There is a nagging concern for potential Facebook shareholders: the guy running the company doesn't care that much about making money. Mark Zuckerberg has done an incredible job building Facebook into a product that 900 million people use every month and 500 million people use every day.
"We don’t build services to make money; we make money to build better services." - Mark Zuckerberg
Because of that truly massive user base, Facebook's valuation has soared over the years: reaching $100 billion on private markets just weeks before it IPOs. Despite that momentum, Facebook's advertising business has actually stalled over the past couple years.
Ad revenues continue to decelerate, and the payments business – how Facebook makes money off of games like Farmville – actually shrank during the first quarter of this year. Revenues and revenue growth are so disappointing, in fact, that Henry Blodget says that reasonable multiples don't support that $100 billion valuation.
Yesterday, we outlined the problem with Facebook's business: The ad units it sells are inferior to TV ads and search ads.
But maybe there is a deeper issue with Facebook. Maybe Mark Zuckerberg doesn't care enough about money to run a $100 billion company.
This thought has occurred to us before, but it came screaming back when a friend of Zuckerberg's answered a question on Quora: "What is Mark Zuckerberg's true attitude towards money?"
This friend, early Facebook employee Ezra Callahan, wrote the following (we've bolded two sentences that you should pay particular attention to):
When I worked with Mark Zuckerberg, money was certainly not his primary motivator. He lived an absurdly spartan lifestyle. Well after the point that Facebook's valuation passed $1B, Mark still lived in a small, crappy apartment and slept on a mattress on the floor. All he really cared about was work and he spent most of his waking hours at the office, so it didn't seem to matter much to him to furnish his apartment or spend money on much of anything (food, clothes...anything really). He didn't move into a real house until just a couple years ago when Facebook's security team and advisers more or less forced him.
Mark's main motivations were pretty clearly based around materially changing the world and building technology that was used by everyone on the planet. It's not like he didn't know that if he was successful, he'd become incredibly wealthy - and I wouldn't go as far to say that he would've done everything he's done if there wasn't a big financial payout from it all. But that always seemed like a happy side-effect of his true goals. My impression back then was that if he had to choose, he'd rather be the most important/influential person in the world rather than the richest. And I think that's visible in how he directed the company to focus on user growth and product impact rather than revenue or business considerations. Even today, while Facebook makes a ton of money, it could probably make magnitudes more if that were its primary goal.
Zuckerberg's distaste for financials concerns is also obvious in the way he's set up the company. Sheryl Sandberg's title may be COO, but she's essentially the CEO of the company's business side, running the entire sales and monetization operation on her own. Zuckerberg has also almost entirely divorced himself from the IPO process, delegating it to his very capable CFO, David Ebersman.
Zuckerberg also likes to talk about how the only reason Facebook is a company – and not just a project or a non-profit organization – is that he thinks a corporation is the best organization humans have come up with to motivate a group of people – employees and people with money – toward a common goal.
I hope you have learned a lot from this? If yes, please state what you learned