Even Facebook's CEO Mark Zuckerberg Needs Help When It Comes To Growth Online

As this Wall Street Journal article suggests, even multi-million dollar Facebook needs help every now and then. Read on to learn Facebook's struggle for growth online.

Mark Zuckerberg, Facebook Inc.'s 23-year-old chief executive, is finding that he and his company have to grow up at Internet speed. The latest sign: He has poached a top Google Inc. executive, Sheryl Sandberg, to help expand his social-networking company.

Sheryl Sandberg

Ms. Sandberg, a six-year Google veteran who has been the search giant's vice president of global online sales and operations, will become Facebook's chief operating officer. In that role, the 38-year-old executive will try to help expand the privately held company's operations, revenue and international reach. She will also lead sales, business development, public policy and communication. Ms. Sandberg will report directly to Mr. Zuckerberg, who has been searching for a second-in-command for several months.

Ms. Sandberg's appointment comes as Mr. Zuckerberg is trying to adjust to being head of a company that is quickly outgrowing its position as one of Silicon Valley's hottest startups while preparing himself to be able to lead it to Google-like international heft. Based in Palo Alto, Calif., Facebook is a social-networking site that allows users to create personal Web pages and communicate with one another.

It has grown fast in the four years since Mr. Zuckerberg founded it. Sales reached $150 million in 2007, but the company's operations are concentrated in the U.S., and it is still burning up more cash than it is generating in revenue, according to a person familiar with the company's finances. Facebook declines to comment on its performance.

In early December, the CEO had a conversation with one of his mentors, Silicon Valley investor Roger McNamee, in which he admitted he was having a tough time with some new pressures he was facing as chief. "Is being a CEO always this hard?" he asked, according to Mr. McNamee, a managing director at private-equity firm Elevation Partners who has a personal stake in Facebook.

In an interview, Mr. Zuckerberg says he doesn't recall the specific conversation with Mr. McNamee, but acknowledges the CEO job "is hard -- I do sometimes whine to Roger about it."

Weeks prior, Mr. Zuckerberg had faced protests from users and privacy groups after launching a new advertising program. One element of the program tracked users' activities on Web sites outside of Facebook and shared those activities with their friends. Some Facebook members complained that this violated their privacy, and one local blog dubbed Mr. Zuckerberg "the Grinch." Around the same time, personal information about Mr. Zuckerberg, including material from his Harvard University application, was posted on a Web site for Harvard alumni.

Facebook's advertising initiative was a turning point in the public's perception of Facebook and its young CEO, who had enjoyed years as a Silicon Valley darling and was now the brunt of a backlash.

A Self-Assured CEO

After founding Facebook as a college student four years ago, Mr. Zuckerberg saw almost instant success. Millions of users flocked to his Web site and top Silicon Valley investors rushed to fund it. Mr. Zuckerberg also become known as a self-assured, even arrogant, CEO. Some of his early business cards read, "I'm CEO ... b -- ." (A Facebook spokeswoman says the cards were meant as a joke.) In a speech in March 2007, he said: "Young people are just smarter."

Mr. Zuckerberg is now finding that young people aren't enough. Like other technology startups, the key skills for Facebook employees in the early days were technology know-how and product development. To keep growing, the company needs to tap people with more traditional skills, including the ability to woo advertisers, manage a big staff and handle public relations.

"I coded the original site and managed the engineering teams," Mr. Zuckerberg says in an interview, adding that his next task is to "work on bringing really talented people into the company to help it scale." Mr. Zuckerberg declined to comment on his personal style or his reputation as a CEO.

Mr. Zuckerberg's experience is emblematic of Silicon Valley's accelerated culture, where startups change more in a few years than most companies do in decades -- forcing CEO-founders to adapt quickly in order to survive in their roles. The founders of Google, Yahoo Inc. and eBay Inc. all handed the reins to outsider CEOs within three years of founding their companies.

To season himself, Mr. Zuckerberg in recent years has reached out to high-profile mentors like Mr. McNamee and Don Graham, CEO of the Washington Post Co. Last year, Facebook brought in trainers including Bill Clinton's former speaking coach to help the CEO improve his speaking style.

Ms. Sandberg joins a roster of recent Facebook hires that includes Chief Financial Officer Gideon Yu, formerly CFO at YouTube, and Vice President of Product Marketing and Operations Chamath Palihapitiya, a former head of AOL's instant-messaging business. Mr. Zuckerberg is also seeking to hire a new general counsel and a vice president of communications and public policy, says Facebook spokeswoman Brandee Barker.

Part of the Struggle

Part of the struggle for quickly maturing startups is that founders don't want to lose their stamp on the company -- something they fear may happen if they hand the reins to a hired CEO. Mr. Zuckerberg says he is trying to build Facebook on his own terms, and indicated recently that he doesn't want another No. 1 in the company. Owen Van Natta, chief revenue officer who previously held the role of Facebook COO, last month said he was leaving the company. The departure was related to Mr. Van Natta's ambitions to be CEO of a company, a title Mr. Zuckerberg isn't willing to relinquish, both men say.

In Ms. Sandberg, whose appointment was confirmed yesterday, Mr. Zuckerberg is seeking an experienced hand who can also enable him to hold on to the reins. "It's going to be very valuable for me to have a partner [to help] me to think about how to do operations, especially as the organization grows very large and as we scale internationally," says Mr. Zuckerberg.

Mr. Zuckerberg built an early Internet venture in October 2003, during his sophomore year at Harvard. He acknowledged hacking into the school's online student directory and accessing students' photos, according to an article published at the time in the Harvard Crimson, the school newspaper. Then he put up a Web site that invited visitors to judge students' attractiveness based on those photos. He was harshly criticized by fellow students for the project and quickly closed it down. Ms. Barker declined to comment on the incident.

His next project was Facebook, which let people create online "profiles," or personal Web pages, through which users could interact with one another. In 2004, he left Harvard and moved to Palo Alto with a few friends. Once in Silicon Valley, he raised funding to expand the Web site, which at first only college students could access.

For a while, he kept up his college lifestyle. Early on, he and his friends worked out of a rented house in Palo Alto, which they allegedly left "in total disarray," with barbecue ashes and broken glass spread on the deck, according to court documents posted on the Web site of "02138," a magazine for Harvard alumni. The documents relate to a lawsuit filed in U.S. district court in Boston in which some former Harvard classmates have alleged that Mr. Zuckerberg stole the idea for a social-networking site from them. Through his spokeswoman, Mr. Zuckerberg declined to comment on the documents or the lawsuit.

When the company moved to an office in downtown Palo Alto, he wore Adidas flip-flops to work and often arrived in late morning and worked until the middle of the night, say people who worked for him at the time. Mr. Zuckerberg has been described by colleagues as shy -- sometimes so uncomfortable socially that he comes across as stiff.

Others describe Mr. Zuckerberg as a quietly thoughtful executive willing to learn from others. "A lot of times, when people meet with Mark for the first time, he's really quiet, and people assume he's not engaged or paying attention," says Matt Cohler, vice president of product management for Facebook. "Actually, he's really engaged and he's trying to listen."

In September 2006, Mr. Zuckerberg's profile grew when Facebook began letting in anyone with an email address, not just students. Around that time, Facebook added a feature called the "news feed" that made it easier for people to track friends' activities on the site. When thousands complained that it violated their privacy, Mr. Zuckerberg upset some further with a blog post telling them to "Calm down. Breathe. We hear you." Later, Facebook changed its privacy settings to make it easier for users to manage how their information is shared.

In May 2007, Mr. Zuckerberg wore his flip-flops onstage at a San Francisco event, where he announced he would let other companies offer services such as games within the Facebook site. Mr. Zuckerberg's investors began urging him to focus on finding a way to turn Facebook's popularity into revenue, say people familiar with the matter.

Mr. Zuckerberg sought seasoned help. He brought on Messrs. Yu and Palihapitiya. Michael Sheehan, a communications coach who has advised Mr. Clinton, came in to teach the CEO how to improve his wooden image, in part by coaching him in public speaking.

He asked friends like the entrepreneur Marc Andreessen, who founded Web-browser company Netscape when he was 22 years old, for advice in keeping Facebook's fast-paced, communicative culture intact as Facebook grew, says a person familiar with the matter. Ms. Barker said Messrs. Zuckerberg and Andreessen discuss business regularly but declined to comment on their conversations. Mr. Zuckerberg also turned to Mr. McNamee. He says he encouraged Mr. Zuckerberg not to sell Facebook or give up his CEO role.

All the while, Facebook kept growing. Last year, Microsoft Corp. invested $240 million in the company, valuing the startup at $15 billion. That gives Mr. Zuckerberg a net worth on paper of at least $3 billion. According to comScore Inc., a Web tracking firm, Facebook had 101 million visitors in January, up from 25 million in January 2007. Facebook's social-networking rivals include MySpace, owned by News Corp., which also owns The Wall Street Journal.

Last summer, Facebook began working on a project that involved attaching ads to messages about a user's activities on the site. These ads would then be seen by the user's friends. The company also designed a feature called Beacon that took this idea a step further: It tracked people's activities on sites outside of Facebook. If someone made a purchase on Overstock.com, for example, Facebook would notify the user's friends through a message, sometimes without explicit permission. Vendors partner with Facebook to participate in the service, and Facebook can make money by displaying tailored ads from the vendors on users' profiles.

At an event in New York in November for top advertisers, Mr. Zuckerberg unveiled the ad program, including the Beacon feature. Efe Cakarel, who runs a service within Facebook that lets users watch independent movies, was with Mr. Zuckerberg and recalls suggesting that advertisers might worry that attaching ads in this way could turn off users. He says Mr. Zuckerberg shrugged off the concern, saying, "They'll like it when they see how well it works." Through a spokeswoman, Mr. Zuckerberg says he doesn't remember the conversation but that it could have happened.

Privacy Complaints

Instead, people complained that Beacon was a privacy invasion. The watchdog group MoveOn.org Civic Action started a petition against Beacon, and companies including online retailer Overstock.com Inc. pulled out of the program or raised concerns about it.

That's when Mr. Zuckerberg complained to Mr. McNamee, asking whether the CEO job was "always this hard." Mr. McNamee recalls answering, "Only if you're successful. And if you're successful, it's really hard, but it's also worth it."

Mr. Zuckerberg deliberated for hours over a public apology letter about Beacon, says a person familiar with the matter. "We simply did a bad job with this release, and I apologize for it," he finally posted on Facebook's blog. He also began requiring users' permission to share their details via Beacon.

Mr. Zuckerberg says he also spoke with Mr. McNamee in December about how to structure his management team. That "led me to consider bringing in someone like Sheryl," he says, "starting a few other executive searches and making some other changes on the team."

Mounting Pressure

Ms. Sandberg had joined Google in 2001 when it had fewer than 300 employees. She helped build it into a global company and run its cash-cow AdWords and AdSense programs. Her unit, which has thousands of staff, now handles sales for about 99% of Google's advertisers.

Late last year, Mr. Zuckerberg met Ms. Sandberg at a holiday party. In January, Ms. Sandberg asked Mr. McNamee for career advice about another job opportunity she was weighing, and he suggested she talk to Facebook before making any moves. Mr. Zuckerberg then met again with Ms. Sandberg over dinner and elsewhere before clinching the hire.

Mr. Zuckerberg and Ms. Sandberg will face mounting pressure to find a better business model. Facebook's Web traffic continues to rise. But industry watchers are now questioning whether that growth will ever translate into Google-size revenue.

According to a person familiar with the company's finances, Facebook hopes to double revenue to $300 million to $350 million this year, its fourth full year in business. Google had revenue of $440 million in its fourth year, a fivefold jump from the previous year.

Mr. Zuckerberg's growing fame has included some unexpected challenges. On a recent trip to Los Angeles, for example, paparazzi caught him leaving a restaurant with a woman and heckled him with suggestions that he was cheating on his longtime girlfriend. The video showed up on the gossip site TMZ.com, but it turned out that the woman was in fact Mr. Zuckerberg's girlfriend.