Zucked. Roger McNamee
Facebook recovered quickly each time. The company never looked back.
Facebook was not the first social network. SixDegrees.com started in 1997 and Makeoutclub in 1999, but neither really got off the ground. Friendster, which started in 2002, was the first to reach one million users. Friendster was the model for Facebook. It got off to a fantastic start, attracted investors and users, but then fell victim to performance problems that crippled the business. Friendster got slower and slower, until users gave up and left the platform. Started in 2003, MySpace figured out how to scale better than Friendster, but it, too, eventually had issues. Allowing users to customize pages made the system slow, but in the end, it was the ability of users to remain anonymous that probably did the most damage to MySpace. Anonymity encouraged the posting of pornography, the elimination of which drained MySpace’s resources, and enabled adults to pose as children, which led to massive problems.
The genius of Zuck and his original team was in reconceptualizing the problem. They recognized that success depended on building a network that could scale without friction. Sean Parker described the solution this way in Adam Fisher’s Valley of Genius: “The ‘social graph’ is a math concept from graph theory, but it was a way of trying to explain to people who were kind of academic and mathematically inclined that what we were building was not a product so much as it was a network composed of nodes with a lot of information flowing between those nodes. That’s graph theory. Therefore we’re building a social graph. It was never meant to be talked about publicly.” Perhaps not, but it was brilliant. The notion that a small team in their early twenties with little or no work experience figured it out on the first try is remarkable. The founders also had the great insight that real identity would simplify the social graph, reducing each user to a single address. These two ideas would not only help Facebook overcome the performance problems that sank Friendster and MySpace, they would lay the foundation for a company with more than two billion users.
When I first met Zuck in 2006, I was very familiar with Friendster and MySpace and had a clear sense that Facebook’s design, its insistence on real identity, and user control of privacy would enable the company to succeed where others had failed. Later on, Facebook would relax its policies on identity and privacy to enable faster growth. Facebook’s terms of service still require real identity, but enforcement is lax, consistent with the company’s commitment to minimize friction, and happens only when other users complain. By the end of the decade, user privacy would become a pawn to be traded to accelerate growth.
In 2006, it was not obvious how big the social networking market would be, but I was already convinced that Facebook had an approach that might both define the category and make it economically successful. Facebook was a hit with college students, but I thought the bigger opportunity would be with adults, whose busy schedules were tailor-made for the platform. To me, that suggested a market opportunity of at least one hundred million users or more in English-speaking countries. In those days, one hundred million users would have justified a valuation of at least ten billion dollars, or ten times the number Yahoo had offered. It never occurred to me then that Facebook would fly past two billion monthly users, though I do remember the first time Zuck told me his target was a billion users. It happened some time in 2009, when Facebook was racing from two hundred to three hundred million users. I thought it was a mistake to maximize user count. The top 20 percent of users would deliver most of the value. I worried that the pursuit of one billion users would force Zuck to do business in places or on terms that should make him uncomfortable. As it turned out, there were no visible compromises when Facebook passed a billion monthly users in September 2012. The compromises were very well hidden.
The company had plenty of capital when I first met Zuck, so there was no immediate opportunity for me to invest, but as I’ve said, the notion of helping the twenty-two-year-old founder of a game-changing startup deal with an existential crisis really appealed to me. As a longtime technology investor, I received many requests for free help, and I loved doing it. Good advice can be the first step in a lasting relationship and had ultimately led to many of my best investments. The strategy required patience—and a willingness to help lots of companies that might not work out—but it made my work life fresh and fun.
My first impression of Zuck was that he was a classic Silicon Valley nerd. In my book, being a nerd is a good thing, especially for a technology entrepreneur. Nerds are my people. I didn’t know much about Zuck as a person and knew nothing about the episode that nearly led to his expulsion from Harvard until much later. What I saw before me was a particularly intense twenty-two-year-old who took all the time he needed to think before he acted. As painful as that five minutes of silence was for me, it signaled caution, which I took as a positive. The long silence also signaled weak social skills, but that would not have been unusual in a technology founder. But in that first meeting, I was able to help Zuck resolve a serious problem. Not only did he leave my office with the answer he needed, he had a framework for justifying it to the people in his life who wanted their share of one billion dollars. At the time, Zuck was very appreciative. A few days later, he invited me to his office, which was in the heart of Palo Alto, just down the street from the Stanford University campus. The interior walls were covered with graffiti. Professional graffiti. In Zuck’s conference room, we talked about the importance of having a cohesive management team where everyone shared the same goals. Those conversations continued several times a month for three years. Thanks to the Yahoo offer, Zuck understood that he could no longer count on everyone on his team. Some executives had pushed hard to sell the company. Zuck asked for my perspective on team building, which I was able to provide in the course of our conversations. A year later, he upgraded several positions, most notably his chief operating officer and his chief financial officer.
Toward the end of 2006, Zuck learned that a magazine for Harvard alumni was planning a story about the Winklevoss brothers and again turned to me for help. I introduced him to a crisis-management public relations firm and helped him minimize the fallout from the story.
I trust my instincts about people. My instincts are far from perfect, but they have been good enough to enable a long career. Intensity of the kind I saw in Zuck is a huge positive in an entrepreneur. Another critical issue for me is a person’s value system. In my interactions with him, Zuck was consistently mature and responsible. He seemed remarkably grown-up for his age. He was idealistic, convinced that Facebook could bring people together. He was comfortable working with women, which is not common among Silicon Valley entrepreneurs. My meetings with Zuck almost always occurred in his office, generally just the two of us, so I had an incomplete picture of the man, but he was always straight with me. I liked Zuck. I liked his team. I was a fan of Facebook.
This is a roundabout way of saying that my relationship with Zuck was all business. I was one of the people he would call on when confronted with new or challenging issues. Mentoring is fun for me, and Zuck could not have been a better mentee. We talked about stuff that was important to Zuck, where I had useful experience. More often than not, he acted on my counsel.
Zuck had other mentors, several of whom played a much larger role than I did. He spoke to me about Peter Thiel, who was an early investor and board member. I don’t know how often Zuck spoke with Thiel, but I know he took Peter’s advice very seriously. Philosophically, Thiel and I are polar opposites, and I respected Zuck for being able to work with both of us. Washington Post CEO Don Graham had started advising Zuck at least a year before me. As one of the best-connected people in our nation’s capital, Don would have been a tremendous asset to Zuck as Facebook grew to global scale. Marc Andreessen, the Netscape founder turned venture capitalist, played a very important role in Zuck’s orbit, as he was a hard-core technologist who had once been a very young entrepreneur. Presumably, Zuck also leaned on Jim Breyer, the partner from Accel who made the first institutional investment in Facebook, but Zuck did not talk about Breyer the way he did about Thiel.
In researching this book for key moments in the history of Facebook, one that stands out occurred months before I got involved. In the fall of 2005, Facebook gave users the ability to upload photographs. They did it with a new wrinkle—tagging the people in the photo—that helped to define Facebook’s approach to engagement. Tagging proved to be a technology with persuasive power, as users felt obligated to react or reciprocate when informed they had been tagged. A few months after my first meeting with Zuck, Facebook made two huge changes: it