>>Kim Ricketts: Good afternoon, everyone, and welcome. My name is Kim Ricketts
[phonetic], and I'm here introduce and welcome David Kirkpatrick who is visiting us as part of the Microsoft Research visiting speaker series.
David Kirkpatrick is here today to discuss the Facebook effect, the inside story of the company that is connecting the world. In a little more than half a decade, Facebook has gone from dorm room novelty to a company with 500 million users. It is one of the fastest growing companies in history, an essential part of the social life not only of teenagers, but of hundreds of millions of adults worldwide.
As Facebook spreads around the globe, it creates surprising effects, even becoming instrumental in political protests from Columbia to Iran.
David Kirkpatrick is senior editor for internet and technology at Fortune Magazine and a long-time author of its weekly Fast Forward column. He's been writing about technology and the technology industry for 19 years and developed the Fortune Brainstorm
Conference and is now organizing a new conference called Techonomy for summer
2010.
So please join me in welcoming David Kirkpatrick to Microsoft to discuss the Facebook effect.
[applause]
>>David Kirkpatrick: Thank you, Kim. And for those of you who are coming late, you should know the first 50 people got free copies of the book [laughter]. I think we're past
50 now, aren't we?
So, any, I love being here at Microsoft to talk about Facebook because I feel like I probably have a fairly knowledgeable audience, and a lot of things that I often say about
Facebook don't probably need to be said. So I don't want to talk for too long. And what
I would most like, if it's okay with you, Kim, is to mostly have it be a discuss and a Q and
A kind of thing. Because, actually, if there's one company I know almost as well as
Facebook at this point, it's this one.
Where's Frank sitting?
Frank knows I've been up here quite a few times over the years thanks to his help and
Richard, wherever he is, and others. And I have huge respect and even affection for
Microsoft, despite its corporate board-like quality at this point because I just think you're such an interesting, smart a bunch people, and I think -- one of the reasons I think I wanted to write a book about Facebook was because having spent a lot of years writing about Microsoft and Apple and IBM and the incumbents, it was really quite -- I had a very strong sense when I first met Mark Zuckerberg that he really wanted and had the potential to create another company of that scale, its scale both in influence and possibly actual financial business success, although the other most interesting thing that made me so fascinated by him from that first meeting was that it was very apparent that he was much more interested in creating a social phenomenon than a company. And he even said at that first meeting, which I wrote about at the time, a business is just a

good vehicle for getting things done or stuff. I don't know whether he said things or stuff.
And I think that was a very telling conversation, and his attitude is entirely unchanged for almost four years later. That service was in September of '06.
He is making a company, but he doesn't think of it that way. He thinks that what he's doing is changing the world. And I think, actually, there's tremendous parallels with Bill
Gates. And the parallels are not complete, because Bill Gates was something of a natural businessman in a way that Mark is not.
But the thing that I think is -- well, it's bizarre they're both sophomores at Harvard who left and went to start a company. That's just weird. But the fact that they both began with a very concrete and articulate vision that was very much about empowering the individual is extremely parallel, and the vision of a computer on every desk and in every home, which was an extremely early articulated vision for this company and genuinely drove it for many, many, many years -- in fact, I don't think they even changed that slogan until, like, 15 years later, right? That is awfully similar to making the world more open and connected, because that was in an era when people didn't even have a device to be empowered with.
And your company, more than any other, I would argue, is responsible for creating the context that would allow Facebook to then, and other services, but Facebook particularly to take this whole thing to another level where once everyone's got a device and is empowered to that degree, Facebook turns everyone into a broadcaster. And that is its revolution primarily in simple form, in my opinion.
So Facebook can be discussed isn't that disturbingly large variety of different ways.
And, frankly, I kind of talk about it differently at almost every talk, which is probably not the greatest idea, but in its essence for me, that's what makes it most interesting is that it is a platform for empowerment.
And I think -- some people in this room who I've known for many years know that I was really, really interested in groupware way back in the early '90s for a very similar reason.
That was inside the enterprise. And Richard knows this, because I've been talking to
Richard about this stuff for longer than anybody here because he was at Lotus at the time. Now he works with Ray and he was at Groove. Anyway, so I don't mean to embarrass you, but I thought Groove was fascinating for the same reason. It was a little different because it was a more narrow sort of community that it was targeting, but
Notes was fascinating to me because inside the enterprise, at least in theory, it gave everyone a tremendously enhanced ability to gain and share information.
And one of the reasons Notes never really succeeded the way it was supposed to was because management didn't really want that to happen. And that's still true in most companies as I'm sure those of you who work in various businesses inside Microsoft that have elements of empowerment of the individual may have thought about, when you really empower an employee, you disempower the managers, and most companies are managed by people who would rather control the flow of information than have it be shared widely, even though we all probably at this point could observe and pretty much

prove that the flatter the organization, the more productive and successful they're likely to be. But the world is full of very flawed human beings who like power.
And so if you think of that context and the fact that I wrote about that stuff for many, many years, I think it's very clear to me, at least, why I was so immediately interesting in
Facebook. Once I realized that it wasn't just a plaything for college kids, which was also part of my meeting with Mark, but Facebook does that same thing in the whole world. It basically gives the people on the bottom a voice and an ability to connect with one another and to share messages virally that is extraordinarily powerful and has tremendous impacts or effects, as the title of my book would call them, in almost every realm of human activity.
So those -- how many people here have actually read my book? Has anybody read the whole thing?
All right. That guy gets a prize [laughter]. And Alexandra probably should have read it, so she has, thank you.
Can I say what you do?
She heads Microsoft in a whole -- everything to do with Facebook. So she and I have been talking a little bit, which is fascinating.
Any, now I forget what I was saying. But -- what was I saying?
>>: [inaudible].
>>David Kirkpatrick: Yeah, well, okay. I'll find something to follow that with. I had a very clear train of thought, but then I freaked myself out. But anyway --
>>: [inaudible].
>>David Kirkpatrick: Oh, effects. Thank you. Very good.
So the book begins with an anecdote, which is not what I think most people who pick up the book would expect, set in the bedroom of a 32-year-old computer programmer in
Barancia, Colombia, which is a small -- medium size coastal city of, what, likes 800,000, something like that, or a million maybe, in Colombia. And it's in January of 2008, and he, like so many Colombian citizens, is really pissed off about the FARC guerilla movement. And at that time they were just doing something that he was particularly upset about involving a small child, and he just, out of sheer frustration, created a group on Facebook in the middle of the night which had a simple message: FARC, stop killing, stop kidnapping, and stop being FARC. Just get out of here. Get out of had your country and -- you know, very simple. No more killings, no more lies, no more kidnappings, in more FARC. That was its message.
And he had a couple, maybe 125 Facebook friends at the time, because even in early
'08 English-speaking kids, young people, in Colombia were very heavily using Facebook as the elites were in pretty much every country in the world at that time already. And so he put up his group and sent a message to his Facebook friends, maybe 100, 125, and

went to bed. And then he woke up the next morning and he had 1200 members of the group. And that was quite interesting to him.
So he went to the beach, which was what he was doing, because it was holidays, and came home, and I forget the number, but he had a couple thousand members of the group later that same day, and by the next day he was spending all his time just cultivating and maintaining the group. And a day after that the 5- or 6,000 members of the group decided collectively that they should have a demonstration because they wanted to take their anger about FARC public.
And this was very extraordinary, because in Colombia people had been afraid to speak out against FARC almost universally. It had been very, very dangerous to do so, and the fact that it started happening based on one individual's very human impulse is, to me, fascinating. And what's most fascinating about that story and the reason that I begin the book with it is that one month to the today after he created that group in the middle of the night in his upstairs bedroom, a series of demonstrations occurred in every city in Colombia, and even almost every village with a total of an estimated 10 million people marching in the streets, including even in Barancia, there were 30,000. I forget the numbers. But a lot. A lot.
And I think it's the biggest single demonstration in recent world history that I know of.
It's certainly a dramatic example of what the empowerment of the individual can lead to if the message is just the right one that people are poised to receive at that moment, because Facebook's -- one of Facebook's most amazing qualities is the speed of viral dissemination of information that it facilitates.
And so as you all know, if you say something on your Facebook page and a friend likes it and their friends see it, they might like it, and that thing can spread really fast. Really fast. And in politics, that has had major impact in a number of places, probably more than I could even -- and probably literally tens of thousands, maybe hundreds of thousands of places, that's had a big political impact. It's had a big political impact at the local community neighborhood level in many places, it's had a big political impact at the national political level and places like Iran and Egypt and Indonesia and Colombia.
In Egypt, for example -- and the New York Times Magazine did an article about this a year or so ago -- really protesting against Mubarak is not recommended if you're
Egyptian. And on Facebook, however, I believe something like 35,000 people had joined groups that at some point in '08 under their real name was saying Mubarak is a jerk and some things he was doing were really, really wrong. And it led to offline real world protests. A lot of people were arrested. But Facebook was the tool of empowerment there. Not nearly as dramatic as Colombia, but a very repressive government compared to the Colombian one, which is more or less democratic.
But in Iran, as widely is discussed, Mousavi, when he lost the election because it was stolen from him by Ahmadinejad, because used Facebook as his primary means of communicating with his followers. Twitter was a very big factor in that whole chain of events too, but I think Facebook probably was a bigger factor, although Twitter was more commented upon by the press because the press generally understands Twitter better than it understands Facebook because the press uses Twitter and they love
Twitter.

This whole thing of Twitter and Facebook has been amazing to me -- just to take a total detour -- but I like Twitter a lot. I think it's very important. But there have been so many articles written by journalists that really lionize Twitter in the last two years, a little bit less in the last few months, but you've seen it even fairly recently. David Carr did a piece in the New York Times that was really prominent. And
I honestly think -- in fact, Frank, I posted a post on this. I actually think that a lot of journalists fundamentally misunderstand Twitter because it's so good for them, it's so exactly what they need to acquire their own community and to broadcast to a large audience at a time when their employers, the traditional media, is collapsing around them, and it allows them to build their own brand up, and it's a very valuable and useful thing for them, they incorrectly intuit from that that it's good for everybody and everybody should be tweeting. And they write these articles implying that, which is probably fundamentally wrong.
And the Twitter, for the average person of -- the nature of the average person who's on
Facebook, which is, like, anybody, the guy who drives a cement truck or the seventh grade student, those people don't really have a message to broadcast on Twitter, but they can use Twitter dramatically usefully by tuning in to listen to tweets from Microsoft or Britney Spears or Virgin American Airlines or whatever. And that's really important, and it does give the broadcaster this interesting feedback mechanism.
But unlike Facebook, Twitter is not a bidirectional connection. So when you about me friends with someone on Facebook, you are each subscribing to one another's data, whereas on Twitter you just subscribe to someone else's data and they don't even know who you are. You probably don't even use your real name.
Another fundamental difference between Twitter and Facebook that I think is very infrequently noted is that Twitter is not based on genuine identity. A lot of people choose to use their real names, but I would say of the roughly 3500 people that follow me on Twitter, only about half use their real names. And I have no include even if they're giving the right name because, you know, you can make a name up even if it sounds like a real name. On Twitter there's really nothing to test that, and there is on
Facebook. And the way that your name is tested on Facebook is someone friends you, because that's the ultimate authentication of identity on Facebook is not that you self-identify about that your friends link to you and authenticate you by saying, yes, she's my friend.
And that is a very, very powerful piece of Facebook, by the way, which I think is not much understood and I think it's starting to sink in on people. And it's one of the reasons why at the end of my book --
We'll get a question just in one second.
Well, actually, go ahead.
>>: [inaudible] your last point because right now I'm facing a situation where somebody took the name of my son and posted bad things about him and friended people just to badmouth him. And it's not him.

>>David Kirkpatrick: Yeah, that happens.
>>: [inaudible] so the authentication [inaudible]. It doesn't mean that it's authenticated.
>>David Kirkpatrick: No, it's not perfect. And there's plenty of ways to game it and exploit it and abuse it. Absolutely. But, still, on balance, it works very, very effectively.
There's a guy who I was talking to in here -- I don't even know where he is. I forget his name -- who has two Facebook accounts, one for work and one for friends. And it's very clever the way he did it, very obvious, but I hadn't thought of it, but maybe somebody -- most of us might not have this ability. He has a nickname that all his friends from childhood and college use for him, and that's the name he uses on
Facebook for his real friends, and for all you people who he works with he uses his real first name, right?
And that's very effective, because, actually, I have given a lot of talks on Facebook recently where people, either I or somebody else there, ask the audience how many people in the room use it for work -- actually, let's do this now.
How many people use Facebook primarily for work purposes in this group?
Wow. That's amazing. That's a very small number. On average --
Yeah, well, you have to, kind of [laughter]. You're a different case. You're a special case.
But I was in a meeting in New York last Thursday morning -- Friday morning, and half the room raised their hand when they asked that question do you use Facebook primarily for work. And how many used Facebook primarily for personal reasons, the other half raised their hands.
And a lot of adults female like they're forced to make that choice. Maybe because you have unusual tools as Microsoft employees that allow you to communicate digitally in work contexts. Maybe you don't need it the same way.
>>: I actually use it for both. I mean --
>>David Kirkpatrick: Well, I mean, I would think everyone -- oh, yeah, who uses it for both? That's a good question. Sorry.
>>: [inaudible] using it for work and play?
>>David Kirkpatrick: It means you only friend people that -- you use it as if it was
Linkedin almost where you really just connect with work people and then you don't put up a lot of personal data about your friend life.
And, frankly, I guess I tend to be on that side. I have a 18-year-old daughter. When I first started using Facebook, I used to put family photos from our vacations and stuff on
Facebook, and a very smart PR person who's friend of mine said she thought, given that I had so many friends on Facebook who were just work connections who I didn't

really know very well, it was not a good idea for me to put pictures of my daughter on
Facebook.
And I thought about that for a while, and I realized she was probably right. Now, I'm 57, so my attitudes are not necessarily indicative of everyone's, but I have not really regret that had, and I doubt for now, given that I have 1050 friends on Facebook, all of whom I have met in one way or another, I actually feel like I try only to be friends on Facebook with people I actually know, which is the way it's designed, and I have not answered or turned down well over a thousand requests, which is not always that easy to do and it worth discussing in itself, actually. But even despite that, I don't want to put my family photos on there.
I don't want to talk forever, but I would say one of the things that -- the standard thing I say about Facebook to less savvy audiences than you, but I will say it to you, is that I don't think most people should put any information on Facebook that they would be uncomfortable seeing on the front page of the newspaper, because once it's in digital form, you really can't control it. And if you think that you're really, really protected on
Facebook against any eventuality of disclosure, you're fooling yourself.
Now, on the other hand, another thing that I do say and I do believe is that Facebook, from the very beginning, offered more privacy protections for the internet than almost any service that has ever existed before or since. And it still does. It still does offer better privacy protections than almost any other system you can name.
But the privacy protections are more -- actually you call them sort of procedural or pragmatic privacy protections rather than absolute privacy protections. And the best -- even just talking about Facebook every day as I've been doing for the last several weeks is really helping me think better about it. And I was thinking about my daughter, my 18-year-old daughter who just graduated high school, because this whole question -- do young people care more or less about privacy than old people like me?
And it's not an easy question to answer.
And Dana Boyd [phonetic] recently wrote a piece arguing that actually young people care more about privacy than old people. I think she was interpreting data differently than I would from a recent Pew Research study. But back to my daughter, she doesn't really use much Facebook privacy protection, but she doesn't friend me [laughter].
So she is, in effect, using Facebook's privacy protections very, very cannily in a way that almost everyone of her generation would also do, which is that she's completely open with her peers, of whom she has 800 friends on Facebook and her data is completely open to anybody who's a member of her network at school, which is another probably 2- or 300 -- she goes to a smaller school -- but she is not friends with her parents.
So even though probably literally many, many thousands of people can see any photos of her that her friends put up, I can't. And that's probably one of the only people she doesn't want to have see it. And Facebook gives her that control. That's a pretty damn well-designed system if you ask me. And it's real privacy in a pragmatic procedural sense.

So people who say Facebook, Mark Zuckerberg, doesn't care about privacy in my opinion are totally full of shit. Privacy is a very complex subtle set of issues. But if what they mean is you cannot absolutely have total anonymity and also freedom to use
Facebook, that's a correct statement, which is meaningless, because if you had total anonymity, you couldn't use Facebook because Facebook's entire design and purpose is to connect to other people because you're you and they have to know who you are in order to have that interaction.
So this is funny, you know -- this is actually a real issue. Right now the EU, which, you know, they kind of get a really crazy about privacy over there, and right now there are
EU commissioners who are demanding that Facebook should give all of its members the ability to put privacy protections on all of the data on Facebook, including their name and their photo.
Now, Facebook says no. Then it's not Facebook. I mean, why would somebody who wants to do that even be on Facebook. I honestly barely know. I could imagine. I don't think it's to any Facebook's benefit or to the benefit of the other users of Facebook for that to be possible, although, frankly, I would predict it will probably happen that that will become, by regulation, a requirement in the European Union. I think it shows -- it's one of many, many things you can point to that show just how stupid government typically is about technology.
And maybe there's a reason why they should do that, because -- but I think it's interference is a normal commercial activity. But I just don't think people think about these issues very subtly, and they're not simple issues. I don't even understand half of this Facebook privacy stuff, which I'll [inaudible] in one sec.
But here's a funny anecdote which I probably am disclosing information I shouldn't, but I was having lunch with one of the founders of Facebook, I won't say who, but somebody who doesn't work there anymore, and -- actually, I'd better say who because there are only, like, three. Chris Hughes -- and we're sitting there at lunch about a month ago right after this whole privacy kerfuffle blew up. And we're sitting there in New York, and we realize neither one of us could really understand or explain at that moment what was happening with our data on Facebook.
And I kind of thought, well, that suggests there's a problem with how people understand -- if I, who spent two years thinking about nothing but Facebook, and he, who's often used by them as a spokesman and is one of Mark's best friends, if neither one of us can explain what's happening with our data on Facebook, they haven't done a very good job of explaining it at a minimum, and probably something's wrong with the way it works. And then, of course, they changed a lot of stuff and it's probably a little easier to explain now.
So anyway --
>>: On the discussion of privacy, I don't think people are concerned about sharing their picture and their name with people that they know, right? The concern is about sharing it with advertisers unwittingly. And so I think your discussion of privacy is really over simplifying that, right? Your daughter is sharing all her pictures and personal

information and she's intentionally not sharing it with you, but she is unaware that she is sharing that out to various commercial --
>>David Kirkpatrick: Well, she may be unaware or she may not care. I mean, I think a lot of people like you presume attitudes of the average user of Facebook which are absolutely unknown, and I would say behavior of people on Facebook suggests that they do not share most of the attitudes that the average privacy concern pundit or
Microsoft employee assumes that they have. That's my opinion.
But I think you're right. The EU, they're really concerned about corporate abuse of the data. That's true. Absolutely. But, you know, I think an awful lot of people who have been speaking out in the last month or two, you know, senators, pundits, Jason
Calacanis, et cetera, about what people on Facebook think have no clue. And in reality, the proof is in the pudding that the average user of Facebook doesn't even know there is a privacy controversy and couldn't care less because they're just sharing data freely and, you know, they show what they think about it by putting all that data up.
Now, I do think Facebook should do a better job of disclosing to their members the fact that, really, they cannot guarantee much absolute security of data from companies, from, you know, malcontents, from social deviants, whatever. You can't be sure that your data won't be seen in that context --
Just a second. I'll get there.
But, you know, the recently privacy controversy has been a controversy of the elite, you know, which is their job. I'm a journalist, and I think journalists do have a job to try to sound the alarm before even the public necessarily is aware of it. So that's healthy and appropriate.
But it's wrong to think that Facebook's users are upset. That's why all these articles are, like, oh, my God, only 30,000 of people quit Facebook on quit Facebook day! Well, that's hardly a surprise. More than a million new users start using Facebook every day.
So the numbers speak for themselves.
And, by the way, this thing about data -- you know, you guys understand data. You think about data a lot. One of the things that's really important to keep in mind when you're looking at Facebook and trying to understand its corporate behavior, especially when these controversies erupt is that, you know, as you probably would immediately realize, but as many people would not, whenever there's a controversy, the Facebook people, and Mark in particular, spend a lot of time looking at the behavioral data of what's actually happening on the service.
And if they make a change and people stop doing something that they at Facebook think is critical to the use of Facebook, that's a real protest that they know and understand. And what Jason Calacanis says means nothing if the behavior of
Facebook's users contradict it. And that's really important to know. They really look at the data at all times about, you know, new members, suspensions, reduction in the number of statute updates. They have data about everything they look at all the time.
Sorry.

>>: Yeah, so recently there was a word count comparison with social networking privacy policies. I don't know whether you remember this.
>>David Kirkpatrick: Yeah, I saw that. Facebook's was, like, 10 times longer than anybody else's.
>>: Well, no, actually they used it as sort of a ramp, but, yeah -- so creating a fake identity for Facebook is actually a violation of their terms of use.
>>David Kirkpatrick: It is, yeah.
>>: However, there is a conflict. Because if you're dealing with an account that you just want to do a wall for work or maybe you have a child that you don't want their -- whatever they say as a child or a tweet to be put down for the record in all perpetuity, especially if you're not in control of the data, there's legitimate reasons for creating a fake data -- a fake profile. And what they're seeing is that the privacy policy in terms of use of the created for business purposes --
>>David Kirkpatrick: You mean for their own business purposes?
>>: They would much rather have a real identity in there than to be having it used for an organic means.
>>David Kirkpatrick: Well, I agree with everything you just said except the last thing, which is it's not done for business purposes. And we can talk about that. And this is a very controversial discussion.
But what you just said is actually a very important and interesting policy point that should be made to them. And the way think would probably respond to that, I'm guessing, they wouldn't like to hear somebody say that, but they probably would say, yeah, you know, we probably should allow some degree of flexibility there. But, you know, they only have 1500 employees and 500 million active users, and their basic job is keeping the wheels on the bus. And that's something that, you know -- it's actually an argument why they should monetize more rapidly so they can afford better customer service and better work on issues like that, in my opinion. Because they always take this attitude, we'll just take the money we need to kind of build the server farm we need this month, and then if we need more money, we'll figure -- that's their attitude.
But Mark said the other day he doesn't make any of these changes in the product or the privacy because of ad and commercial considerations. And I believe him, he believes that about himself.
But otherwise, you're right. But I would also say that, you know, there's a whole chapter in my book on privacy, and all my chapters have a little epigraph, and the epigraph in that chapter is you have one identity. And that's a quote from Mark Zuckerberg, and he really believes on principle that people should not show different sides of themselves in different contexts of their life.

He believes that Facebook is helping to move the world towards a more honest world.
And that is very controversial. And, frankly, the number of people who agree with him who don't work at Facebook is very small, I think [laughter], but there are a lot of people who agree with him who work at Facebook, which is very interesting.
Sorry.
>>: So this is just a question [inaudible] I totally agree with Facebook. It just makes the service a whole lot less [inaudible] if you allow people to [inaudible] in that way. Like what you said about Twitter. Twitter is full of fake accounts, people who you can't be sure you can trust or not. With Friendster and MySpace before it, all of those places are now looked at as cesspools today. But Facebook, well, my mother-in-law is on
Facebook [inaudible]. And I feel comfortable with that because I know I can look at all of your friends and there's no Coolgirl24. They're friends from school. If it's somebody I don't know I [inaudible] I know there's a real identity behind that. And they've built a truly bountiful service. I can understand some people feel uncomfortable about that, but they can't make everyone happy. So I think the benefit to human interaction on the web, human interaction in general is so significant versus, well, I can't be Coolguy52 on the internet anymore.
>>David Kirkpatrick: Yeah. Well, I basically agree with you on that. And when I answer the question which is often asked, you know, will Facebook go away just like
Friendster and MySpace, in effect, did, or the question of what makes Facebook fundamentally different that allowed it to grow so rapidly, you know, the fact that it used genuine identity and that it just, by almost a fluke, arose in a place where the identity could be iron-clad authenticated by a university-issued email address which created a culture that exists to this day is the single biggest differentiator from Friendster and
MySpace and Orchid and pretty much everything emphasis, although SixDegrees actually did a decent job of that back in 1999, but it was too early.
And I also think, on this general identity, that all this functionality that Facebook is now so interested in bringing to the entire internet by socializing all of these experiences through the open graph API and these various things they've just been announcing and talking about a lot, all that is completely dependent on genuine identity. It really won't have much value in exactly the way you describe unless those identities are basically reliable.
>>: I just have to say there's a different way of looking at that. I mean, you wouldn't take your mother with you on your honeymoon because you're showing two very different sides of your identity. Maybe a single identity. But how you show up in different scenarios should be completely under your control.
>>David Kirkpatrick: That's your opinion. It's not Mark Zuckerberg's opinion. That's all
I'm saying is that this is what he thinks.
>>: I'd really like to know whether he intends to take his mother with him on his honeymoon [laughter].
>>David Kirkpatrick: In effect, he does. Although I'll tell you one thing -- this is an interesting contradiction. No, here's something -- you know, this is really legitimate --

this is a fascinating thing to talk about. And this is one of the most -- I didn't even begin to do justice to the subtleties of this whole arena in my book. In fact, somebody should write a whole book about this just on Facebook.
But one of the peculiarities of Facebook in my opinion, considering this supposedly ethically held view that people have one identity which is shared by Dustin and Adam
D'Angelo and more or less the founders of -- particularly those three, Dustin, Adam and
Mark all really, really, really strongly say this: They're not heavy users of Facebook, any of them [laughter].
Mark posts something directly on Facebook maybe once every three weeks. And I don't think it's entirely coincidental. I mean, he definitely wants to use Facebook to connect to his real friends and family, but he also has a considerable portion of his life that for one reason or another he feels he doesn't want to share there.
I think it's worth delving into that, and I intent to ask him more about that because I haven't really pressed him as hard as I should on that. But I just want to reiterate that if you read the book, you will see, this is a very strongly stated view among the inner circle at Facebook, that you should feel comfortable showing your mother-in-law the same face that you show at the sex club or whatever. I mean, that's honestly what they believe.
>>: Okay --
>>David Kirkpatrick: And then we'll get to you after. Sorry.
>>: I have a quick question. So you know you have lists, you can have lists in
Facebook and basically do -- like your daughter could friend you, put you in a list, and hide most of the stuff that she posts, right?
>>David Kirkpatrick: Right.
>>: But there's a fundamental flaw within that, because it's really hard, if you have a thousand friends, to put everyone in different lists and then --
>>David Kirkpatrick: Tell me about it.
>>: Yeah. So essentially what I'm saying is in your real life you have friends that you're really close with, you have friends that, you know, you maybe want to be connected to through Facebook, but I don't really want to share everything, right? So I guess my question is do you see, like, how -- how do you see Facebook's flaw within the fact that they can't really tier your friends like you tier your friends in real life? How do you overcome that?
>>David Kirkpatrick: I think it's one of the single biggest user interface improvements they need, and they really should be working on that more aggressively than they are. I think they're somewhat distracted by how excited they are about the platform potential.
And even though they kind of know this is a big deal, and I know they have people working on it, their primary priority right now is the open graph API and extending

Facebook around the internet and not actually improving the functionality of
Facebook.com so much as basically taking activity out of Facebook.com.
But, nonetheless, to really use Facebook effectively through the open graph API, that problem needs to be solved, in my opinion. Because, really, when I'm clicking that I like a site, I really should be able to like it only for some of my friends. But then, again, it kind of contradicts this issue of do you have different kinds of friends or not.
And I honestly think even inside Facebook there is a certain inconsistency and poor intellectually incomplete dialogue about this set of issues. And, you know, they're very intellectually honest people, and I believe that over time they will confront all this and sort it out, but it's pretty weird still that the people who are doing that are, many of them,
26 years old, and they have 500 million people that they're trying to service, and it's not always that easy to take a three-day retreat and, like, muse on these issues, you know.
And it may be that the user is the worse for that. But then, again, if a million new people are trying to use it every day, it's not a crisis. And so that's sort of -- again, they look at the data and they probably say, yeah, it would be nice, but people are still using the service like crazy. So how much should we worry about that?
Anyway, I said I'd -- yeah?
>>: [inaudible] identity is different from [inaudible]. You sort of answered some of the things that I wanted to talk about. But really what's happening is because there's a co commingling of people at work, people at home, family and all that on my Facebook, what I effectively project as my thoughts and what I say is essentially a lowest common denominator in sort of [inaudible].
>>David Kirkpatrick: Right. That's true.
>>: I survive with different emails, and I can ignore the Cougar21. If I want to ignore the Cougar21 I can sort of -- you know, I can reject that if I want to. So I don't see that as being a big [inaudible]. I survive with different emails. I should be able to survive with --
>>David Kirkpatrick: Yeah, actually, your point is really very valid, and it's totally related to this, that in effect they are suppressing our willingness and ability to express ourselves inside the system by making it harder for us to control the communities that listen.
And I feel that myself all the time. And I don't use Facebook nearly as actively as I would if I was really sure that quite easily I could direct a certain message only to my 20 closest friends or only to my family or whatever. And they get, I think, maybe a little confused because they're so into this ethical idea of you have one identity and this bizarre concept -- well, I don't call it bizarre in the book, but certainly many would call it bizarre, idea of radical transparency, which they really do talk about at Facebook.
Yeah?

>>: So, I mean, you mentioned Mark doesn't post much. Do you think he has a concern that he has all sorts of friends [inaudible].
>>David Kirkpatrick: He doesn't have that -- he only the has 860 friends or something, which is -- that shows a heck of a lot of restraint for him to only have that many friends.
I don't know if that's the reason. I think it's more a personal -- a personality thing, which is actually potentially a personality trait that conflicts with his stated ethical beliefs, and I think it's worthy of further exploration by me and anybody who talks to him and interviews him. I think it's really an important question.
Because, really, if Facebook is so well designed and if you really do have one identity, why don't Mark Zuckerberg and Dustin Moskovitz and Adam D'Angelo post all time? Is
Facebook a useless system? Maybe that's what they're saying. I mean, it's actually a very weird thing.
>>: So is -- so would you say -- is radical transparency really their, like, philosophy or is it their business model? Because isn't the whole point of how they're making money is they can serve up ads and blah, blah, blah, so the more they know about you, the more they share --
>>David Kirkpatrick: I don't think they make that distinction in their minds. I mean, the thing about business model -- radical transparency is not the corporate policy, by the way. What I say in the book is that there is a substantial community inside Facebook that talks that way, and Mark is among them, but it is not, you know, one of their corporate values. I think that would be going a little too far.
And if they hadn't -- you know, honestly this is one of the really cool things about the book is that I think I got in there just early enough when they were still talking freely to somebody like me who they thought was going to do a fair journalistic book, but there's certain things now, even after this recent controversy, that they're never going to talk freely to the press about, including probably me, unfortunately. And maybe I might still be able to pry a few things out of them because I know them so well, and I hope, and they kind of think that I'm a fair person so that they can tell me what they think and maybe it's not going to kill them.
But, you know, the thing about the business model and all that, I think it's -- it really is the case when Mark said at the press conference, you know, we don't think about ads when we change the product and the privacy, he really did mean that. But what's happened with him is -- and he's observed this -- you know, Mark is very analytical.
You guys understand that. This is the kind of thing you guys understand the Microsoft.
He's very analytical, and he observes things, and he draws conclusions from them. And one of the things he has observed over time is that he has never given a shit about advertising, and yet no matter what Facebook did as a product, people have been able to work there and figure out ways to make money.
And he's pretty confident that that's going to continue to be true even though he doesn't have to think about it at all and he can do whatever he thinks is right for the product, and he's pretty comfortable with the likelihood that somebody -- Cheryl Hanberg
[phonetic] and all her people are going to be able to come along and find ways of monetizing.

But, you know, now that Facebook has 250 ad salespeople or whatever, somewhere in that ballpark, when Mark says we don't give any thought to advertising when we change the product, you have 250 people who are very unhappy every time he says that. And that's the kind of problem that you come to when you have a bigger and bigger company with more and more specialization and people whose interests are somewhat fundamentally different from other people inside the enterprise.
So this is the kind of thing that's really going to require Mark to rise to a new level of leadership and maturity, which I think he's only slowly getting to. And I think even this interesting incident at D when he kind of choked on stage might explain that he's starting to realize that he doesn't have a completely consistent argument to make in front of a very knowledgeable audience.
And, I mean, there are other reasons you could explain it too, but I think he probably can rise to the challenge. He's an amazing leader and thinker. But, you know, he's still only 26, and it's kind of hard to figure all this stuff out in realtime with 500 million users.
>>: So what is their business model outside of ads?
>>David Kirkpatrick: Well, ads to be very big, first of all. So, you know, it's hardly, like, something to sneeze at that you have the world's largest repository of user reported data about themselves. I mean, that is the most targetable set of data that's ever existed in commerce.
>>: Particularly, he wasn't focusing on ads so --
>>David Kirkpatrick: The only places that might have something comparable to that would be, like, Visa and Mastercard, and even that is not of the same nature, in my opinion. So he -- but there are plenty of other ways he can make money.
I mean, they're making at least -- I bet they make at least 50 million this year just on virtual goods, cupcakes and whatever. And then you have credits, which in my opinion and many people's opinion could become a very, very, very, very good business for them, potentially even their primary business. In fact, Sean Parker and I were on stage with Michael Arrington at TechCrunch Disrupt in New York about three weeks ago, and
Parker, who's as close to the company as anybody outside the company could be, you know, he really -- he's such and brilliant guy, and he really knows these people, talks to them all the time, he predicted on stage that by the end of this year 30 percent of
Facebook's revenue will come from credits.
Now, credits are this -- it's like basically a currency that you use inside Facebook. So it's primarily used in games, and one of the issues between Zynga and Facebook, if you read about that clash, was that Facebook is taking a 30 percent cut so that if you buy a dollar's worth of credit from Facebook and then someone takes that dollar and spends it for a new hoe on FarmVille or something, Zynga only gets 70 cents. And it may be that in the case of Zynga they now get 80 cents, by the way, because they did negotiate a secret deal that I'm sure is uniquely good because Zynga was also the largest advertiser on Facebook last year so they have a lot of leverage.

But credits -- you know, this is another point about genuine identity, by the way. And I'm not a financial expert, I'm a tech competition person. That's what I understand and think about, you know, professionally.
But I do know that the biggest single problem that the credit card industry has is fraud, and a system that brought identity to commerce could radically reduce fraud, and as a result, if Facebook were somehow to link up with the transaction industry, whether they went directly to the credit card companies or tried to bypass them and work directly with merchants in some weird way or worked with the Federal Reserve or I don't even know who, I mean, Facebook is so big, you can't leave out any scenario, you know. It's not even a joke when you say things like the Federal Reserve when you have a company of their scale. Only Microsoft probably and Google are the others that would have that kind of -- but anyway, you probably wouldn't say it about either of them, though.
But anyway, I believe they could become a massive player in commerce, period, because of their ability to -- because of the maintenance of identity and the ability to use that as a way of reducing the fraud in transactions. Money has got to be going away. I mean, this is the kind of thing Microsoft's probably believed for 15 years, and I certainly think it's inevitable. Why do we still carry around bills? It's insane. But it's partly because a lot of people still don't trust digital commerce, I mean, just pragmatically speaking.
And so if by some chain of events, because they have identity and all these things, I think you can imagine a scenario where they made a lot of money through that role.
And they wouldn't have to take 30 percent. They could take half a percent and still make a lot of money.
>>: I want to know if you had a sense from working with these folks how Facebook is equipped to deal with civil liberties. They've got a ton of interesting authenticated data which has to be of great interest to governments. You mentioned the Egyptian example before. I have to imagine the Egyptian government was interested in finding out what else Facebook knows about these people who were talking about Mubarak. You get a sense that, you know, with respect to particularly governments like Egypt or Russia, that they're equipped to manage user trust in that way.
>>David Kirkpatrick: I mean, you'd have to say no to that question simply because there are only 1500 people, and they have tens of millions of users in these countries with repressive regimes. How could they possibly keep up with the incredible amount of energy that these corrupt and repressive governments are devoting to screwing with their citizens? Just logically, I don't think there's anyway they could be capable of really fighting back.
However, I think they're working -- you know, algorithms are amazing things, and they can really start seeing a suspicious behavior inside Facebook. I mean, there's a million ways to answer your question, but one way that I think is that, you know, in Egypt you know for a fact that the secret services, Mubarak's police, are in Facebook in scale finding ways to friend, you know, the political agitators just as they go undercover and join the groups. It's easier to do probably on Facebook even than it is in real life.

So in any country with a repressive government, which is, you know, probably 70 countries you could say right now, something like that, that's probably going on to some degree. They're going in and spying on their citizens.
And the only way Facebook could figure out that that was happening would be if they somehow figured -- you know, some algorithmic observational technology was able to detect when people were really dissembling their identities, right? And I wouldn't rule out that possibility, by the way.
So, I mean, honestly I think -- and you guys believe in algorithms, right? You know, this whole thing of multiple identities could potentially be solved with just algorithms, I think.
It could be radically improved anyway.
So that's one way of answering the question. But I do think that Facebook's biggest -- one of Facebook's biggest challenges as it grows is going to be how they handle the dramatically increasing resistance of governments to an open system that empowers ordinary people.
And if you saw what just happened in Pakistan, for example, where this Everybody
Draw Mohammed Day was something begun I think in the United States, I don't even know where it started, but it was an insulting, quite effective campaign that was basically anti-Islamic. I think that would be pretty -- I mean, it was certainly anti-radical-Islamic, and in Pakistan it was perceived as a Facebook thing, not that somebody created a group on Facebook but that Facebook was saying Everybody
Draw Mohammed.
So the government started talking about a death sentence for Mark Zuckerberg, okay?
So what did they do? They blocked that group from being seen inside Pakistan and I think also Bangladesh. So, you know, that's actually a violation of their own terms of service, really, because they -- their rules are if it's not a violation of the law -- if it doesn't advocate breaking the law, it's legal on Facebook to say it. But they're operating in 180 countries or whatever, and a lot of those countries have weird laws and weird social mores.
So this whole intersection of Facebook's scale and the empowerment of the individual and repressive governments and even just governments like the EU that are extremely protective of certain aspects of their citizens' experience, that's going to be very, very difficult for them to navigate, I think.
>>: One thing I saw that was really interesting the other day was a new Honda commercial, and at the end it said go to Facebook.com/honda.
>>David Kirkpatrick: You just saw that for the first time? That's been happening for, like, three years. Gap has had it on their billboards in Manhattan for at least two years.
>>: Does Facebook do that as advertising or does --
>>David Kirkpatrick: No, no. Honda's -- their getting better results on their Facebook page than on their own website so they're just directing people there. It's because it's viral.

But I think actually it's stupid myself. Right now I think it's stupid for companies to do that because if they're going to rely on Facebook, they might as well at least rely on
Facebook on their own website. And now with Facebook's APIs, you can basically have all the same functionality you can have on a Facebook page, but you can have all the graphic control and other functions that you can build with, you know, all the rich tools that are available on the web, whereas on a Facebook page it looks really horrible, and you can't even do very much with it. And even if Honda might have 3 million fans on
Facebook, which I don't know how many they have, you know, they can still reach all those people by having a website where they implement the open graph -- what used to be called Facebook Connect and the "like" button and all that stuff.
So once you click the "like" button on the Honda.com, then all of the benefits that they are taking advantage of by directing people into Facebook, which are primarily that if one member of Facebook says something positive about Honda, other people hear it very rapidly because of the viral dissemination capabilities, they can take advantage of all that on the open web. And I don't think most marketers have totally digested that because most marketers are, like, five years behind what's really happenings in technology, honestly.
>>: So I actually disagree with that, because I think that one of the challenges for brands and for their consumers is there's so many places on the web we're asking them to go and the thing I like about it -- so I work on the Windows Phone team, and with
Windows Phone 7, we are directing them to Facebook because we understand that their time is valuable on the web --
>>David Kirkpatrick: Well, that's an interesting point of view.
>>: -- and if we're asking them to step outside where all their other things are going on,
I think the propensity to lose them is greater. And then it gives us some flexibility to keep our official site sort of evergreen and whatever but then be really dynamic. So I think it can -- if you aren't engaging with an active community and making the Facebook page vibrant and active and using tabs, then I totally agree. The only thing that does concern me, though, which I think is to your point, is if it shuts down tomorrow.
>>David Kirkpatrick: But that would be equally problematic, I mean, in terms of the community aspects if you were using them on your website.
>>: Right. So as --
>>David Kirkpatrick: But you're right --
>>: -- building, like, your own community --
>>David Kirkpatrick: You have nothing left if you did it all inside Facebook.
>>: Exactly. Exactly. So it's an interesting gamble and one that we're watching.
>>David Kirkpatrick: But wouldn't you like them, as somebody hob maintains a
Facebook page, to give you a lot more control about the graphic look and all the

experience that's had? Do you think it's fine that it looks like every other thing in
Facebook?
>>: I think it's fine because I think that the importance is the community and the dialogue, not the fancy graphics, and I think that it's -- when you said it was a two-way conversation, to me community is a noun and Facebook is a verb. It's a tool for interacting with them. And the consumers who need the fancy graphics probably will go to our live site. So I think if you do it across a holistic strategy using Twitter and
Facebook and your website, then you can be smart about it.
>>David Kirkpatrick: Do you also implement Facebook's platform on your website?
>>: We're actually looking at doing that now.
>>David Kirkpatrick: So you would want to do that eventually.
>>: Yeah. Because one of the other challenges marketers face is a lot of times the website they're building to is out of their control.
>>David Kirkpatrick: Yeah.
>>: You mentioned [inaudible] the schedule and --
>>David Kirkpatrick: Actually, I think the way you look at it is very sophisticated, and I just learned a lot from what you just said. So, I mean, maybe there is a really good argument for that.
The other thing I love about Microsoft is that you never accept anything at face value
[laughter]. You're not afraid to disagree. And, you know, I know that's really -- it's one of the great things about your culture I've always admired.
>>: When they go to the thing about Honda, are they trying to fake authenticity or trying to pretend that that's more authentic than their --
>>David Kirkpatrick: No, they're just trying to take advantage of community. That's all they're doing. And community is a super powerful thing. I mean, word of mouth is the most powerful marketing medium that ever existed. In the digital age, you can actually kind of guide it in a new way.
It always was probably what sold Hondas even what Honda first came to the United
States in, like, 1965 or whatever. But now Honda can actually, you know, really build and direct and sort of seed and promote viral and word of mouth. And that's what they're trying to do, and that's what Facebook enables both for us as individuals and for brands.
I mean, we do that for ourselves in Facebook. We promote word of mouth about ourselves by the tools of Facebook. That's what they do. That's just another way of describing it.

>>: Well, I find it interesting that companies want to encourage communities outside of the company on Facebook very easily, but yet they'll block Facebook usage by their employees who are trying to use it to do work.
>>David Kirkpatrick: It's stupid, I think.
>>: We've got research that shows both ways. People want the ease of use, they like the [inaudible] nature of it, but they also don't want their employer seeing all their personal stuff. So when we talked about privacy earlier, you were focusing namely on government. But how are people seeing this from a corporate perspective, like --
>>David Kirkpatrick: Well, it's just another argument for this point this guy was making, you know, the ability to really use groups and lists so that you're really controlling the flow of your data as appropriate for the kind of message.
I mean, this is --
>>: But how do you know for sure if that's happened? I think there's this trust aspect that's not clear.
>>David Kirkpatrick: What do you mean? How so not clear? You mean not clear on the interface or --
>>: Because the interface can be extended, you can't guarantee that everybody has implemented that feature. There are things that will happen on my phone that don't happen on the website because I have more control there. So I think there's this trust aspect of how they're building out their API that they haven't considered that I can accidentally expose data through mobile that maybe I couldn't do through --
>>David Kirkpatrick: Well, that's interesting. Well, actually, it is weird that the mobile apps have such different features than the -- there's certain features I prefer on the iPhone in Facebook to what I can get on the web, which is pretty weird, I think. That's a more -- that's a complicated discussion you just introduced. But you guys don't -- you know, you definitely think about interesting things.
Over here?
>>: I want to ask for your opinion about the condition of Facebook. In your book, supposedly Mark Zuckerberg and with Dustin, they keep pounding the table and saying
Facebook's a utility, it's open [inaudible].
>>David Kirkpatrick: We're going to have a what?
>>: We're going to break all the walls down and it's not going to be this [inaudible] thing, and the more open we are, the more successful we are. And then on the flip side you have companies like Apple, our company as well, who generally like to own the ecosystem and the experience. And this whole open Facebook Connect mantra in those other companies would be maybe not very successful. So in your observation and working with these guys, you know, Microsoft as well, but living with them in the culture for years, what do you think that is going to lead to?

>>David Kirkpatrick: I don't think in the end they have any less desire to own, you know, control an experience than you do, but I think -- what's a little complicated -- and this is probably a really, again, another long conversation, but I think, you know, what they really want to control is essentially just your social graph, right? Which is your friend connections. And that is the most valuable asset they have.
I mean, in some ways you could argue they really would rather not even have Facebook photos and all these apps if there was -- if there was another photo service with, you know, 70 billion photos out there that was completely integrated in Facebook, that would probably be easier for them to manage because all they'd have to do is maintain the hub where all the connections are held and transit that data, you know, between individuals, what is what their -- that's sort of their core competency, in my opinion. And
I think a lot of people there would say the same thing.
So the one thing they're not going to give up is the social graph, the control of the social graph. Right? I could see a scenario in which they would give up almost literally everything else. And so that's a little different from Microsoft in that, you know, now you are such a multi-branded, multi-silo'd or multi-departmented, you know, visioned company, you have a lot of businesses.
I think Facebook is sort of running now on the idea that the way they're going to really get big as a business is by -- it's a lot like Google in a way. One thing done really, really, really well that's super powerful. I think it's actually more powerful, at least in theory, than what Google does. If they could succeed in being the maintainer of friend connections for everything in modern life, which I really question if they can succeed in doing that because I can't really believe that governments and ordinary people are all going to want that essentially infrastructural role to be performed by a company.
And that's really one of the tautologies of Facebook. And Arrington was making fun of me at this TechCrunch conference for saying -- he asked me did I worry about most with Facebook, and I said -- or what did I think they worried about or what -- something.
I said that I thought that governments getting in their way as they move towards ubiquity. He said, oh, so your big concern is they're going to grow so much that the governments actually have to stop them. So that's the worst thing you can say about them?
But in reality, this is the way they think about themselves, and I'm just trying to explain how to think about Facebook. And, you know, their vision is quite simple for the long time, and it is to become infrastructure, and the primary element of the infrastructure is the social graph.
So I don't -- I don't think there's -- you know, people sometimes say why don't think buy
Zynga, right? They're not going to -- they don't want to get into -- that's the last thing they want to do. They don't even like games, by the way. Mark told -- there's a part of my book where they were saying, no, games will never work on Facebook when they first launched the platform. So they obviously don't figure everything out beforehand.

But they don't want -- they're launching this really interesting new app now, which is the question and answer product, at least they're beta testing it, and I believe they will launch it. And that's very powerful.
They keep the number of apps that they're actually building to a dramatic minimum, and
I think they will continue to. Although maybe they'll change their strategy on this too.
Maybe the website will just turn into such a good business, they'll just put more banner ads there and just rake in the dough that way. I don't know. But I'm just telling you the vision is a social graph and maintaining that.
>>: Can you talk a little bit -- can you talk a little bit about how you see this playing out with Facebook and Google? Because I think for a long time, you know, many of us have wanted this sort of universal profile that we didn't have to keep describing ourselves in all these different sites and that it just traveled --
>>David Kirkpatrick: You mean like Passport?
>>: Yeah, kind of like Passport. Google obviously wants that too. I mean, you fill out your Google profile and there's lots of places you can use that. You can use OpenID and all that. Facebook clearly wants that. That's sort of core to their business. Where do you see in going? Is it going to come to a head? Do you think they're going to stake out their turf and try to own that?
>>David Kirkpatrick: Well, I think that's a really hard question to answer. Of but if I were to predict how that would play out, I would think Google would finally -- Google's going to have to figure out social, which they haven't done yet, for their own survival. I mean, Eric Schmidt said, like, a year and a half ago that social search is our biggest challenge or something like that. And I quote him saying that in the book.
So they've got to find a way to bring identities and data that's produced by real people and seen by other real people into their service. Now, they have a partnership with
Twitter. It may be that other services will arise that do things similar to Facebook that do well enough that Google will either buy them or license their data. They're certainly going to want to do that.
I'm certain that Google now looks back on history and kicks themselves for not trying -- for not outbidding you in the fall of '07 when you guys tried to buy Facebook for $15 billion. And if anybody didn't know that, it's in my book, and it did happen. And not only did Ballmer want to pay 15 billion cash, basically, to Zuckerberg for Facebook in, like,
October of '07, but when Zuckerberg said no, no, no, I'm not interested in that, even though he would have gotten 3 and a half billion for himself that way, they went back and constructed this very complicated structure where they would have bought it over time much the way that Roche bought Genentech, allowing Zuckerberg to maintain control for a number of years. Because he has absolute total control. Never forget that about Facebook. And he would have been able to continue doing all the things he wanted even as Microsoft moved toward total ownership, but that he didn't want either.
And it would have allowed him to get a higher price that way.
So that was a side trip about Microsoft, but Google should have bought -- for Google's own interest, in my opinion, they should have bought Facebook when they could.

Antitrust would prevent that now. It would also prevent you guys probably from buying
Facebook now, and I'm sure that in some way you guys would like to buy Facebook now.
No?
>>: I think Yahoo has tried to buy it for $1 billion.
>>David Kirkpatrick: You don't comment on such things?
>>: We don't comment on the price either, remember? We talked about that. We didn't confirm or deny the price.
>>David Kirkpatrick: I couldn't care less. I know it's right [laughter].
>>: [inaudible].
>>David Kirkpatrick: Say it again.
>>: Yahoo was trying to buy --
>>David Kirkpatrick: Yahoo tried to buy Facebook for a billion and then they -- they dropped their price and the deal was off, and then they actually signaled they would pay more. I bet Yahoo would have probably paid up to one and a half billion -- this is in the fall of '06 -- but Zuckerberg didn't want to sell it then, and he had turned down a deal -- an offer from MTV and Viacom for one and a half billion, which the second half of it was an earn-out that they didn't want. So it was really a 750 million cash and then the rest in sort of vague money. Turned that down in the spring of '06.
So, really, this is one of the amazing things, just the lack of financial motivation. And I think this is -- one of the reasons it's so key that Zuckerberg has absolute control of the board is that with Excel owning 10 or 11 percent of the company and Microsoft offering
15 billion, the deal would have happened if VCs had the kind of control they typically have in a start-up. But because of Sean Parker, who hated VCs so much that he figured out a way to structure a deal that did not give the VCs any kind of real power over Facebook's long-term disposition, Mark didn't want to sell, so they didn't sell.
Do we have time for any more?
>>Kim Ricketts: Yeah, maybe a couple more.
>>David Kirkpatrick: Anybody who hasn't -- you didn't ask a question.
>>: Hey, David, I'm curious if you got any insight from them in terms of how they see the platform potentially evolving to be more of a business tool, become a groupware --
>>David Kirkpatrick: Yeah. That's not something Mark's interested in. I do think that there are people at Facebook who are interested in it, and one person who is very

interested in that is Dustin Moskovitz, and it's one of the reasons he left Facebook to start Asana, which is all about that. It's all about social enterprise productivity. And we haven't really seen what the product is. They've told very little about what they're trying to do. But I think you could sort of -- I believe what it is is something along the lines of, you know, the online version of Office totally integrated with Facebook in some way.
But it's complicated to know how that would work, you know, because of this issue of, you know, your different communities of friendship.
And I once had an interesting conversation with Dustin soon after he left Facebook where he said -- he was talking about how he'd sort of been frustrated Facebook that
Mark was never interested in this and he is. He did a lot of this kind of thing inside the company when he was still CTO and -- he was head of engineering and did the various things he did. He's an amazing guy.
But he said, well, one of the things we've thought about is, like, when you're in your work stuff, the background of the page would change color. So you'd have some visual clue that, okay, this information is going to your work people and maybe -- and there's a lot of creative things that could be done with an interface, as you all know as well as anyone, and I think maybe someday -- I would probably say that almost certainly will be done by an application partner, not by them.
But we probably all would benefit by being able to bring sort of -- and, of course, there's a lot of things happening like, you know, Chatter at Salesforce or Yammer. There's a lot of interesting social things that are Facebook-esque that are starting to creep into the workplace, but, still, nothing really like this has yet emerged that is -- that we really want to use. And I think people need in workplaces.
I mean, there's more hands. I thought we were going until 12 so --
>>Kim Ricketts: We are. But I also wanted time for you to sign books --
>>David Kirkpatrick: Oh, okay. If they pay for them, I'll start signing them now
[laughter]. A little more? I mean, when there's hands it's always -- well, you always want to leave them wanting more, but let's ask this guy.
>>: I wonder if you have any comments on the possibility of users paying for an additional level of service or if you heard any talk about that.
>>David Kirkpatrick: They are so adamant that they would never do that that I honestly can't believe it would happen. The way it's more likely to happen is through an indirect route like Facebook credits where, you know, in effect they're taking a tax whenever you do a transaction rather than charging to you use the service. That is just not in their mind, and I think -- if you think about their basic challenge right now, which is growing the service further into all the corners of the world and the internet that are the poorer, you know, more newly interneted parts of the world, you know, that would just simply be a total non-starter if they start trying to charge for Facebook.

And, again, this is the way you've got to think about Facebook. It's not an American thing. It's 500 million people, most of whom are all and the world in every country, and their biggest challenge and biggest opportunity and biggest interest is growing in places like India and Brazil and Russia and especially China, which they haven't figured out and they want to figure out, and Indonesia and Malaysia and -- you know, the countries with a lot of people, that's where they want to grow. And they don't really -- they're not growing that much here anymore because -- they're growing slowly here. But once you get 130 million, you know, you kind of probably got the early adopters by then.
>>: Can you speak a little to the customer's bill of rights that was circulated a while ago? Do you think that you're ever going to see a serious response from social networking companies to hand over controls to [inaudible] their customers in a self-regulatory way?
>>David Kirkpatrick: Well, control -- not control. I think they'll probably take that sort of thing more and more seriously as time goes on because governments will force them to.
Either they do self-regulation or it will be regulated.
But the thing about -- you know, this is something a lot of people in the software business will understand. Mark is paranoid about being rendered irrelevant by a more aggressive creative entrepreneurial start-up. Therefore, the last thing he's ever going to do is let his users, anymore than they do just by being there, constrain his ability to keep changing his service to adapt to the latest software potentiality and, you know, the newest services that are out there and, you know -- Facebook is going to keep evolving very rapidly because it has to or it will die. And that's their belief, and I think it's a correct belief.
And so you cannot let your users say what they want too much because the users are never going to understand what the next technology capability is. And you face the same thing in your business. You can't do everything by focus group or you'll never go anywhere. You just keep building this thing that happened yesterday.
And it seems like it's not connected, but it is connected to the issue of rights and responsibilities and the role of the user. I mean, one of the things that I will say is they made this very dramatic move to say user democracy inside Facebook after one of the controversies where they took a vote. That was over the statement -- that was over the terms of service. And they had one vote. They haven't had a vote since then, I don't believe. And they said they were going to do it all the time, and they only had, like, I don't know, a couple million people vote, and at that time they had 100 million users or something. So it didn't really work that well even though the majority of users voted in favor of the change that they wanted.
>>: And when you logged in, it showed up.
>>David Kirkpatrick: They tried to convince you hard to vote, right? Yeah. But you had to read a lot of verbiage to even know what you were voting about and, you know -- the problem with democracy.
>>: Aren't also users misusing messages through Facebook, right? [inaudib le] contact friends and family, right? But the only way you can communicate with

them is using, let's say, a chat or a [inaudible]. Can you see this way or direction where users can do more [inaudible].
>>David Kirkpatrick: Oh, totally. Voice and video, absolutely, is coming to chat. I'm sure Facebook Chat is going to have that. It's just a matter of time. I'm sure they're working on that now. It's a matter of, you know, building the back end that is capable of managing that. And it's a little complicated because Facebook servers are all in the United States and they're a global service. So they're relying on all the [inaudible] of the world to help them distribute their content, and I think -- I don't know all the technical issues, but I'm sure that when you get into realtime voice and video, it's a lot more challenging not to have your servers closer to the user. So that may be the constraint.
And I think we probably should wrap up -- can we take --
>>Kim Ricketts: Thank you very much.
[applause]