Mark Zuckerberg Interviewed by Michael Arrington - TechCrunch Disrupt 2012:part1

Announcer Please join me in welcoming to the stage Facebook founder and CEO Mark Zuckerberg and TechCrunch founder and CrunchFund founder Michael Arrington.

Michael Arrington Did I mess up already?

Mark Zuckerberg You lost standing room when you do this.

Arrington Well yeah it's been like this, hasn't really been like this all day so, it was a few more people in here. I think they want to hear what you have to say. So first of all welcome to TechCrunch Disrupt and thanks for coming.

Zuckerberg Thanks for having me; it's good to get a chance to be here.

Arrington This venue probably looks familiar because that's where you do F8 and that's how we originally found out about it and it's such a great venue so you probably feel fairly comfortable in this venue.

Zuckerberg Yeah although you get a lot more people in here than we do.

Arrington Okay so you ready? I have a few questions for you about the IPO to start, you went public on May 18th and the stock has lost roughly half its value since then.

Zuckerberg Just get right into it!

Arrington If you could have done anything differently with hindsight, would you have?

Zuckerberg Well, you know I mean the performance of the stock has obviously been disappointing and we care about our shareholders and the commitment that we made is that we are going to execute this mission of making the world more open and connected and we are going to do things that we think are going to build value over the long term and, you know, over the next three to five years I think the biggest question that is on everyone's mind is, that will determine at least our performance over that period, is really going to be how well we do with mobile and, you know, we've been in this quite period for the last six months or so.

Since right up to the time when we get, when we were getting started with the IPO and a lot of stuff has changed since then. Six months ago on mobile we hadn't launched our new set of apps so we were still in a pretty bad place there, Apple hadn't announced the iOS integration, literally six months ago we didn't run a single ad on mobile.

So I think it's easy for a lot of folks, without us being out there talking about the stuff that we're doing, to really underestimate how good, how fundamentally good mobile is for us and that is one of the main things that... You know, this is the first time that I've really spoken since the IPO publicly, and it is one of the main things that I think is misunderstood right now, is how fundamentally good it is on a bunch of different levels.

So I mean the first is there, there are just, there are more users, right, obviously. The second is that per... per person who's using- who's using Facebook on mobile, there's more engagement and they're spending more time. And then the third is that, per amount of time that people spent on mobile, we think that we're going to make a lot more money than we do on desktop too.

So, you know, you can kind of' go through all three of these things and a number of users. That's fairly obvious. There are a lot more people who have phones, then, then who have computers. Five billion people in the world who have phones. The number of smartphones are growing really quickly. The number of Facebook mobile users growing really quickly.

On engagement, we already see that mobile users are more likely to be daily active users of Facebook than desktop users. They are more than twice as likely to use Facebook six out of seven days of the week. So, there's a lot that we can do there. Those stats are from before we even launched the most recent version of the iOS app, which has been a massive improvement. Since we launched that, the number of stores that people have consumed have doubled on that.

Arrington Just, just slow down.

Zuckerberg? Feel free to comment.

Arrington I want to unpack, like, everything you just said, but it's going to take me a while. I don't want to cut you off.

Zuckerberg We have... we have twenty-one minutes.

Arrington But you've just said so much. There's so much to unpack in there, but just to. Let's just jump back up on. I want to get rid of the IPO questions first and then, you know, it's interesting how much you talk about mobile, though. And then we are going to talk a lot more about that.

Zuckerberg Go for it.

Arrington But you know, when you went public you said, "We don't build services to make money, we make money to build great services."

Zuckerberg Yeah.

Arrington So my response is, "Wow, you really meant that." Let's talk a little bit about that.

Zuckerberg You, you said I did mean that?

Arrington It seems like you really meant it.

Zuckerberg Yeah. We really mean that. You know, the statement we build, we don't make, we don't build services to make money, we make money to build better services, really goes to the heart of the philosophy that we have been running the company in. There's no doubt, we are a mission-driven company.

I mean, we exist and we wake up in the morning and the thing that gets us excited is making the world more open and connected, and the things that we are doing to build that. But, you know, you can't just focus on that, right? I mean, since the beginning of building Facebook, what, one of the core things that, that I've learned is that in order to do this, we have to build a great team.

And in order to build a great team, you know, the best people want to work on a mission that they believe in, but they also want to make a bunch of money, right? In order to do that, you have to build a great business. We want to build a platform, right? In order to build a platform, we need to build tools that are going to make it so that developers can build the things that they want and make a bunch of money.

And in order to do that, we need to have a business model that works for them and incentivises them to want to work with us. Advertisers produce a lot of the content, right? I mean a lot of what people do on Facebook is around pages. That content is in the system because the advertisers get a good ROI working with Facebook. So, building a mission and building a business go hand in hand.

And it is definitely true, that the primary thing that makes me excited about what we are doing is the mission. But, I also think that from the very beginning we have had this healthy understanding, which is that we need to do both. And we're about doing both and that, that's a key part of understanding the philosophy that we have.

Arrington Okay. With the, with the stock price fluctuations, is it... are you finding it, like, you have to be creative in incentivizing employees to stay, keeping morale up? Is there a morale problem? How are you dealing with that, in general?

Zuckerberg Well, it doesn't help. But look, but, I mean, I think that there are a few things that are important to keep in mind here. First is that Facebook has not been an uncontroversial company in the past, right? So it's not like this is the first up and down that we've ever had, and I think that people at Facebook are fairly used to, at this point, the press and folks saying good things about us and saying bad things about us.

And we have a pretty good compass and understanding, here's what we need to build, we're going stay focused on that. I always make a point when I think that people are being too nice to us or writing too nice of stuff about us, to get up in front of the company and say hey, we're not as good as they say we are now. And then when I think that people are being too critical, I am underestimating us.

saying, you know, I think, you know we're not as bad as they say we are either, and I think it's really important to keep that in mind, and I think people understand that. The second thing is just that, what really motivates people at Facebook is building stuff that they're proud of. And I don't think that this is just Facebook, this is universal, right? I mean it's really hard for people to wrap their heads around, okay, I'm building something that nine hundred fifty million people are going to use. But what I think resonates with a lot of people is, you know, I'm building something that I'm going to show to my friends and my family, and that I am going to be proud to do that.

And one of the things that we've found is when we release apps, right, the, the new version of messenger, the new version of the iOS app, the iOS integration that's coming out, the camera app, all these types of things. We - that, that's not only the stuff that drives morale inside the company, but it also drives a lot of recruiting. Because a lot of people come to us and say, you know, I want to work at this place because you guys built that and because you guys are doing some of the most interesting stuff out there.

So that's the second thing. And then the third things is, you know, we haven't really done anything on equity or anything like that in order to, incentivise people. I think that basically sticking to the normal path that we have there is good. But it's important for people to understand, both new people who are coming to the company and people who are at the company that the way that we do compensation is that we translate the amount of cash that we want to give you into shares.

So, if the shares are undervalued or valued less than you think that they're going to be in the future, then you're going to get more shares with the amount of money that, that they we're willing to compensate. So, and I think the, the real question, sure. You know, I mean, some people are going to look at this and maybe, you know, some people will leave. But I actually think it's a great time for people to join, and it's a great time for people to stay and double down. And, I think, we're seeing that.

Arrington Can we talk product now? They like that answer. So I want to talk about product. And I've been rough on the company, as others have, over mobile in the past. I've said it was the Achilles heel. I've said it was - some of your mobile products are the worst product I've ever seen in my life. I've said that

Zuckerberg We are very self-critical too...

Arrington Is mobile a strength and opportunity for Facebook or is it, or is it your weakness?

Zuckerberg Well, it really gets back to what I was saying before, you know, so mobile is, you know there are going to be more users. Each user is going to spend more time, and per amount of time that they spend, we're going to be making more money than we are on desktops. It's pretty easy to paint the picture for all of those I mean, so more users, pretty clear. There are a lot more people who have phones in the world.

More engagement, I think that could have gone either way, but we are already seeing the stats that mobile users more use on a daily basis. You know, since we did the new version of the iOS app, which makes what we're doing competent. You know, we've already seen double the amount of feed stories that people have consumed per user on a daily basis. So, we've shown that in addition to all already being ahead on mobile engagement compared to desktop, there are huge things that we can do that can move the needle on that.

Arrington Yeah

Zuckerberg And then on monetization, I'm really optimistic because, you know, mobile's a lot closer to TV than desktop where, on desktop we basically, for the past five or six years we've- we've had these right-hand columns... ads, right? So, we basically we've had this ads team that's worked, largely in isolation, to build this service that any product team at Facebook can use.

You're building a product. You can put these ads on the side of your product, and it's been great, you know. We-we've built a multi-billion dollar business by doing that. But on mobile, that's clearly not going to be the answer, right? We're not going to have ads on a separate column. There's just no room, so the ads have to be more integrated.

And what we are seeing now is, each of the product teams in Facebook are taking ownership over that. We are seeing some great mobile monetization products get developed. They have to be fundamentally integrated into the product. And what we're seeing already, even with the early mobile ads that we have, is that they perform better than the right-hand column ads on desktop. So, I think we know that we're going to do well on that.

There's a huge opportunity. Now the question is getting there. And, you know, there's no doubt that some of this stuff that... we've, we've had a bunch of missteps on this. You know, I think, I mean, part of the first question that you asked me that I didn't quite get to answering, was what are some of the big mistakes that we've made? When I am introspective about the last few years, I think that the biggest mistake that we made, as a company, is betting too much on HTML5 as opposed to native.

Because it just wasn't there, right? And it's not that HTML5 is bad. I'm actually, in long-term, really excited about it. And you know... and one of the things that's interesting, is we actually have more people on a daily basis using mobile web Facebook, than we have using our iOS or Android apps combined, right? So mobile web is a big thing for us, but there's no doubt that. We went for this approach, we built this internal framework that we called Face-web, which was basically this-this idea that we can take the, the infrastructure that we built out from pushing code every day.

Not having just submit to an app store, building, building web code on the, on the web stack that we have, and then we can translate that into mobile development. We just were never able to get the quality that we wanted. So we made this decision two years ago to go in that direction. So it took us six to eight months to build Face-web and get that approach going.

Another four months or so, to decide that it wasn't going to do it after we kind of committed to doing that. And then, we had to start over and rewriting everything to be native, so that is kind of. It brings us to where we are now. We burnt two years. That's really painful. I think probably we will look back on saying that that is one of the biggest mistakes, if not the biggest strategic mistake that we've made. But we are coming out of that now, the iOS app I think is in good shape and the Android one will hopefully be soon.

Arrington Okay. I want to unpack that a little bit. You said that it was about, it was about two years ago. It was about twenty months ago that you actually decided native is the way to go. Is that right? Or was it less time?

Zuckerberg No. So, two years ago is when we decided to basically bet completely on HTML5. Then that's when we started building Face-web and we got into that framework and, you know, in the beginning, we launched a version and we were like all right, we know that this isn't as good as we want.

But, we believe that because it's using the same desktop, same web methodology that we are used to, and really good at as a company, we are going to be able to improve on that really quickly. And, pretty... we worked at that for a few months and then came to a conclusion that, hey this isn't going to get better, to the quality level that we want anytime soon.

The level of mobile experiences that are out there are just so good that we need to - good enough is not good enough. We need to have something that's of the highest quality level, and the only way we're going to get there is by doing native so we just have - alright, scrap this. Not completely, I mean. We're still kind of integrating it on the side, but we're minimizing it. Native is going to be the approach that we go with for iOS and Android going forward.

Arrington And so you say that is probably the biggest strategic mistake you've made is...

Zuckerberg I think so.

Arrington Is HTML too long?

Zuckerberg Yeah. Or just betting completely on it. Like I said, we have more usage on our mobile website than we have on our iOS apps and our Android apps put together and that's not like a... I mean, our iOS and Android apps are the biggest iOS and Android apps out there, right? So, I mean so, mobile web is huge, right. And, that is... well we just couldn't bet completely on it. On iOS and Android, you can do so much better by doing on native work and we needed to just do that.

Arrington My reaction to the iOS app, I was, I was sceptical at first and then I tried it out and I wrote about it, it's amazing. Did you feel the same way, was there a point before you launched the native app, where you were like, "Oh my god, this sucks." On the iPhone?

Zuckerberg Yeah, yeah. I don't think we... we're very self-critical. It was not... it was not where we wanted it to be before. But, you know, and, and, and to be honest even what we have now is not as good as it can be. I mean, we basically have... we spent the last period of time... we made this decision that we wanted to get this rewrite done as quickly as possible, so we knew that we wanted to add a bunch of features and there is a bunch of design things that we want to do that aren't reflected in the current version.

But, just to kind of execute on it well and simplify the project from an engineering perspective, we just decided to scope, and hey, let's ship exactly the same features that we had before, which is now fast. And one of the things that I'm really excited about is that in parallel, other teams have been building other features and apps that we just didn't launch with the last release, because we wanted the first release to just be this clean thing.

You know, exactly the same feature set, just really fast now. And over the coming weeks and months, I think we can expect to see a lot of the cool stuff that people have been working over the past half-year or year, come out on this apps as well. So, that's going to be awesome. I'm really excited about that.

Arrington Will you be rewarding Android users with a better app soon, as well?

Zuckerberg Yeah, I mean a lot of the same infrastructure that we built for iOS, in terms of the way that we do data fetching, that we kind of had to invent from scratch. It wasn't just pushing down a website, like we did with Face-web and all of that stuff is going to apply to Android and we're working on that and we hope to have that ready soon.

Arrington Soon, can you talk about it specifically or you are not...

Zuckerberg I mean it will be ready when its ready.

Arrington Okay.

Zuckerberg Yeah.

Arrington Yeah, and not before.

Zuckerberg And hopefully not before.

Arrington I want to spend a minute, you've somehow, you've retooled the entire way you build products internally, you have separate mobile group. You have a separate monetization group. What's happened? How has that changed and when?

Zuckerberg Well, one of the things that we did was... so, you know, we used to be purely functionally organized, right? So, the management team, we used to have one head of engineering, one head of product. And then we made this change around the end of last year, where we set up these product groups, right? So now there's a new speed in the information distribution product group. There's an identity product group, a platform product group. We were just putting people in charge of these things.

So before, the people running each of these big products for us, were kind of scattered across the organization. Some were in the engineering team, some were in the project team. Now there's a person who owns each one of those. I basically said okay, in two years we want to be world class at each of these things. So build your road map to get us there.

And you know, naturally what a lot of the folks did was... the first thing they did was they took a step back and say okay well, I don't have the framework or the infrastructure in place now that I am going to need to get there in two years, so, there was lot of rebuilding and retooling, as you say.

I've got us on mobile side that was rebuilding the native infrastructure that we built out. And, you know, we have similar projects going on in a bunch of other areas, rethinking different areas of what we are doing. And you know, because of the cycle where we started all that around the beginning of this year, that's why the first half of the year was a little bit slow on products, but for the next six months or nine months, I expect that a lot more interesting stuff is going to come, and I'm really excited about that.

But, we've... on the mobile side for retooling specifically, we did go from having this mobile core team before. Where we have this graph that we track inside the company of mobile check-ins right of commits of code. And it went from, at the beginning of the year, ninety per cent of the mobile code being committed being--from this mobile core team, to now educating everyone across the company.

So now ninety per cent of the check-ins and commits are coming from all the different product groups decentralized and only ten per cent of the kind of product infrastructure is getting built by the mobile core team. But that- that's a much healthier balance, right? So, we've transitioned and now we are a mobile company, right? And the code that's being written is mobile.