Profitable Learning Curve for Facebook CEO Mark Zuckerberg (Reblogged)

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In Taking Facebook Public, Reshaping It Around Mobile Phones, Chief Gained Focus on Bottom Line

Mark Zuckerberg has prioritized increasing Facebook’s ad revenue. Reuters

MENLO PARK, Calif.— Mark Zuckerberg needed help. Facebook Inc. FB +0.54% ‘s initial public offering in May 2012 had been a mess. And after turning a website born in his college dorm room into a company valued at $100 billion, the young chief executive was under pressure to prove he could sell lots of ads on smartphones.

Facebook has seen its shares rise and revenue from mobile ads jump up. How did CEO Mark Zuckerberg turn the company around after its ill-starred IPO? Evelyn Rusli joins digits. Photo: AP.

So he went for a long walk a few weeks later through the center of Facebook’s corporate campus here with Andrew “Boz” Bosworth, a top engineer at Facebook and friend who once was Mr. Zuckerberg’s teaching assistant at Harvard University.

“Wouldn’t it be fun to build a billion-dollar business in six months?” Mr. Zuckerberg asked. He wanted Mr. Bosworth to help lead the company’s shaky mobile-ad business, then bringing in almost nothing. Another part of the job: figure out all the ways Facebook could make money.

Ads didn’t sound like fun to Mr. Bosworth, but his boss persisted. Soon, the engineer was filling in the blanks of a spreadsheet that grew to about 80 pages long. The entries became the manifesto of an in-house project that Mr. Zuckerberg called “Prioritization.”

Interviews for this article with the CEO, Facebook directors and executives, and dozens of other engineers, friends and former employees laid out how Mr. Zuckerberg’s growing attention to the bottom line was part of a sea change by the often-stubborn, idealistic 29-year-old chief executive once called “toddler CEO” in Silicon Valley. Taking Facebook public and reshaping it around mobile phones forced him to grow up.

“It’s a story of a vertical learning curve,” says venture capitalist Marc Andreessen, a Facebook director and longtime adviser to Mr. Zuckerberg.

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Mr. Zuckerberg still wears jeans and a T-shirt to work, drives a black, stick-shift Volkswagen GTI and keeps the temperature in his glass meeting room, known as the “aquarium,” near 68 degrees to keep everyone alert. As a holiday gift, friends of Mr. Zuckerberg got socks decorated with the image of Beast, his white, woolly Hungarian shepherd.

Yet Mr. Zuckerberg has learned to embrace—or at least accept—the reality that he now is in charge of what might be bluntly described as the most visible advertising business in the world. It is a big leap for the college dropout who wrote in a letter to potential investors just before the initial public offering: “Facebook was not originally created to be a company.”

He embraced the idea in 2012 of selling more ads in Facebook’s prized “news feed,” the center of the screen where the social-networking site’s 1.2 billion members spend most of their time. The news feed is a constantly updated list of stories from people and pages followed by a Facebook user.

The intensified focus on advertising, long shunned as less important than the photos and status updates posted by users, generated a surge in new revenue from corporate giants such as McDonald’s Corp. and Wal-Mart Stores Inc. WMT -0.79% Analysts expect Facebook to announce later this month that its revenue jumped more than 40% in 2013 compared with a year earlier. About $3 billion of the company’s revenue—or more than one-third of the overall total—likely came from mobile advertising.

Facebook shares jumped 105% last year, compared with the technology-heavy Nasdaq Composite’s rise of 38%. On August 2, the stock climbed back above its IPO price of $38, erasing a $50 billion slide in stock-market value. Facebook closed Friday at $54.56 a share.

Still four months away from his thirtieth birthday, Mr. Zuckerberg is worth about $20 billion. Last month, he pocketed about $1 billion in his first stock sale since Facebook went public, and separately he donated about $1 billion in stock to the Silicon Valley Community Foundation.

Facebook’s CEO is putting new focus on the bottom line. Reuters

Mr. Zuckerberg bristles at the view of some people close to him that he has changed as a CEO. His primary mission still is to connect the world digitally with Facebook. “It drives me crazy when people write stuff and assert that we’re doing something because the goal is to make a lot of money,” he says.

Even in his most self-reflective moments, what Mr. Zuckerberg sees is a series of logical moves and adaptations that are part of what he calls a “continuous trajectory.” In an interview, he paused abruptly after saying the words “business review.”

“Uh, I’ve never used that term before,” he said with a smile.

Despite all the improvements, Mr. Zuckerberg must show that Facebook can out-innovate a steady stream of upstarts. Investors were rattled in October when Facebook reported a decline in use among young teenagers, some of whom are migrating to newer mobile-phone apps such as Snapchat. Snapchat messages automatically disappear in 10 seconds or less.

Last fall, Mr. Zuckerberg approached Snapchat with a takeover offer for more than $3 billion. Snapchat’s 23-year-old chief executive said no. Facebook previously tried to create a similar app called Poke, with Mr. Zuckerberg even contributing some computer code, but the project flopped.

A secret project called Firefly included a “social” phone that was to be created with HTC Ltd. of Taiwan—but was killed by Mr. Zuckerberg in mid-2012 because of glitches, according to people who worked on the project. An app for Google Inc. GOOG +0.21% ‘s Android operating-system mobile phones, known as Home, has failed to gain momentum since last spring’s debut, despite a big publicity push by Facebook. And a smartphone released by HTC and based largely on Firefly’s design has been a dud.

Mark Zuckerberg has prioritized increasing Facebook’s ad revenue. Shown, an employee at the Menlo Park, Calif., headquarters. Associated Press

Nasdaq’s board in Times Square in New York on Facebook’s trading debut Associated Press

Just a few years ago, Mr. Zuckerberg paid little attention to many of the numbers that are obsessions to shareholders. In 2010, he said there was “no point right now in having a massive profit.” He boasted that the ad business “factors in, like, not at all” to decisions about Facebook’s operating platform and user services. His No. 1 goal: increase the company’s total membership to one billion users.

“If you brought up revenue in an argument with Zuck, you would lose automatically,” says one former senior employee. He recalls being chided for mentioning revenue while discussing a new product. Mr. Zuckerberg says such comments are a reminder that Facebook was designed to care more about its mission than money.

At the time, most Facebook users looked at the site on a desktop computer. Ads usually were banished to the right-side gutter of the screen, the Facebook equivalent of Siberia.

By the end of 2011, though, the surging popularity of smartphones was causing Facebook users to spend less time on computers. “The IPO process surfaced how fast the mobile shift was happening,” says Facebook director Peter Thiel, a founder of PayPal and one of Facebook’s earliest investors. Executives worried that Facebook was falling behind at an alarming rate.

Internal data showed that many users were so frustrated by Facebook’s mobile software that they would quit the app and use their tedious mobile Web browsers to reach the social-networking site instead.

The smartphone shift also was a problem for Facebook’s ad business. There was no easy way for the company to relegate ads to the side of small screens, and Facebook had no mobile ads to sell anyway. Meanwhile, efforts to sell older types of ads on desktop computers were starting to lose their punch as more users embraced mobile devices.

“We pulled the lever, but this time, it didn’t work,” recalls one senior employee about 2012’s first quarter.

Just before Facebook went public in May 2012, Mr. Zuckerberg walked into the “aquarium” and did something that surprised everyone.

A group of Facebook engineers presented the latest mock-ups of ads for Facebook’s iPad app. The ads were marooned on a separate screen—and to the right of the news feed.

The CEO quietly studied them. “Why don’t we just explore ads in news feed?” he said, according to people at the meeting. Mr. Zuckerberg indicated that he would be open to the possibility of more types of ads there, including ones not tied to “likes.”

“Oh, my gosh, he’s actually open to it,” one executive present at the meeting remembers thinking. No one in the room asked Mr. Zuckerberg why. They were too worried he would change his mind.

“It’s not like I just decided to get more involved in ads,” he says now. “I needed to because basically the ad product had to be more integrated.” He adds: “And that created all these hard decisions that we needed to do well.”

Mr. Zuckerberg’s willingness to upend even what some people close to him describe as sacrosanct beliefs took on more urgency after Facebook’s bungled IPO, which subtracted more than 25% from the share price in its first 10 days of trading.

In public, he tried to play down the importance of the stock price. Mr. Thiel now says the CEO was more worried than he let on, citing the risk that Facebook employees who owned stock might get discouraged and quit. “I care about this because I want to retain my people,” Mr. Zuckerberg told senior executives in a private meeting.

Facebook’s first earnings report, which hit analysts’ targets but disappointed investors who wanted even more, sent the stock into another tailspin. The mood of some employees darkened.

A worried Mr. Zuckerberg asked Facebook executive Mike Schroepfer, one of his most trusted lieutenants, to interview engineers about morale. They were frustrated about the plummeting stock price and worried that top management couldn’t relate to their financial stress because those executives owned so many Facebook shares that they were rich despite the stock’s slide.

Mr. Schroepfer, usually an unemotional software engineer, choked up when he presented the results to a room full of engineers. “I know you are fathers, parents. I am, too, and I know that you have to think about putting your kids through school,” he said, according to someone at the meeting.

Mr. Bosworth, the Facebook engineer who agreed to help Mr. Zuckerberg hunt for new revenue, worked on his spreadsheet for about 1½ months, quizzing scores of employees. Around the same time, Mr. Zuckerberg began assigning revenue targets to certain product teams. Previously, he resisted the idea because he worried managers would become too fixated on money.

Over the next several months, Mr. Zuckerberg also grew to fully embrace putting “nonsocial” ads, or those that aren’t tied to a user’s “likes” or other signals, in the news feed. The shift came after Chris Cox, Facebook’s vice president of product, showed the CEO internal data that suggested his previous resistance to nonsocial ads was hurting Facebook’s business.

Tests by the company showed that adding nonsocial ads improved the overall quality of Facebook’s advertising for users. “At the time, it kind of struck me as a crazy idea,” Mr. Zuckerberg says, since those ads veered away from Facebook’s traditional word-of-mouth-based pitches.

The CEO even compromised on a subject where he had rarely budged before: user experience.

Mr. Zuckerberg told Mr. Cox that some decline in usage would be an acceptable trade-off for higher ad sales, as long as Facebook made improvements elsewhere that more than offset the decline. The first test showed that more ads reduced user activity by 2%, below a target of a low single-digit percentage, while overall “engagement” rose by a much bigger percentage. Engagement is a broad gauge of user activity.

Facebook’s sales gain of 53% to $1.81 billion in the second quarter was the company’s largest jump ever. In July, a beaming Mr. Zuckerberg addressed most of the company’s more than 5,000 employees. “We did a good job,” he said. “We’re figuring this out.” A few days later, Facebook shares drifted above their IPO price.

Mr. Zuckerberg now meets often with Facebook’s biggest advertising clients, often spending hours with them. He has told customers to message him with ideas, which he will consider incorporating into product decisions.

At a visit last summer to the headquarters of Facebook ad client McDonald’s in Oak Brook, Ill., he learned how to cook an egg-white breakfast sandwich and asked the head of french fry taste tests why one batch he tasted looked a few shades lighter than fries served in McDonald’s restaurants.

Her answer: French fries sold at McDonald’s are cooked in oil that has been through multiple fry cycles. Mr. Zuckerberg said: “You have the greatest job ever.” His own Facebook page has long been peppered with McDonald’s and Chicken McNuggets references.

This year, Mr. Zuckerberg will have to wrestle with how to avoid turning off some Facebook users with too many ads, as some critics have warned. Some investors are antsy for Facebook to wow users with something new.

Mr. Zuckerberg says he is aware of the risks, but notes that user activity still is rising. The company does more than 35,000 surveys a day to monitor user sentiment, and the “driving force behind everything is that we’re trying to build the best experience for mobile,” he says.

Some of the changes at Facebook remind him of walkways at his old high school, Phillips Exeter Academy in New Hampshire. As a student, he was befuddled by a meandering path to the campus cafe. The route seemed strange, so Mr. Zuckerberg did some research.

The answer? “Instead of choosing the path up front, they kind of waited and saw where people walked and put a path where people walked,” he says.

—Reed Albergotti contributed to this article.

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Yasser Arafat: A criminal culture

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A criminal culture

From Fresno ZionismYasser Arafat in Syria, 1970

The Palestinian people deserve an end to occupation and the daily indignities that come with it.  Palestinians deserve to move and travel freely, and to feel secure in their communities. Like people everywhere, Palestinians deserve a future of hope — that their rights will be respected, that tomorrow will be better than today and that they can give their children a life of dignity and opportunity.  Put simply, Palestinians deserve a state of their own. — Barack Obama, March 21, 2013

Not surprisingly, I disagree. Palestinians do not deserve a state.

There are many arguments against creating a Palestinian state: arguments based on Israel’s security, on the Jewish people’s historic rights to Judea and Samaria, on the impossibility of a viable Palestinian economy, etc.

I would like to make another argument, which is not heard so often because it is not politically correct: the Palestinian nation has developed a criminal national culture, a collection of aspirations, modes of thought, discourse and behavior that would make a Palestinian state a destructive element in the community of nations.

Now, please stop screaming ‘racism’ for long enough to understand that this has nothing to do with biology. A baby born to a Palestinian mother in another culture would grow up no different from anyone else in that culture. Palestinian Arabs aren’t biologically different from Arabs anywhere else in the Middle East, and indeed there is a lot of genetic overlap with Israeli Jews. I don’t believe that
Palestinians are born violent, angry and dishonest — I believe that the culture that has developed along with the creation of the ‘Palestinian people’ in the past 100 years or so has made them so.

The ancestors of most Arabs living between the Jordan and the Mediterranean migrated into the region starting in the 19th century. They were brought there by an Egyptian military campaign against Ottoman Syria in the 1830′s, by famines and political upheavals in Syria, by the British (in the 20th century) to work on projects such as the construction of railroads, and most of all by the better economic conditions brought about by the British and by the Zionistyishuv.

One of the attributes of present-day Palestinian culture is the belief that history is whatever Palestinians say it is. So we have Palestinians saying that they are descended from ancient Canaanites or Philistines. This is nonsense. Some small number may actually be descended from the Arab conquerors of the 7th century, and some from local Jews or Christians converted by those conquerors. But the idea that there is a unique ‘Palestinian people’ that has lived in the region for centuries is a fable.

What brought these disparate Arabs together was opposition to Zionism. The first great leader of the Palestinian Arabs was Haj Amin al-Husseini, who stirred up anti-Jewish riots and pogroms as early as 1920. The British helpfully made him Grand Mufti of Jerusalem in 1921, and he became the face and voice of the Palestinian cause. During the war, he worked closely with Hitler, raised an SS division among Bosnian Muslims, made Arabic broadcasts to the Middle East from Berlin, and did his best to encourage Hitler to conquer Palestine, where Husseini planned to set up extermination camps for Jews.
Only the British victory at El Alamein prevented his plan from becoming reality. After the war, al-Husseini helped SS officers and other war criminals escape to Egypt and Syria where they aided the regimes in their struggle against the Jewish state. I think we can call him a ‘war criminal’ too, don’t you?

Husseini was overshadowed, though, by Yasser Arafat, one of the founders of the Fatah terror group (around 1959), who became the head of the PLO in 1968. Arafat’s Fatah still holds the record for the most Jews killed by a terrorist organization, more than Hamas, Islamic Jihad, Hizballah, etc. Arafat took terrorism to new levels, popularized airline hijacking for political purposes, was wholly or partially responsible for several wars — the Black September conflict in Jordan in 1970, the Lebanese Civil war of the 1970′s, the Israeli invasion of Lebanon in 1982, the Second Intifada in 2000, and lesser incidents like the Munich Olympics massacre, the Achille Lauro hijacking, and many more.

In possibly the greatest mistake made by any Israeli government, Arafat and his gang — who had been exiled to Tunisia after the 1982 Lebanese war — were allowed to return to the territories and set up the ‘Palestinian Authority’ (PA) under the Oslo accords. Arafat — now officially recognized as the ruler of the Palestinians in the territories — continued to engage in terrorism while he pretended to negotiate a peace agreement, and established a system of indoctrination for Palestinians in every aspect of their cultural and religious institutions and media.

The Palestinian nation was forged by al-Husseini, Arafat and others who took this disparate group of Arabs and united them under the banner of ‘resistance’ to the Zionists, and later to the state of Israel, who developed the idea of the nakba as a loss of honor that had to be avenged. They created a monster, a culture whose predominant memes are of blood and murder.

The PA continued its indoctrination campaign after Arafat’s death, promoted its invented version of Palestinian and Israeli history, its glorification of terrorists and ‘martyrs’ and its incitement against Jews. Today, Palestinian society is suffused with feelings of anger and frustration over its supposed ‘dispossession’ and continued ‘oppression’, frustration which breaks out every so often in the form of stabbing 9-year-old Jewish girls, shooting anti-tank weapons at schoolbuses, or slaughtering whole families.

Listen to or read an interview with a Palestinian — male or female, any age. You will hear about their victimization and their suffering. You will not hear that it is unfortunate that about 3,700 Jews (and a few others) have been murdered by Palestinian terrorists since 1920 (the number does not include casualties in wars, or Palestinians murdered for ‘cooperating’ with Israel). Nothing is ever their fault; it is always the Jews, the United States, the British, etc. You will never hear about a need for reconciliation; only ‘resistance’.

Look at their heroes: above all, the mass murderer Arafat, along with smaller-time murderers like Dalal Mughrabi, the exemplar for Palestinian womanhood, whose ‘operation’ only killed 37 Jews (12 of them children). Look at the reception they are giving to the murderers that Israel is releasing in response to American pressure.

Since the stupidity of Oslo, Israelis and the PLO have been ‘negotiating’ to arrive at yet another partition of the sliver of Jewish land that exists precariously among the 22 Arab nations of the Middle East and North Africa. The Palestinians have never stopped incitement and terrorism, and they have never negotiated in good faith toward an end to the conflict. They have pursued a strategy of alternating violence and deceitful diplomacy whose objective is the elimination of Jewish sovereignty.
And yet President Obama says they ‘deserve’ a state!

In deciding whether establishing a new state here is a good idea, it makes sense to think about what the character of that state will be. And there is no doubt that ‘Palestine’ will be an aggressor and a locus of terrorism. A criminal culture will produce a criminal state.

How could the embodiment of the philosophy of Yasser Arafat be anything else?