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Zuckerberg has given Facebook investors all they need. He wants one thing in return: control Zuckerberg has given Facebook investors all they need. He wants one thing in return: control
(about 4 hours later)
Mark Zuckerberg has dominated the desktop internet. He’s dominated the mobile internet. Now he’s going to dominate Facebook itself, and the company is probably going to let him.Mark Zuckerberg has dominated the desktop internet. He’s dominated the mobile internet. Now he’s going to dominate Facebook itself, and the company is probably going to let him.
The big news that came out of Facebook’s quarterly earnings report is that the company is making more money, from more users, being shown more adverts – and more profitable adverts at that.The big news that came out of Facebook’s quarterly earnings report is that the company is making more money, from more users, being shown more adverts – and more profitable adverts at that.
The numbers are, well, big. Its userbase grew from 1.44 billion to 1.65 billion. Once upon a time, the number of people on Facebook grew fivefold over the course of a single year; it can’t do that anymore, because there aren’t enough people on the Earth.The numbers are, well, big. Its userbase grew from 1.44 billion to 1.65 billion. Once upon a time, the number of people on Facebook grew fivefold over the course of a single year; it can’t do that anymore, because there aren’t enough people on the Earth.
It can’t even double any more, because there aren’t enough people with internet access. Which lends some necessary context to the company’s philanthropic efforts to push low-cost connections to the developing world through its Internet.org program.It can’t even double any more, because there aren’t enough people with internet access. Which lends some necessary context to the company’s philanthropic efforts to push low-cost connections to the developing world through its Internet.org program.
More users is nice but that’s not why Facebook is on top of the world today. Instead, it’s about where those users are: on their phones.More users is nice but that’s not why Facebook is on top of the world today. Instead, it’s about where those users are: on their phones.
Way back in 2009, the switch to mobile represented an existential problem for Facebook. As analyst Ben Thompson wrote in January, the company dominated on desktop, but had just 35 million users on mobile – barely beating Twitter, which had 30 million users. Way back in 2009, the switch to mobile represented an problem for Facebook. As analyst Ben Thompson wrote in January, the company dominated on desktop, but had just 35 million users on mobile – barely beating Twitter, which had 30 million users.
But Facebook saw the writing on the wall and doubled-down on its mobile apps. Even so, it was worried enough to begin a spate of acquisitions that saw it transform from a simple social network to a modern-day General Electric: Instagram, WhatsApp and Oculus were snapped up, and even SnapChat was offered, but declined, a cool $3bn for its business.But Facebook saw the writing on the wall and doubled-down on its mobile apps. Even so, it was worried enough to begin a spate of acquisitions that saw it transform from a simple social network to a modern-day General Electric: Instagram, WhatsApp and Oculus were snapped up, and even SnapChat was offered, but declined, a cool $3bn for its business.
These days, those acquisitions mostly look important for the breathing space they gave the core business to reinvent itself. Once it owned its biggest competitors, Facebook could take the time to do mobile right. And it did.These days, those acquisitions mostly look important for the breathing space they gave the core business to reinvent itself. Once it owned its biggest competitors, Facebook could take the time to do mobile right. And it did.
The company introduced new ad units that let businesses target users based on their location, behaviour and even race – sorry, “ethnic affinity group”. Privacy advocates complained but users carried on clicking in the increasingly well-targeted adverts in ever-greater numbers.The company introduced new ad units that let businesses target users based on their location, behaviour and even race – sorry, “ethnic affinity group”. Privacy advocates complained but users carried on clicking in the increasingly well-targeted adverts in ever-greater numbers.
They also stayed on the site more. The average user now spends 50 minutes a day across Facebook, Messenger and Instagram, thanks to an increasing push from the company to keep them from clicking away. Goodbye links to news sites, hello “Instant Articles” – the same thing, but served from Facebook’s servers, in Facebook’s app and (often) with Facebook’s adverts. The same switch happened in video, where Facebook aggressively pushed its own video product ahead of links to competitors such as YouTube and Vimeo. They also stayed on the site more. The average user now spends 50 minutes a day on Facebook, Messenger and Instagram, thanks to an increasing push from the company to keep them from clicking away. Goodbye links to news sites, hello “Instant Articles” – the same thing, but served from Facebook’s servers, in Facebook’s app and (often) with Facebook’s adverts. The same switch happened in video, where Facebook aggressively pushed its own video product ahead of links to competitors such as YouTube and Vimeo.
Those efforts combined to make the company’s mobile ad revenue jump by 57% in the first quarter, from $3.3bn to $5.2bn, with each user worth $3.32 over the quarter, up from $2.50 last year.Those efforts combined to make the company’s mobile ad revenue jump by 57% in the first quarter, from $3.3bn to $5.2bn, with each user worth $3.32 over the quarter, up from $2.50 last year.
The company has costs that offset that, with its overall profit just $1.51. But that’s tripled from last year and helps explain why investors viewed the company’s results favourably when compared with Apple, which pulled in north of $50bn – but on a downward trajectory.The company has costs that offset that, with its overall profit just $1.51. But that’s tripled from last year and helps explain why investors viewed the company’s results favourably when compared with Apple, which pulled in north of $50bn – but on a downward trajectory.
Facebook’s achieved all this while under the command of one of the most concentrated leaderships in Silicon Valley. Founder and chief executive Mark Zuckerberg wields a huge amount of influence in the company, and while the company’s results are this good, investors are happy to let the state of affairs continue. So Zuckerberg is pushing it just a bit further.Facebook’s achieved all this while under the command of one of the most concentrated leaderships in Silicon Valley. Founder and chief executive Mark Zuckerberg wields a huge amount of influence in the company, and while the company’s results are this good, investors are happy to let the state of affairs continue. So Zuckerberg is pushing it just a bit further.
He already holds a disproportionate amount of “class B” shares, which carry 10 votes in internal debates compared to the one vote guaranteed by a “class A” share. Now, the company has proposed a three-to-one stock split in its quarterly results, which would give each Facebook shareholder two additional, non-voting shares for each single share they already hold.He already holds a disproportionate amount of “class B” shares, which carry 10 votes in internal debates compared to the one vote guaranteed by a “class A” share. Now, the company has proposed a three-to-one stock split in its quarterly results, which would give each Facebook shareholder two additional, non-voting shares for each single share they already hold.
Those non-voting shares can be sold without relinquishing any actual control, which is perfect for Zuckerberg, who has committed to giving away 99% of his Facebook shares to charity over the course of his lifetime. If the plan is approved, Zuck explained to shareholders, “I’ll be able to keep founder control of Facebook so we can continue to build for the long term, and Priscilla [Chan, his wife] and I will be able to give our money to fund important work sooner.”Those non-voting shares can be sold without relinquishing any actual control, which is perfect for Zuckerberg, who has committed to giving away 99% of his Facebook shares to charity over the course of his lifetime. If the plan is approved, Zuck explained to shareholders, “I’ll be able to keep founder control of Facebook so we can continue to build for the long term, and Priscilla [Chan, his wife] and I will be able to give our money to fund important work sooner.”
The voting structure will revert to a more conventional system if Zuckerberg ever gives up an “active leadership role” at Facebook. And on the strength of the company’s history so far, that’s not a day you’ll be looking forward to if you are a Facebook shareholder.The voting structure will revert to a more conventional system if Zuckerberg ever gives up an “active leadership role” at Facebook. And on the strength of the company’s history so far, that’s not a day you’ll be looking forward to if you are a Facebook shareholder.