Media :: Facebook: the revenge of the nerds

We'll look at the other side of the coin in a moment, but first let's give credit where it's due and admire the obverse: I'm delighted to see Facebook going public, just deserts for Mark Zuckerberg and his group of very smart techies.

If you have the time and inclination, take a walk through Facebook's SEC S-1 filing in preparation for its IPO – you won't regret it. Pay particular attention to the manifesto Zuckerberg calls The Hacker Way and allow this ageing geek (I'll soon be 28) to sing its praises. Consider this verse:

"We have a saying: "Move fast and break things." The idea is that if you never break anything, you're probably not moving fast enough."

Where others have stumbled as they shuffled, Zuckerberg and his gang have raced to create a technical giant. The infrastructure required to support 845 million "monthly active" users that upload 250m photos each day might not be Google-sized (yet), but it's definitely Google-class.

 King geek: Facebook founder Mark Zuckerberg.

To show off this plumbing, Zuckerberg & Co. took a few pages from Apple's (and Google's) stylebook: They stuck to a simple, clean UI – unlike Myspace and its pavement pizza chic.

Facebook's success isn't just a sweet retort to Zuckerberg's critics, it's a confirmation of what makes Silicon Valley tick: techies, geeks, and nerds. While the technoïds aren't always right – far from it – the great ones end up making and running great companies.

The establishment bluestockings may roll their eyes at the hoodies and bare feet, but look at what happens when the suits take over. Look at HP, Yahoo, or Cisco; regard Apple during its dark age.
It wasn't very long ago, I recall gleefully, that the kommentariat cluck-clucked disapprovingly over the founder's "obvious'' immaturity, his tactless management style, his poor public-speaking manner. But when you read Facebook's S1, you'll realise how good a negotiator Zuckerberg must have been early on.
Since its inception, the company has raised about $1.5bn (£952m), an unusually large amount for a startup, and well above the threshold that usually translates into management castration as investors demand a bigger share of the spoils, ransom for their assumption of greater risk.
Instead, Zuckerberg got investors to go for the radius of the pizza as opposed to the angle of the slice, their ownership percentage. Zuckerberg may own "only" 28% of Facebook, but he manufactured agreements that give him effective control of the company with 57% of voting rights.
Some will downplay the achievement: "He must have gotten good advice." Of course … but he followed it. When you're in charge, the quality of the advice is no excuse for bad performance; conversely, good advice shouldn't be used to dismiss good results.
Speaking of which, in 2011, the company's revenue was $3.7bn, with a tidy $1bn profit and $3.8bn in cash – to which they'll be adding at least $5bn in the upcoming IPO. This is a nicely profitable company.

The Washington Post's Wonkblog put Facebook's performance in graphic perspective:

Take a look at the number of employees: a mere 3,200. With $3.7bn in revenue, that works out to $1.2m per worker. Turning to cash per worker ($3.9bn/3,200=$1.2m), Facebook is about as rich as Uncle Apple's $1.3m cash per "full-time equivalent" employee. It's a remarkable achievement for any company, and unheard of for one so young.

But it's not all roses.
As Zuckerberg's Letter To Investors properly contends, Facebook can "change how people relate to their governments and social institutions" and "improve how people connect to businesses and the economy".
Making tons of money in the process is totally legit … as long as a key condition is met: informed consent. And "informed consent" mean just that: information that a reasonably attentive individual – as opposed to an Apple patent attorney – can understand.

On this count, Facebook's actions have been less than transparent. Perhaps it's a consequence of the Hacker Way: ship first, ask questions later. Or perhaps Facebook is betting we're too lazy and ignorant to read the fine print, just like wireless carriers who try to dazzle us with their sleight-of-plan hoodwinks.

Furthermore, Facebook's ubiquity and power raises the spectre of yet another Walled Garden: is Zuckerberg's company killing the Open Web by superimposing a proprietary lattice of connections between users, including companies that use Facebook to do business with its community?
Many have noted that Google can't really index the Facebook web. As John Batelle puts it:

"Sure, Google can crawl Facebook's "public pages," but those represent a tiny fraction of the "pages" on Facebook, and are not informed by the crucial signals of identity and relationship which give those pages meaning."

(True. But does Google want to index Facebook? Behind the Open posture stands Google's real aim: bulldozing anything and anyone standing between their ad engines and their targets.)
Lastly, let's consider the Web 2.0 proverb: if the product is free, you are the product. With that in mind, I couldn't help wince at the opening of Zuckerberg's Letter To Investors:

Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected.

It reminded me of the Don't Be Evil puffery in Google's own S-1:

Don't be evil. We believe strongly that in the long term, we will be better served – as shareholders and in all other ways – by a company that does good things for the world even if we forgo short-term gains. This is an important aspect of our culture and is broadly shared within the company.

When I read those words back in 2004, I thought Google was either incredibly naive or a little too obvious in its do-good posture. Either way, we know what has happened: Google needs to be all things to all people, all the time, everywhere, on every device, in order to irradiate us with its advertising photons. Google's motto should be Disintermediation R'Us. Instead, its mission statement reads:

Organise the world's information and make it universally accessible and useful.

… all in the name of selling ads.
In his letter, Zuckerberg comes up with a similarly lofty sentiment:

There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future.

I don't mean to diminish Zuckerberg's accomplishments. He's built an epoch-making company, I'm delighted by the team of highly skilled technologists he's assembled – a team that includes some dear friends of mine – and the tech culture they evince.

He's surrounded himself with sharp business people and extracted oodles of money from strong investors; he's Bill Gates/Larry Ellison/Page+Brin caliber or above … and I'm thrilled to see the former naysayers now eating out of his hand.
So why not just say something like:

We help people connect in safe, convenient and innovative ways. In doing so, we've built a business of historic proportions. We make money selling advertising that is finely tuned to reach our users in cost-competitive ways. Because we believe in Facebook's unlimited potential, we will manage ourselves for the long term rather than for short-term profit. We have built an ownership and control structure to accomplish this goal.

There's good evidence that the people who buy Amazon, Google and Facebook shares are willing to let these companies run for the long term rather than for the next quarter. Smart people don't need lofty mission statements to guide their investments, they watch what the execs do and decide if they're using "the long term" as an excuse or if they're really aiming for it.