Personal Life Media

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Susan Bratton: Welcome to DishyMix. I’m your host, Susan Bratton, and on today’s show I’m recording live in our Los Altos studio with David Kirkpatrick. David is the author of a very exciting new book. It’s called The Facebook Effect and we’re actually going to talk about what that facebook effect is. I want to read the whole book name here for you: The Facebook Effect: The Inside Story of the Company That is Connecting the World. It’s a beautiful cover, and I know you’re going to end up buying and reading this book. It’s a fabulous story, a beautiful history, and it opens up so many questions. David is the author of The Facebook Effect and he’s also the cofounder of a really interesting conference coming this August called Techonomy, The Techonomy Conference. And we’re going to talk about that because it’s I think the next generation of where the conference business should absolutely be going. He nailed it, and it’s fascinating. So welcome David. It’s great to have you here.

 

David Kirkpatrick: Well thank you Susan. It’s great to be here when you’re saying things like that especially.

 

Susan Bratton: It’s my pleasure. So you’re out here, are you doing a big book tour out in the Silicon Valley, ‘cause you’re a New Yorker?

 

David Kirkpatrick: I’m, well we’re doing this a little in advance as you know, but I…

 

Susan Bratton: Yeah.

 

David Kirkpatrick: when the book publishes I will be all over the place – I’ll be out here, I’ve got an event at the Commonwealth Club the 23^rd I think of June, I’ve got a big event at the Computer History Museum in late July, I think it’s the 21^st of July, I might have those dates reversed, but…

 

Susan Bratton: Okay.

 

David Kirkpatrick: And Mark Zuckerberg is schedule to appear with me at the Computer History Museum, so that’s very cool.

 

Susan Bratton: I might have to come. I’ve never been to the Computer History Museum.

 

David Kirkpatrick: The one in San Francisco, Arrington’s interviewing me and Mark (unintelligible) introducing us, so I think that’s kind of…

 

Susan Bratton: You got a good crew. Well The Facebook Effect has absolutely created a fervor on the interwebs even before its launch, but before we get into that I really want to talk about this is really the story of Facebook’s history, their rise, and it’s beautifully written. I mean you’re the former senior editor of Fortune Magazine, you’ve written about tech companies for a big part of your career. You know how to do it. You’re an awesome journalist. You wrote a really good story. How was what you imagined the book to be before you started – “Hey I think I’ll write a history of Facebook” – and what you ended up with with The Facebook Effect? How did that change for you?

 

David Kirkpatrick: It’s a good question, and in fact when I first came up with the idea for the book I called it The Facebook Effect because I thought it was going to be more a book about the impact that Facebook had on the planet, on society, on America, on our lives, etcetera, which I could’ve done…

 

Susan Bratton: And it is about that too.

 

David Kirkpatrick: It is about that…

 

Susan Bratton: partly.

 

David Kirkpatrick: Well I’m glad you think so, but what happened was – and I essentially sold a book and we had an auction, there was a lot of interest – but it was a idea really about why Facebook matters. That was really the book I sold.

 

Susan Bratton: And Simon and Schuster was the high bidder.

 

David Kirkpatrick: Simon and Schuster bought it, but…

 

Susan Bratton: Mm hmm.

 

David Kirkpatrick: the thing, you know, I had talked to Mark before doing that and he had said, you know – in fact I told him about it at Davos one year, and I said “You know Mark, I think I should write a book about your company.” He said “Go for it.”

 

Susan Bratton: Great.

 

David Kirkpatrick: And…

 

Susan Bratton: He had some trust.

 

David Kirkpatrick: So as soon as I had Mark’s “go for it”, then I knew I had a book, but I what I didn’t realize was the degree of commitment he would have to cooperating with me and the incredible doors that it would open when he basically told everyone “Yes, cooperate with David.” So I was able to tell a much more thorough history than I would’ve expected. I mean the original idea would to have a couple chapters of history in a book that was mostly about the effect. It ended up being I think it’s 17 or 18 chapters and like 12 of them are history, 13 of them are history, and all of them have history in them, and the impact and effect is all sort of cast in the context of the company’s history, which really makes it much easier to understand, and I think the import of it is more significant. So it became much more of a history because of the extent of Facebook’s cooperation.

 

Susan Bratton: Yeah, that’s awesome. I know you were talking about Brandy Barker essentially just like being everywhere for you and making sure…

 

David Kirkpatrick: Yeah, Brandy’s great and Brandy just had a baby, and what a great person she it…

 

Susan Bratton: Awesome! Congratulations Brandy. So the Furor; lets talk about that before we even get into some of the story. Business Insider, Venture Beat, Tech Crunch, there’s like this – you know, there’s some cranky bitchy people out there having issues with certain aspects of the book and it’s not even necessarily what you wrote in some ways. It’s more about getting their mitts on the content, right?

 

David Kirkpatrick: Yeah, well I’m not totally a believer in this like “If I can acquire it I can publish it” idea of contemporary internet journalism, although, you know, I don’t have huge objections to much of anything that’s happened and happily even in the places where there’s been a lot of controversy over how content is handled, there’s been tremendous enthusiasm for the book which I’m very gratified by.

 

Susan Bratton: Yeah, really nothing can be better than people…

 

David Kirkpatrick: My actual biggest problem about that was when Venture Beat took a 350 word uninterrupted excerpt from my book which was all about Mark Zuckerberg’s views of Google, which is very sensitive, very hard for me to acquire, you know, it took years of relationship building for him to say things like that to me, and then they just run it when it’s unreleased, they hadn’t even been given the galley. And then when I said to them I thought that was really inappropriate they started insulting me, you know. Owen Thomas came at me with saying I was noisome and you know, basically threatening legal action against me, simply – you know, ridiculous. Otherwise, you know, Venture Beat – I mean, I’m sorry, Business Insider ran some stuff that was extremely enthusiastic but because they were using the advanced galley and they, which says “Uncorrected, do not quote”, you know, they ran with a bunch of stuff that’s not in the final book that’s inaccurate, and they were willing to correct that, so that’s fine. And then, well they also ran a piece saying Sean Parker was fired, which the book very carefully doesn’t say. It says he resigned under pressure, but it’s not the same thing as being fired, and he didn’t have to leave, so there was some controversy between me and them about that. The controversy with Tech Crunch was really more between Fortune and Michael Arrington and I tried to stay out of that one.

 

Susan Bratton: Mm hmm, mm hmm. And it was mostly all about people publishing your content without explicit rights to do so and…

 

David Kirkpatrick: Well it’s good they’re all so excited about the content…

 

Susan Bratton: Totally.

 

David Kirkpatrick: I will say that.

 

Susan Bratton: Go back to the part about the hardest thing that you, that you had to get, the best thing that you got because it was the most difficult was Mark’s position on Google, and give us a little recap from the book about what that position is.

 

David Kirkpatrick: Well, I mean it’s not like he was hesitant to say it. It’s just that, you know, you have to – to get the relationship that I’ve, you know, reached with Mark, you know, it’s just a real relationship. He’s a real, I would almost call him a friend, you know, and he’s amazingly understanding about the fact that the book is going to have warts and he’s smart enough to realize that if you don’t tell the whole story it’s not convincing and that you got to be upfront and he believe in transparency, as I say in the book. Its been amazing to write a book about someone who believes in transparency because I got a lot of transparency. Probably not as much as I would’ve liked, but a heck of a lot more than I think you can get at almost any company. Which is one of the things I think makes the book unusual…

 

Susan Bratton: It does.

 

David Kirkpatrick: is that this company, both because it believed in transparency and because it’s largely comprised of people who are 25 and 26 years old and don’t really either think about it in these terms or even care about hiding things, it just, I got material that I would never have guessed I could get. People just told me all kinds of things quite freely and it was really like a mana from heaven. And now I forget the question.

 

Susan Bratton: The question is Mark’s position on Google.

 

David Kirkpatrick: Oh, Mark and Google, sorry.

 

Susan Bratton: Yeah.

 

David Kirkpatrick: Well, you know…

 

Susan Bratton: That happens.

 

David Kirkpatrick: with Google, Mark, you know, Facebook’s been in the crosshairs of a lot of the world lately on privacy. And Mark’s view is that Facebook has from the beginning had a more respectful attitude about privacy than just about any other service on the internet, which is why all of us have been willing to put so much of our personal information there, because we trusted it. And the reason we’ve always trusted is because it gave us the ability to control who saw our information. Now some of the recent moves Facebook has made has somewhat removed a little bit of that control from us and that’s a legitimate controversy and I will not defend them on all that by any means. I criticize them on some of the things they’ve recently done. However, his point about Google is that, you know, here we are a company that has really tried to move towards a more, you know, more, a world of more sharing, as he puts it, giving the user some more control. In contrast to another company, Google, which he has great respect for, as do I, but which he says what do they do? They call it crawling. They go out and they look at everything out there and they give it back to everybody else. They will crawl into some pretty, you know, remote corridors and put that as the result of a search. Now that’s a different approach to privacy and his ultimate, you know – I love when he says, this is what he says, “And what do they do when they want to make a map? They drive a truck with a camera down your street”, right. Facebook doesn’t do that. Facebook doesn’t like put their, you know, camera, you know, figuratively in your face and then publish that for the world to see. They ask you for your permission before you say who you show it to. And that’s basically Mark’s point. And he goes further, he says, he doesn’t really accuse Google of trying to do this per se, but he says the world faces a choice as it moves towards more sharing inevitably, is will that sharing and transparency be under the control of us as people or will we live in a surveillance society? Are we going to 1984 or are we going to have a highly digitized internet centric world where we still control a lot of our data? And it’s ironic given all the controversy recently that Mark still believes in the control of the user. That’s not the way it’s understood. I don’t think Mark has done a good of a job at all as he could have in explaining his own point of view, but that’s what he believes.

 

Susan Bratton: I want to get more into the walled garden and some of the advertise, how advertising is affected in the Facebook ecosystem. But before I do, since this is such a rich history of Facebook and it’s still so fresh in your mind, what were some of the smart moves and what were some of the strokes of luck that allowed Facebook to become what it has become?

 

David Kirkpatrick: Okay, good question. Well the first stroke of luck was starting it at Harvard. That was a stroke of luck for two reasons. One, because it was a perfect community to begin a social network because at college people are more concerned about social interaction than any other time in their lives and they probably have more friends than at any other times in their lives, friends that they interact with regularly. So it was the perfect dense interconnected community to start a network. Also it was a stroke of luck to limit the membership at the outset to people with Harvard University email addresses because that created a culture of genuine identity that has never gone away from Facebook, and because you were authenticated by your unique Harvard email address Facebook knew you were who you said you were, and that is key and they’ve done enormous things, many things since then to try to continue that culture and they’ve essentially succeeded. Then the third element of luck that Harvard brought to Facebook is that it was of all schools Harvard, the (unintelligible), the ultimate aspirational place for the planet. And so especially as Facebook began, first as it began expanded in the ivy league – I remember I interviewed people at Dartmouth and they said, “Well, if this started at Harvard, it must be cool”, right. And then it was an ivy league thing so when it went…

 

Susan Bratton: Sure, it had an (unintelligible).

 

David Kirkpatrick: to the University, you know, Michigan State it was like “Well, if this from the ivy league we should be part of it.” But the real impact was this: when they began expanded outside the United States, which they didn’t even try to do for a long time, they began attracting English speaking young people all over the world who were the aspirational elite in every country on the planet because every kid in Turkey, which is a great example, who is well educated and aspirational knows of Harvard and they probably think in their own mind “I should really be at Harvard. So if this thing started at Harvard then it must be cool for me”, and that’s why they took over the young people of Turkey, they took over the young people of Indonesia, they took over the young people in so many countries. And a lot of it had to do with that elite origin. Now so, the smart moves, to go to the other part of the question. I mean there are several key smart moves that Facebook has made, I mean really, really smart. I mean the news feed controversy was a critical essential move which changed the nature of communication on the internet in my opinion, applying the concept of a feed to communication between individuals, which effectively reversed the way that we communicate and instead of causing us to always have to initiate an outbound communication to make a connection with another individual it allowed people to subscribe to our information, and then required us only to do things and have that be broadcast to everyone who’s subscribed to it, I call that bringing automation to communications, and that was a huge transition that marketed very deliberately and brilliantly and even though you had to adjust it it laid the groundwork for everything that’s come afterward in Facebook. Then the next obvious thing, which was huge, was the platform, and turning Facebook – well actually there was something that came in between that or even maybe preceded that; photos. I mean let me just talk about photos for a minute first and then we’ll get back to the platform. But Facebook photos was something that Mark had to be convinced to do. He was not a visionary on this, although he was willing to be convinced and he did do it. And when the photos feature launched on Facebook it instantly became by far the most popular thing on the service, accounted for by far the majority of the traffic, for many years more than 50 percent of all page views on Facebook were photos. I don’t think that’s true anymore now with all the gaming and stuff that’s going on, but it’s still a huge percentage of activity, it’s by far the largest Facebook app, it’s probably still by far the largest app of any kind even much more than Farmville. So doing that was huge, photos, and to have the tagging on the photos; that was the lucky piece of the photos thing. The tagging was not like on Flickr, you know, Windmill, Holland, you know, (unintelligible) or whatever. It was tags only for names of people and because names are associated with genuine identity, you know who was in the photo, that really radically increased the distribution of the photos, and then with the news feed that distributed the news that you had been tagged in a photo, that put the photos app on steroids and all these things began to feed on top of one another. And then when the platform came along that was the real cudagros because to envision Facebook and create Facebook as a platform for the applications created by others was a real big change, it was a risky change. Some people were not entirely behind it inside the company, especially the fact that applications could run ads themselves, they didn’t have to pay for any kind of services from the company. There were many people inside the company who had disagreed with that, Mark overrode them. And as we’ve seen, especially with the success of gaming but many, many different kinds of applications of which there are literally hundreds of thousands, this has accounted for a vast increase in activity on Facebook, and now they’re taking that platform concept off to the broader internet and building on it even further, which is another major, major move that they recently announced at F8. So those are some of the things. Another really important move they made was the translation application where they allowed their users to translate Facebook for them so that all the Spanish speakers or Italian speakers or French speakers or German speakers in effect competed to translate all the phrases on Facebook and voted among themselves which were the most accurate renditions in another language, that allowed them to go to 75 languages in like a year and a half, and they never would’ve been able to do that, and that’s another key part of their internationalization. There’s a lot to say about Facebook.

 

Susan Bratton: There is. And here’s the thing I’m surprised that you didn’t say, they turned down so many financial suitors. They were, what were there, 11 major deals or something…

 

David Kirkpatrick: I haven’t ever counted how many there were but…

 

Susan Bratton: I saw a blog post.

 

David Kirkpatrick: there was, you know, Viacom, Yahoo, Microsoft are the biggest ones, which really, really, really tried to buy them. News Corp probably would’ve liked to have done it at a certain point. Time Warner considered doing it. You know, it really to me, it’s interesting to me one of the things that has not been picked up much in the media as my book’s been discussed even though it was in the Fortune excerpt was the fact that Microsoft offered to buy Facebook for $15 billion dollars…

 

Susan Bratton: Yeah.

 

David Kirkpatrick: in the Fall of 2007…

 

Susan Bratton: And he turned it down.

 

David Kirkpatrick: Now he turned it down without even thinking, and Microsoft wanted to do it so badly they went back and tried hard to come up with a model that would allow them to buy it and give Mark, allow Mark to retain control for a much longer period, so they used a model of Rosche buying Genentech which took like 19 years to complete, as a way to try to convince Mark that “We’ll do it the same way, incrementally, and until we own 50 percent you’ll still have absolute control”, etcetera, etcetera – And oh, here’s another thing about the, go back to your earlier question about luck, Sean Parker, who was a very early partner of Mark’s, hated VC’s and he negotiated at the very beginning of the company’s life a corporate structure that guaranteed that Mark has absolute control of the company to a degree you’ve never seen in a company of this scale, not at Microsoft…

 

Susan Bratton: He still owns 25 percent of the company at the (unintelligible), right?

 

David Kirkpatrick: He does own about 24 percent is my calculation of his ownership, but more importantly he controls 3 out of 5 board seats, which gives him absolute control. And that is unheard of, and it’s not likely to change.

 

Susan Bratton: Well we’re going to go to a break, ‘cause I like to thank my sponsors, and when we come back I want to talk about F8, the open graph API and what you think the, you know, the far reaching ramifications of this will be. I want to talk about Sheryl Sandberg and a billion dollars in revenue and how she did that. And I want to talk a little bit about the walled garden of Facebook with regard to advertising and, you know, what you see as the pros and cons of the way they’ve structured advertising and where you think it will evolve. And then I definitely want to get to Techonomy, the conference that you’re envisioning because in reality, you know, you’re going to go on a book tour, you’ve written this book, this is beyond you man. You’ve got Techonomy coming up and that’s a huge opportunity for so many people to know about, and I think a lot of my listeners would be interested in blogging it, covering it, getting access to some information. So what I want to make sure is that not everyone’s going to get to Lake Tahoe in August, but how can we participate and help you as some of the most savvy internet marketers, we are the most savvy internet marketers in the world listening to you right now, and…

 

David Kirkpatrick: I love it.

 

Susan Bratton: how can we, how can we help you further your vision, ‘cause your vision is beautiful? So lets do that at the end too. Sound good?

 

David Kirkpatrick: Sounds great.

 

Susan Bratton: Awesome! I’m with David Kirkpatrick. He’s the author of The Facebook Effect: The Inside Story of the Company That is Connecting the World and the cofounder of the Techonomy Conference. So we’ll be right back. Stay tuned.

 

Susan Bratton: All right, we’re back with David Kirkpatrick. He’s the author of The Facebook Effect and the cofounder of a new conference called Techonomy. So before we get off the Facebook thing David, F8 just happened. That’s the Facebook developers event, their conference. And I know they have a lot of long-term ambitions for Connect and the stream API, essentially just the entire, what we would call the collection of the open graph. What I want to understand is what is the levelset today on where the open graph API is based on your understanding of it – I know you’re not a tech guy, you have a business/technology mind, but what you look at and you see are longitudinal trends. I always liked that about you. So where is open graph going and what would you translate Facebook’s vision as being?

 

David Kirkpatrick: Yeah. Well when you try to understand where Facebook thinks of itself as going this is the area you have to look at. Facebook as a long-term vision is not really as interested, at least from the point of view of Mark or Chris Cox who’s head of product or Mike Schroepfer who’s head of engineering, as a website. We think of it as a website. That’s not how they think it should be thought of for the long term. They want to think of it as infrastructure. And this is very controversial because the questions has to then be asked, “We’ll should a company provide this infrastructure?”, but leaving that aside for a minute they want to be the identity matrix for the internet and really the identity matrix for the world, and they believe they have a good shot at it. And what they’re doing with the open graph API, which is the new way they’ve kind of bundled, as you say, all these former pieces like Connect into a new set of software at F8 just recently, that is their biggest play so far to extend Facebook across the internet as infrastructure. And it’s very early, but it’s a very key part of how they think we’re going to work and live in the future, which is that, you know, we will do all kinds of things in a social way and their software will help facilitate that. It won’t be the only thing that we use, but it will be critical and central to a lot of it. And, you know, whenever we read content, have an experience, buy something, find something exciting, we will have the ability to let our friends know about what we’re doing in a way that both benefits them in the short-term and also allows them to find it in the future when they’re interested in that topic. So it becomes a very search related phenomenon as well.

 

Susan Bratton: So as I understand it, there’s a big difference between the way Google crawls and indexes the web and the content that Facebook is making available and making available to surface. And then there’s also the Connect and the news streams and all this information being distributed all over the web in all these different websites. Take me to the next level of that. What’s it going to be like when nearly every place you go you can log in with your Facebook profile and maybe what you do on the site is part of your news stream or, you know, is that what’s happening now?

 

David Kirkpatrick: That’s what Facebook wants. I wouldn’t necessarily say that’s going to happen. I think especially with the extent of the privacy controversy Facebook’s been in the thick of, there are some reasons to question whether they’re going to get there certainly as quickly as they hoped or if maybe ever. One way to think about it is that, you know, we will have the ability to see when our friends are with us or have been at a similar site or done something similar on the internet or in the real world because you’ll bring location into this too and we’ll have mobile devices and this is going to be an online/offline thing in ways that we can’t even fully imagine yet. But I also think that Facebook will not be the only place where you got to see your news feed and Facebook information. So Facebook makes it possible for other sites to essentially display your news feed and display what’s happening to your friend, and exactly how that will play out I honestly cannot prognosticate, but I will tell you that they are very focused on thinking about it everyday at Facebook. So, you know, I wish I could be more concrete about that, but it’s just, it’s a really moving target.

 

Susan Bratton: Yeah. One of the things that I love so much right now, for example on, I have a vanity website for my public speaking called susanbratton.com, and I have my DishyMix fan page feed on the homepage of that site, and it’s absolutely fabulous. If you got my site and you are reading my blog posts and then you see things fans are posting about my show. I mean just…

 

David Kirkpatrick: On Facebook, you mean.

 

Susan Bratton: On Facebook, that’s now on my…

 

David Kirkpatrick: Isn’t that cool?

 

Susan Bratton: you know, my blog. I love that.

 

David Kirkpatrick: So that’s just a little bit of the future right there.

 

Susan Bratton: Love it.

 

David Kirkpatrick: Yeah.

 

Susan Bratton: Little bit.

 

David Kirkpatrick: And you’re a little bit ahead of the curve to be doing that, not that many sites are, but it’s happening more and more.

 

Susan Bratton: Yeah. If I can do it, anybody can do it.

 

David Kirkpatrick: It’s not hard to do.

 

Susan Bratton: It’s not hard to do. It’s a beautiful little widget. What is the Achilles heel of Facebook?

 

David Kirkpatrick: Well you got to say it has something to do with privacy. I mean if Facebook…

 

Susan Bratton: You think that’s true?

 

David Kirkpatrick: Well I…

 

Susan Bratton: I mean ‘cause they can figure that out.

 

David Kirkpatrick: I’ll tell you, there’s another one that most people haven’t thought of since you’re a smart interviewer and your audience is pretty intelligent, but I mean first lets talk about privacy…

 

Susan Bratton: Pretty? Very.

 

David Kirkpatrick: I mean I’d say that two of them are privacy and video.

 

Susan Bratton: Yeah.

 

David Kirkpatrick: Okay, that would be my two basic areas.

 

Susan Bratton: Interesting, okay.

 

David Kirkpatrick: Privacy in the sense that, you know, at the moment if you were to ask any kind of close observer what could kill Facebook or what could cause a mass exodus, you’d say, you know, even worse treatment of the data of their members. Now in reality despite the controversy’s volume at the moment, the average member of Facebook couldn’t give a shit, if you don’t mind my using that tough term.

 

Susan Bratton: You’re okay.

 

David Kirkpatrick: They really couldn’t. They are just using it, and you know, I don’t think there’s a mass revolt on Facebook’s members part right now. There’s a…

 

Susan Bratton: Yeah, it’s probably just all the Google engineers that are closing down their Facebook pages.

 

David Kirkpatrick: Google engineers because Google is extremely nervous about Facebooks success, for one thing, and also the press loves to have something to write about. Facebook is now in a way even bigger than Google, certainly in a popular mind and as a phenomenon, and they, you know, like everything else in American media society we attack the large. We bring down the powerful, we try to cut off the legs – that’s just what we do. It’s just the sad reality of American media and the world, and I think Facebook’s really experiencing that as hubris… People are accusing them of hubris, there’s a desire to just bring them down because they are seen as too powerful. So that’s a privacy thing. But I think more subtly one of the areas where Facebook could encounter a problem down the road is in video. I think if you look at Chat Roulette, which is a controversial and quite simple and almost stupid service, one of the things that it does is it kind of just gives us a little window into the future of what may begin to happen with live video and video connections between individuals and a world where we all have a camera with us at all times, which is pretty much imminent.

 

Susan Bratton: I think you should describe, I’ve seen Chat Roulette, it’s very interesting, and there’s, there are a lot of other ones coming out that are competitors to Chat Roulette…

 

David Kirkpatrick: They’ve got to be because…

 

Susan Bratton: Yeah.

 

David Kirkpatrick: it’s really, it’s where the world is moving is towards video.

 

Susan Bratton: But describe it, yeah.

 

David Kirkpatrick: Well Chat Roulette is a service that allows you to have random live video connections with anyone in the world and you don’t even know who they’re going to be, you just click “Next” and you see someone live in video who might be in Latvia or might be in Thailand or might be in the next apartment, and half the time they’re men who are looking for something sexual, but a lot of times it’s something else and it’s just an interesting communications model. The reason I mention it is that Facebook for all of its virtues is still primarily a textually based infrastructure and product. And, you know, like everything it has a legacy set of issues. It has a legacy set of issues in the quantity of the user base that it has to bring along with its changes, which is a huge challenge. But it also came out of an era when the internet was a primarily textual medium. And, you know, it still has that heritage in its genetic code. And so the world is moving to video and images and it’s just possible in my mind that another kind of service could come along that was not based on the textual model, that was able to create some kind of connectivity between individuals in a way that was even more efficient and powerful than what Facebook has created. I would suspect given the way things are going right now that if it happens in the near future it will ride on top of Facebook’s infrastructure and used for Facebook’s identity infrastructure as a way it gets distribution so this wouldn’t necessarily kill Facebook. But I think you have to really look – you know, someone like me who spent two years thinking about Facebook day in and day out I’ve spent a lot of time thinking “What would kill it?” You know, it seems like its got a endless trajectory towards the moon at the moment. But, you know, you got to ask what would be the negative? What would hurt it? And I think there’s something, a risk potentially in the video area that isn’t much discussed.

 

Susan Bratton: Smart. Thank you. Sheryl Sandberg, amazing woman, came from Google, now runs the revenue side of Facebook. Its been projected that they’ll have a billion dollars in revenue this year; is that right?

 

David Kirkpatrick: That’s probably low. I put that in my book, in the Fortune excerpt I upped that to two billion but I think I was being a little aggressive. I wouldn’t be surprised if they have one and a half billion this year, but it’s impossible to know. But Sheryl is responsible for the revenue boost they’ve seen, which has been huge.

 

Susan Bratton: How did she do it? What are they really selling?

 

David Kirkpatrick: Well Sheryl is, you know, one of the great internet advertising geniuses who created a lot of Google’s ad infrastructure when she was there, and she came to Facebook explicitly to build the business. And she, when she first arrived, did a lot of work to try to just get clarity inside the leadership team of Facebook of what they thought they were doing. And she had a series of meetings, which I describe in detail in the book, in which she basically asked people to talk about all the various monetization opportunities that Facebook had and pick between them, “What should we focus on?”, and they basically ended up with the fairly obvious choice, which is in some form advertising. I mean, ‘cause it’s not the only choice by the way – there’s virtual goods, there’s currency, there’s, you know, getting a cut of transactions, there’s all kinds of stuff that Facebook probably will make money from – but for the time being it’s advertising that they see as their big opportunity and, you know, Sheryl has thought carefully about how to make ads work on the internet and they’re making more and more money with advertising.

 

Susan Bratton: You quoted her in the book, “We have the revenue model. The revenue model is advertising. This is the business we’re in.”

 

David Kirkpatrick: Yeah.

 

Susan Bratton: I know it was no small feat for her to work in an organization full of engineers who basically hate advertising and try to, you know, to actually do advertising. One of the things that I want to give you, David, actually is this white paper maybe, research report that Nielsen and Facebook launched at the AdTech conference here in San Francisco just about a month ago. It’s called, it’s an adverting effectiveness research study, and they’re trying to figure out the value of a social media impression, because obviously Facebook has a lot of social media impressions.

 

David Kirkpatrick: More than anybody else, that’s for sure.

 

Susan Bratton: So the findings of this Nielsen/Facebook report, which was essentially a report that they launched at AdTech that talks about brand lift – you know, recall, purchase intent, the classic kinds of ad effectiveness studies that a Nielsen do. And they looked at the three types of Facebook ad executions. They had the ad on the homepage, the homepage with a social context like “Meg Griffing, Ryan Alley and six of their friends are fans of Virgin America.” And then the organic impression, which is, you know, Alex who became a fan of Virgin America. And what they showed was that, you know, the homepage ad is paid, a social impression is paid, the earned media side can be a social or an organic impression, and what of course came out of it was the more of these things you have in unison during a particular time period – you know, we’d think about it as maybe like a roadblock. You get a whole bunch of people to like you, you could drive a whole bunch of people to your fan page, you’re running ads that have your fans in them and your fans are like it and you’re on the homepage of the site. All that in concert it extremely powerful for driving purchase intent and brand recall and things like that. The only downside is that you have to spend at least $25,000 dollars a month to even be allowed to – and you have to have a page…

 

David Kirkpatrick: Do they say that there or are you saying that?

 

Susan Bratton: They don’t say it here. I…

 

David Kirkpatrick: Yeah, I didn’t think they’d say that…

 

Susan Bratton: I went to the Facebook team and I said, “Okay, I want to buy these, what do I have to spend?” You have to spend $25,000 dollars a month and they…

 

David Kirkpatrick: To get a social ad on the homepage, yeah.

 

Susan Bratton: To get an ad that allows you to have the social context. The social context is when a person, your friends…

 

David Kirkpatrick: They call those ‘engagement ads’ at Facebook; that’s the term of art they use, engagement ads, yeah.

 

Susan Bratton: Engagement ads, when you have the engagement ad with a fans names that you know in the ad.

 

David Kirkpatrick: Any kind of action that’s in the ad itself that’s somehow social, that’s what they consider an engagement ad. That was one of the great innovations that Sheryl did come up with and her team after she arrived.

 

Susan Bratton: And the interesting thing about it is that what you’re really doing is you’re spending at least $25,000 and certainly much more if you’re driving a billion to two billion in revenue with these brands, you’re running these ads, you’re paying $25,000 plus a month, but what you’re doing is you’re advertising within Facebook to drive people to your Facebook page. Those ads don’t click out of the Facebook walled garden. It’s…

 

David Kirkpatrick: Is that true? None of them…

 

Susan Bratton: That is true.

 

David Kirkpatrick: ever, ever click out? I thought some of them could, but they…

 

Susan Bratton: These ads do not.

 

David Kirkpatrick: Okay.

 

Susan Bratton: These social ads or what you call engagement ads…

 

David Kirkpatrick: Well there you go…

 

Susan Bratton: So they’re getting you to spend…

 

David Kirkpatrick: that’s what you call a walled garden, isn’t it? Yes…

 

Susan Bratton: They’re getting you to spend money to advertise within their site to drive people around their site.

 

David Kirkpatrick: Yeah, no certainly some people would object to that.

 

Susan Bratton: You think that’s sustainable? What do you think about that?

 

David Kirkpatrick: I doubt if it is sustainable and I also doubt that Facebook would intend to sustain it very much longer or certainly not indefinitely, because if you look at their strategy being to enable any page on the internet to have all of the functionality of a Facebook page by just logical induction, they would soon enable those same pages out on the open internet to have links from an engagement ad on the homepage. I cannot believe that would not be their intent, and actually until you just said it I didn’t know it was impossible, but Facebook’s a complicated thing that I don’t know every last thing about unfortunately, although I try…

 

Susan Bratton: Yeah, you do. You’re doing a good job.

 

David Kirkpatrick: But so I do think that, you know, that that’s interesting, many people object to Facebook’s, you know, insistence on so much activity seeming to be inside its walls. But I will tell you Mark doesn’t care about that that much. There could even be some disagreement between Mark and Sheryl that I’m not aware of but it wouldn’t surprise me, as Sheryl might be a little more interested in sustaining this kind of thing you’re asking me about, whereas Mark who’s big on sharing and he’s never been a big an of advertising anyway, although he does certainly support it now and understands that it’s the way Facebook has to go, but he’s much more interested in ubiquity. I mean this is something if you don’t mind my briefly taking a side journey here…

 

Susan Bratton: Please.

 

David Kirkpatrick: One of the key themes and sort of leap motifs of my book is the tension that’s existed in Facebook all along between growth and monetization. And, you know, Mark has always believed that growth was more important, and after about a year and a half of Facebook’s growth he began – Dustin Moskovitz and Sean Parker and a few others, Matt Cohler – they began to start using the term ubiquity for what Facebook’s goal was and they meant it literally, that they saw Facebook as having the potential technology to go to everyone who uses the internet. And, you know, right now they’re at about a third of all the people on the planet who use the internet, so you’ve got to give them some credit. They’ve gone pretty darn far. And they still think they can basically get to everyone or something really close to everyone. So the way they look at it – and I have lots of quotes in my book from Mark and Dustin and others about this, you know, plenty of people there who go along with this stuff – they think advertising risks being an impedance to the achievement of the goal of growth and ultimate ubiquity, and they would rather delay monetization as long as possible if there’s any risk that monetization efforts could slow growth. And that has always been the attitude and it’s still basically Mark’s attitude. Now he has found in the last year or so that advertising is not slowing growth. They’ve still been growing it roughly 25 million a month on average for quite some years really. And as long as that’s the case you can’t get too worried about a few ads might be causing problems, you know. They went from, you know, like 8 million to 30 million in Indonesia in the last year and a half, just for example, you know…

 

Susan Bratton: 8 million, what? Dollars in revenue or active users?

 

David Kirkpatrick: Active users…

 

Susan Bratton: Active users, okay. Uh huh.

 

David Kirkpatrick: So anyway, that’s just an important thing to remember; this goal of ubiquity and advertising and monetization being secondary, except to the degree they’ve got to pay the bills. And Mark’s always been very pragmatic, you know, “If we’re going to run out of money we’ve got to take some ads”, you know. But beyond that he’s not like terribly worried about a bottom line profit, he’s not oriented towards a short-term IPO and showing numbers to investors that will impress them. He’s interested in growth and heading towards ubiquity.

 

Susan Bratton: It’ll be very interesting to watch how this all pans out. Obviously they’ve had a lot of success in advertising, yet I know for a fact that a lot of brand marketers are loathed to advertise in the Facebook community because of its personalized content…

 

David Kirkpatrick: Well that’s stupid, if you don’t mind my saying so…

 

Susan Bratton: I don’t mind you saying anything…

 

David Kirkpatrick: Any advertiser or marketer who’s not trying things out in Facebook at a minimum is at risk of not understanding the world they live in. It’s not a matter of “Oh, we’ve got to have a clear ROI”, you’ve got to just be using it to figure it out because this is the cutting edge of what’s happening now, and if you’re not doing it you’re just losing your opportunities for the future and you may decide you got to do something even better that happens elsewhere, but you will not fully understand it if you’re not trying this. I’m totally convinced of that. It’s too central to what’s going on in the moment.

 

Susan Bratton: I think that the world is changing in the ad community, in the marketing community, that marketers when they made mistakes in the past they got slapped down. But now with, you know, agile development and, you know, many revs of software and all of the ways that our technology world is changing our culture and our humanity, it’s just one more thing that’s happening where it’s beginning to be okay in a lot more places, in a lot more marketing departments of big companies to try things that fail, that entrepreneurial…

 

David Kirkpatrick: Just like Silicon Valley.

 

Susan Bratton: It is. The entrepreneurial…

 

David Kirkpatrick: Isn’t that healthy. I love the…

 

Susan Bratton: per view is starting to change. But it’s not changed everywhere. I want to move on to Techonomy…

 

David Kirkpatrick: That’s a perfect segway to Techonomy.

 

Susan Bratton: It is, I know. Sweetie…

 

David Kirkpatrick: Can I just tell you why?

 

Susan Bratton: Baby, I know what I’m doing.

 

David Kirkpatrick: Advertising is just another industry that in so many – like so many has been…

 

Susan Bratton: Right…

 

David Kirkpatrick: weighed down by…

 

Susan Bratton: Revolutionized by technology.

 

David Kirkpatrick: the old preconceptions of the past. And Techonomy’s whole idea is that the mindset of Silicon Valley that exponential change is basically good and allows us to solve problems faster and do all kinds of great things that will help the world, that mindset needs to go into every industry…

 

Susan Bratton: Lets get it in.

 

David Kirkpatrick: and of course advertising.

 

Susan Bratton: Lets get it in to changing the world, which is what we’re doing. I love that you’re doing this. So – oh and I just want to say that I’m going to, David is going to sign my Facebook Effect book and no, I’m not giving it to DishyMix fans, I’m keeping this one. I’ll buy…

 

David Kirkpatrick: Yeah, you got an early copy. I want to know how you got an actual copy so soon…

 

Susan Bratton: You walked in here today, you’re like “How do you have a real copy?”

 

David Kirkpatrick: Yeah, how did you get it?

 

Susan Bratton: And I said “Well…”

 

David Kirkpatrick: You were like one of the first five people to have it I think.

 

Susan Bratton: And you’re going to autograph it. It’s going to be the first one you autographed. I’m going to get a picture of that. That’s going to be so fun for us. But I want to talk about Techonomy. I love what you’re doing here, bringing technology to a new, you call it a new philosophy of progress. Some of the sessions are Reinventing Knowledge: How Humans Succeed as a Species, Reinventing Infrastructure: Why We Should All Think Like Engineers – Stewart Brand, I’d love to hear that – Popular Technology: Can The Public Be Turned In a Techonomic Direction. These are new words you’re coining; it takes a while to catch up.

 

David Kirkpatrick: Yes, I’m sorry.

 

Susan Bratton: That’s all right, I like sniglets.

 

David Kirkpatrick: We are trying to coin a new word.

 

Susan Bratton: I liked, there were a couple of other ones that I thought were really interesting. Gosh, Reinventing Fire: How Business Can Lead Us Beyond Fossil Fuels, China’s Drive For a Low Carbon Economy, The Economics of Invention and The Challenge of Scale, Climate Intervention, Electron Storage, Financial Inventions, The Shape of the City, Reinventing Life – I mean this is – The Thirst For Water, The Longevity Dividend, The Ecology of Innovation, The Universities of Tomorrow, near and dear to our hearts today because we’ve got kids in school, beautiful daughters we’ve got to educate in the right way and not the old industrial revolution factory worker way…

 

David Kirkpatrick: Unfortunately it still happens too often I think, but…

 

Susan Bratton: Well, you know, as parents we have to fill in the gaps. So you are bringing technology to solve some of the world’s problems and this is what absolutely needs to be done. I likened it earlier to Tim O’Reilly bringing his Gov 2.0, the open platform concept, social nets and open API’s to the government for gods sake. Lets get stuff taken care of, right.

 

David Kirkpatrick: Yeah, I totally admire that, what he…

 

Susan Bratton: Me too.

 

David Kirkpatrick: Tim is a real leading thinker in this kind of stuff.

 

Susan Bratton: He is. He’s amazing. So what can we do? You are assembling an amazing group of people. We can’t all make it to Lake Tahoe in August, but some of us can. What can we do as a community of bloggers, marketers, social media experts to support the great ideas that come out of your event? How can we support you in making sure that this event is wildly successful and participate in some way?

 

David Kirkpatrick: Well we’re certainly trying to get a lot of press there to help us spread the message because we really do believe that we’re trying to kind of promulgate a new kind of thinking that we believe is desperately needed across business and government and NGO’s, and not just in the United States but around the world. So we’re very pleased that we’ve got some extremely interesting partners at CNBC, Scientific American, The World Business Counsel for Sustainable Development, are some of our sponsors along with, you know, HP, Chevron, Kinsey, a bunch of other great companies…

 

Susan Bratton: It’s an impressive list of sponsors.

 

David Kirkpatrick: I mean, I’m afraid I’m, I got to mention them all…

 

Susan Bratton: Do it.

 

David Kirkpatrick: LPL Financial, Centerview Partners – who am I forgetting? Oh my gosh, I think I might be forgetting somebody. But anyway, we’re talking to more and we’ve got huge interest in support… The point is that we are going to be trying to blog out this stuff like crazy ourselves, it’s going to be going out really aggressively on CNBC, they’re going to have a lot of crews there. And we’re going to take a lot of the content that’s produced at the conference and host it on our site after the fact and really give it away for