website is largely unknown. It is likely that growing profits will eliminate doubts about Facebook’s lack of scalability due to server or architecture constraints. It is possible that the company could go public or be sold, but will likely not experience the same success without Zuckerberg at the helm.<br />The fact that remains certain is that Facebook is quickly developing at one of the world’s largest media outlets, and the site’s ability to influence human behavior is significant. The site is experiencing the most growth internationally, which is surely a trend that will continue as markets become further saturated with interested internet users. Given the site’s vast adoption rates and ability to disseminate information quickly, the Facebook platform could ultimately become the world’s primary source for international communication, news, and media of every kind. It will be interesting to monitor Mark Zuckerberg and Facebook’s partnerships in the coming year as additional revenue drivers are identified and the future course of the company becomes more evident.<br />Points to Ponder<br />Having researched various aspects of Facebook and Mark Zuckerberg as a leader many questions can be raised. Below are some points to ponder that we will likely discuss in class.        <br /><ul><li>One critic has said, “Facebook is not driven by the leadership style of Mark Zuckerberg,” says Pace’s Kurnit. “It has become a runaway success function of Zuckerberg’s tremendous insight into what people want, how they relate and what socializing means online, kind of a ‘build it and get out of the way’ idea.” Do you believe as many have claimed that Zuckerberg is in fact an “accidental billionaire?” Or has his vision, and understanding of when to maintain control and when to share translated into a $50BN success.
  5. 5. From the beginning, Zuckerberg has expressed a mission of making the world a more open place and early this year addressed the aforementioned revolutions as personal interest on his Facebook profile. What can Zuckerberg do to cope with the increasing censorship on Facebook in other regions due to its significance in the previously mentioned social revolution?
  6. 6. There are 610,736,920 Facebook users, that is one account for every 11 people on the planet. Every month, more than 250 million people engage with Facebook on external websites through Facebook Connect. With a user base of this size, does Zuckerberg still have control over Facebook? Will his vision affect the way we use the site, or will the way we use the site affect how Facebook grows functionality?
  7. 7. We’ve heard about their server problems in our MIST class. Recently Facebook launched the “Open Compute Project.” In which, through open source (sharing) they have built a data center that 38% more efficient and 24% less expensive to build and run than other state-of-the-art data centers. Is Facebook about to move into Hardware products? Where do you see growth opportunities for the website? For the company?

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