Facebook CEO Mark Zuckerberg gave his first public interview after his tech company's rocky IPO and the disappointing stock performance that followed. Facebook's share price is now worth about $19 — half as much as it was priced back in May when its stock first went on the market.
Zuckerberg took questions from Michael Arrington at TechCrunch Disrupt, a San Francisco conference for startups. We watched and listened in to the talk in case you missed it:
Building a mission and business go hand-in-hand
When asked whether Facebook has a morale problem with the stock-price fluctuations, Zuckerberg said the price "doesn't help." But the CEO said this isn't the company's first up-and-down season.
"People at Facebook are used to the press saying good and bad things." What motivates Facebook employees "is building stuff that they're proud of. This isn't just Facebook. This is universal ... It's a great time for people to stay and double down."
Going forward, it's all about mobile
"Now we really are a mobile company. All the code we write is [for] mobile."
He even acknowledged writing his founder's letter to current and potential shareholders on his mobile phone.
He said. "I do everything on my phone. A lot of people do."
The decision to move to a mobile-first strategy follows that of most technology companies, which note that mobile platforms are where users are spending more time.
"On engagement, we're already seeing that mobile users are more likely to be daily active users than desktop users. They're more likely to use Facebook six or seven days of the week."
Mobile platforms also present new and different opportunities for making money.
Profiting on mobile is more akin to how TV makes money
Ads have to be more integrated on mobile because, unlike on a screen, there's no right rail on which to put ads. Zuckerberg says Facebook's product teams are thinking about developing new features with advertising fundamentally integrated.
"I think we know that we're going to do well on that. The question is getting there."
Going all in on HTML5 was a major misstep
When it came to developing Facebook for various platforms, the company's decision to code in HTML5 was its biggest mistake, Zuckerberg said, costing it two years and ultimately not panning out.
"We were just never able to get the quality we wanted."
After failing in its effort, the Facebook team had to start over and rewrite its applications code in "native."
Native applications are built using device-specific tools, which require specialized coding skills and have to be written for each platform. But the upside is they can do fancier things and are often faster.
"The apps are now going to be in better shape now."
Workflow inside Facebook changed
In a part of the talk that will appeal to you systems and workflow techies out there, Zuckerberg explained that the company went from being functionally organized — with one head of engineering, one head of product — to product groups. Today, Facebook has a newsfeed group, a platform product group, etc.
"Now there's a person who owns each one of those."
Zuckerberg said this organizational structure will lead to some exciting rollouts in six to nine months.
On Instagram: 'They're killing it'
Facebook bought photo-sharing site Instagram for a cool $1 billion this summer (though the value of the deal has fallen along with Facebook's stock), a move that led to mixed reviews for both companies involved in the deal.
But Zuckerberg says it was a marriage that benefited both sides. He explained that Instagram was starting to get a lot of distribution on Facebook, but didn't want to bet just on one company; Facebook, on the other hand, didn't want to help Instagram with an abundance of resources without gaining value.
So, eventually Zuckerberg decided they could just become one company.
"We're going to execute on the features we decided on early. We want to help it grow to hundreds of millions of users. But we have no agenda of making them go onto our infrastructure. ... I think it's primarily a waste of time."
Facebook is not making a Facebook phone
"It's so clearly the wrong strategy for us."
He argued that if Facebook theoretically built a phone, it wouldn't move the needle for the social-networking company. The Facebook strategy he outlined is distinct from other tech companies that are getting into hardware. It's to build a system that's integrated into every major device people want to use, instead of building the devices themselves.
Search is an "obvious thing" Facebook would want to do in the future
Facebook's search feature already gets a billion queries a day without trying, Zuckerberg said.
"Most of it is people trying to find people, but others are people looking for brand pages or apps that links to commercial behavior. I think there's a big opportunity there."
He observed that the nature of search engines is evolving to give users a set of answers instead of merely a collection of relevant information.
"Facebook is uniquely positioned to answer questions that people have, like, what sushi restaurants have my friends gone to in New York lately and liked? ... These are queries you could potentially do with Facebook that you couldn't do with anything else, we just have to do it."
Zuckerberg says there is a search team at Facebook, but won't say how many engineers are on the team.
For Zuckerberg, it's not about fun, it's about mission
With his anxious and speedy delivery on stage, it was unclear whether Zuckerberg was enjoying himself at all these days. But he said that's not the point.
"There are times when everyone in the world thinks what we're doing is awesome. ... There are times when people are superpessimisitic," he said. "I personally would rather be in the cycle when people underestimate us. I think it gives us latitude to go out and take some big bets and do some things that excite and amaze people."
He wants the legacy to be connecting to everyone in the world.
Zuckerberg only codes for fun now
Zuckerberg says he doesn't code to the main branch of Facebook anymore because he doesn't want anyone else to have to keep up with what he does.
He said of his programming.
"Everything I [do] ... breaks."
He talks really fast
Zuck Believes Facebook Can Compete in Search
It remains to be seen whether Zuck can get social search to work like it has for Google and its new social network Google+. First, Google search is fully entrenched, and the search engine of choice, and dominant market leader. Whether Facebook can crack the search market against such a behemoth is questionable. Google had 66.4 percent of the U.S. search market in August according to research firm comScore. Microsoft's Bing had 15.9 percent share and Yahoo Inc had 12.8 percent share. It has taken BING the better part of two plus years to gain a foothold in the search market. Second, Google search's algorithms are much more robust and include more than just internet searches but video, image, patent, books and music searches. Most of the one billion search queries a day that Facebook currently garners are for Facebook users looking to find other people on the world's No.1 social network, Zuckerberg said on Tuesday. But he said that a meaningful portion of the queries are also for businesses, brands and apps on Facebook. In short, Google is able to provide a much better overall search experience. Third, Google Search provides advertisers a proven advertising platform and can provide measurable metrics, analytics and ROIs. Facebook's advertising platform is still a work-in-process, lacking accurate measurement metrics, expanded targeting and ROIs. It just recently added analytics, but there's one catch, you must pay for ads in order to benefit from it.
Zuck openly admited that Facebook had no mobile ad revenues three months ago, and it is only now beginning to monetize mobile. To give you some idea just how much work Facebook needs to do before generating significant revenues from mobile, let's look at some data.
Facebook Daily Active Users (DAUs) and Monthly Mobile Active Users (MMAUs)
Facebook's Monthly Active Users (MAUs) have been declining significantly while its Monthly Mobile Active Users (MMAUs) have been increasing rapidly as internet users have began switching their online time from their desktop computers to mobile devices.
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Mobile Ad Revenues by Company - 2011 and 2012-2014 (Estimated)
At the end of 2011, Facebook had no mobile ad revenues (see below). Google was the market leader in mobile advertising with a 24% market share. Google was followed by Millennial Media (17%), Apple (15%) and Jumptap (10%).
Click Image To Enlarge
According to eMarketer, Twitter will generate more US mobile advertising revenues in 2012 than Facebook.
Twitter will earn $129.7 million in mobile advertising revenues this year in the US, eMarketer projects. Facebook, which rolled out mobile ads for the first time this year, will come in at just over half that amount, at $72.7 million in the US.
Both companies earn far less mobile revenue than companies with more established mobile ad platforms like Google and Pandora, though growth in mobile revenues at both social networks is expected to remain high throughout the forecast period.
The increasing focus on mobile by both Twitter and Facebook, as well as other major digital advertising publishers, will contribute to growth in the overall US mobile advertising market, which eMarketer estimates will reach $2.61 billion this year. By 2016, the US mobile advertising market is expected to near $12 billion, according to eMarketer.
As you can readily see, Facebook is joining the U.S. mobile ad market so late in the game, that its U.S. mobile ad revenues will be very negligle in 2012, and even by 2014, will still lag well behind Google by a significant margin. Facebook claims that Sponsored Stories are showing a lot of promise, but mobile display ads are what advertisers want, and it remains to be seen whether Facebook can break the mobile ad DNA code to become a significant player.
Facebook faces a huge disadvantage when it comes to mobile: It does not own its own mobile device platform like Google (Android) and Apple (iOS). Android and Apple have such a huge lead in mobile devices (smartphones and tablets) that I just don't see how it can become a major mobile ad player.
Facebook's glaring weakness in mobile has been the biggest reason why so many stock analysts have lowered Facebook's revenue estimates for 2012 and downgraded the Facebook's target price. In a blog post dated September 1, 2012, I commented on eMarketer's revised estimate of Facebook's revenues from $6.1 billion to $5.04 billion in 2012. As a result of the announcement, Facebook's stock hit new low of $17.69 on September 4, 2012. Zuck's recent announcement that he would not cashin more of his stock for at least a year and Tuesday's interview with the media on TechCrunch Disrupt has increased Facebook's stock price to $20.71 as of today.
Courtesy of an article dated September 11, 2o12 appearing in NPR