Board Update

Nothing too dramatic has changed since the last board meeting. Here are some updates: 1. Mission We rolled out the three year goal to provide free data access to everyone in the world at an all hands in January. It went very well and everyone seems very excited about it as a mission-oriented goal for our company. Additional analysis suggests that doing this may be even cheaper than we'd previously expected, and could cost as little as ~$1 billion / year for data for another ~2 billion people. If we can get some partners to help out, we might be able to provide this will very little expense to ourselves, but we'll see. I'm still planning to grow revenue aggressively so we can maintain good levels of profitability in case we do need to cover a larger bill here. 2. Budget Follow Up We just completed our engineering allocation budget for H1, and ~60% of the 270 engineers we expect to add are going to monetization or infrastructure projects. My commitment is that until we bring headcount growth into parity with revenue growth, we will over index and allocate ~50% of headcount to core business functions like monetization or infrastructure. This half's allocation is a bit more skewed towards those things, but I think that's okay because we have a lot to do. Revenue seems generally on track. Nothing major to report here since we last reviewed. 3. Ads Team Transition We are transitioning the ads team to report to Schrep starting next week. Andrew Bosworth (Boz) will be the product group lead managing all of core ads eng, PM and design, and he will report to schrep along with the other groups Schrep manages, including messaging, photos and pages. Having Boz lead ads will be a polarizing decision, but I'm excited about this because Boz is a 6-year Facebook product development veteran and I want to keep on injecting more product culture into the ads team. Ads currently reports to [redacted] as I mentioned in my update for the last board meeting. He is going to continue running search for at least the next six months since the person who I would like to run search longer term -- [redacted] -- is going on paternity leave for the next 3.5 months. However, I expect [redacted] to retire and leave the company later in the year after that. 4. Mobile Messaging At the last board meeting, Erskine asked if I thought things were going too well and what our biggest risks are. My answer to this is that mobile messaging is the next biggest consumer risk and opportunity. Mobile messaging means people sending private messages -- like text messages -- rather than posting things more broadly. The basic math here is that people share more things with smaller groups than they share with all of their friends at once. On mobile, your SMS, email or other primary messaging app is generally the most important and most used app on your phone. Therefore, the biggest competitive vector for us is for some company to build out a messaging app for communicating with small groups of people, and then transforming that into a broader social network. Companies like Line and Kakao in Korea and Tencent in China are running this exact strategy and it's working reasonably well. They haven't expanded outside of Asia yet, but this is a big risk for us. In addition to being a risk, this is also a big opportunity for us. If we execute well here, there's an opportunity for us to significantly increase the volume of sharing and communication on Facebook. For the past 18 months, our mobile message sends has more than doubled every six months, and we expect that trend to hold true for at least the next six to 12 months as well. In order to execute on this, I've given the imperative that by the end of H1, I want our mobile apps to be as much about messaging as they are about News Feed. Because this is so important strategically, I've asked the folks running this initiative -- Peter Deng (PM) and Raymond Endres (eng) under Schrep -- to come present at the board meeting. 5. Acquisitions I mentioned in my last update that I want us to use M&A to build a competitive moat around us on mobile and ads. I think we could spend $1-2 billion over the next couple of years on such acquisitions. There are two acquisitions that we've been negotiating that are near completion that I'd like to spend some time reviewing at this board meeting. The first is a company called OSMeta that would help our mobile strategy by enabling us to build a better app store. Their technology can take an iOS app and compile it so that it runs on any platform, including Android, Windows, Blackberry, Mac OS, Linux, etc. This lets us build an app store for other platforms that has apps that no other app store on that platform has. It will also enable us to ship many of our own apps faster on other platforms. This is an expensive acquisition -- [redacted] for the company and [redacted] in grants for the founder and employees -- and it is also risky from a number of angles. However, I'm excited about it because I think the right strategy for us is to build a network of people and apps across all devices rather than trying to focus on any single OS. The second company is Atlas, which is currently owned by Microsoft and would help us in our ads strategy. Atlas lets advertisers measure who sees and interacts with their ads in a way that doesn't let the advertiser take our valuable and proprietary targeting information and use it on other ad systems like Google's, which would destroy our biggest strategic advantage and suppress prices on Facebook. This deal is $100m, but the bigger real cost is that the technology has rotted a bit under Microsoft's ownership, so we'll have to divert some of our ads engineering resources to fixing it. Still, we think it's a much quicker path to do this than to start building this on our own. There's one smaller company that's worth mentioning here but doesn't require board discussion. We're buying a medium-sized design studio that has done some contract work for us on ads in order to get a lot more design strength on our ads team. We've traditionally had a hard time recruiting designers for this, so this move should accelerate ads product development. 6. Team The senior team is generally in a good place right now and I don't expect much unwanted attrition this year. (One exception is Eric Antonow, who is very good and unfortunately told us he's leaving later this year to start an education company.) That said, in our company culture surveys, many people across our senior team and company in general said they were only planning on being here for another 1-2 years, which means I'm expecting real attrition in 2014. This intuitively makes sense to me. By this point, a lot of senior people have been here for a long time, have made more than enough money and may just be bored by the slowing growth rate and want to do something different. Going into this period, I'd like to spend some time at the board meeting getting advice on how to best manage through this. What are some things you've seen work well to retain folks over longer periods like this? What non-obvious things should I be paying attention to that I might miss? This seems like a topic where I can learn a lot from your different experiences, and it's a good one to cover now that there isn't any pressing crisis to cover instead. 7. Board After meeting with a lot of women board candidates last year, one person who has continually impressed me and who I'd like to invite to join our board is [redacted], [redacted] (He says she is the best person he has ever worked with.) I was initially skeptical about adding her since we don't need to fill any functional role on the board, but after spending more time with her I've found her insightful on a number of topics, ranging from research and development to organizational thinking to academia and to politics. I think she would be a good fit on our board and I believe her presence would help us make better decisions overall. The downside here is that she will be the ninth person on the board, and that means the board will be larger than I'd like it to be over the long term. I am assuming this will be resolved as one or two folks who have been on our board for a while roll off in the next couple of years. 8. Upcoming Releases Since we last met, we released our rewritten Android native app and Graph Search at their expected dates. Both releases have gone as expected so far. Graph Search roll out has been slow, so I don't have much to report there yet. A project that Chris has been leading to redesign our desktop site and parts of mobile News Feed has been delayed, and instead of being released at the end of January we now expect it in early March. Ansible / Home is still generally on track for release in April. I still expect this to be the biggest single release we do all of this year. --- That's all for now. I'm looking forward to seeing you guys tomorrow. Mark