Inside Facebook: Zuckerberg's $100 Billion Gamble

If you would tell us your name Mark Zuckerberg. M-A-R-K

Would you describe yourself as the has gone from college student to

Apology for the loss of subtitles for 48 seconds

You are one of the top ten entrepreneurs who has ever existed.

But the sign of the Facebook, is it a sign of a dot com bubble. Not

everyone sees it as a good investment. Would you advise

somebody to put it into shares. The danger is that people get

carried away and there will not be another one like it. Plough it and

bid up the price to unrealistic levels.

Zukhra claim it is is not just about money. He is on a bigger

mission. If you go back most people in the

world had no voice no or podium to share things. Now everyone does.

Zukhra's creation has produced lawsuits, accusations of privacy

invasion and even inspired a Hollywood movie.

Do you see your code on face bobbing? With exclusive access, we

examine why Facebook believe it is is worth billions and ask if

investors will bet their money on Mark Zuckerberg's ability to create

a massive business out of the massive popularity of Facebook.

Sorry, I'm nervous, we have the President of The United States

here! APPLAUSE My name is Barack Obama, I'm the guy who got Mark to

wear a jacket and tie! I'm very thousands of software developers,

The biggest act on the bill is still just 27 years old but no-one doubts he's the boss.

CEO Mark Zuckerberg!

CHEERING AND APPLAUSE

Yeah!

Come on!

Hey welcome to F8. We're going to change the universe!

Zuckerberg himself waits in the wings, enjoying his very own warm-up act.

What the hell are you doing? Er...

I'm Mark Zuckerberg. No, I'M Mark Zuckerberg.

The real Mark Zuckerberg is no longer the new kid on the block.

By now, I think that most people see that social networks

are going to be a ubiquitous tool used by billions

of people around the world to stay connected everyday.

There

There is

There is an

There is an interest in the shares that has filtered down to the

average man on the streets. As the shares are in short supply, there

will be a huge demand. But this may not be a get-rich

quick scheme for the small share holder.

They call it dumb money in Silicon Valley. Those people who may not

know as much about the tech industry, they may want to invest

it is like a trophy share to have. Or those who know what it is about,

may be wanting to buy it to sell it on to dumb investors.

To avoid being a dumb investor, you have to take a close look at the

company's product. Facebook's success starts with the ability to

suggest to people you may know from what you have told it about

yourself. You are then invited to connect to the people, making them

your Facebook friends. You may be surprised how many friends you can

accumulate, the average user has 14. Many have more.

200 or 250. Something around there.About 264.

500-odd. Between 600 and 700. Ch Close to

1,000. More than in real life.

what its users have put on there, on their willingness to keep posting-

You want us to share. Mmm. Why?

Well, the mission of the company is to make the world

more open and connected because we believe that

everyone will have a much better experience

when they're doing different things with their friends.

When there's more information out or you can discover great content through your friends

or you can discover new food that you want to eat or places to run or anything like that,

your world becomes a lot richer.

Zuckerberg practises what he preaches, sharing a lot about his personal life

on his own Facebook page, which anyone can see.

He shows pictures with his long-term- girlfriend, Priscilla Chan,

lists his favourite movies and books

and records the life of his dog, Beast.

Come on, Beast, you got this, you got this!

Can we get some Eye Of The Tiger?

LAUGHTER

Our development is guided by the idea that every year

the amount that people want to add and share and express is increasing.

APPLAUSE For many, it's now as much a necessity as a choice.

There is social pressure to join it- and if you're not part of it you don't get invited to certain things.

I always said I'd never us it but since I've got it, I've ended up using it more and more and more.

What makes it so addictive is that you are... It's like living a second life.

No-one e-mails any more but everyone's posting on Facebook.

Facebook not only attracts massive numbers of users - 800 million at the last count -

but more surprisingly, every day half of them log on to the site

making it the stickiest on the internet.

Now Zuckerberg wants them to get even more attached.

We're not trying to make it so that- people spend more time on Facebook,

we're trying to make it so that the time that you spend

is so valuable that you want to keep on coming back every day.

Zuckerberg

Zuckerberg plans

Zuckerberg plans to

Zuckerberg plans to sell off a small propotion of his shares. That

is still expected to bring him a billion dollars. Since Facebook is

his baby, what users think of him is critical to their willingness to

trust him with personal information. As an investment adviser, Josh

Brown has been studying Facebook since the early days.

The bonfire of Mark Zuckerberg's coolness has been lit. Nobody looks

at Zuckerberg as a paragon of cool, he is looked at as what he is,

which is a tech Titan. He is looked more along the lines of Bill Gates

than a rock star. The rock star phase ended when we started talking

about 50 billion, 100 billion. Now Zuckerberg's journey began eight

years ago. He studied at Harvard University.

I remember hanging out with my friends, going to the local pizza

place, talking about in the future, you being able to sure share the

stuff you want and have access to all of the things you are doing and

sharing experiences, but figured that someone else would do it.

Who were we. We really wanted this to exist. So we focused on it

probably more than anyone else. We are one of the companies that is

computer science. Decades earlier, The thing I would say about

he was very eager to learn and very sceptical

about whether anything we were teaching him was actually

the right things for him to learn.

I think Bill Gates had exactly the same feeling.

It was not disrespect for what was being taught

but maybe not exactly what he was interested in and so on.

So he was absorbing everything and not paying any attention to it at the same time.

Zuckerberg's invention of Facebook began with a false start.

At the time a Facebook was just thename of this kind of printed album of students photos and details.

Zuckerberg used his fellow students' Facebook pictures

to make a mischievous website, to rate their looks.

Kind of as a prank my roommates and I came up with this idea that

we'd go through and take all the pictures off of all the Facebooks and make a site that

juxtaposed two of the same gender and let users click on the one that- they thought was more attractive.

He called it Facemash.

Within hours of going online, there were complaints to the university authorities.

So you have a website that kisses off the administration.

I almost got kicked out of school for that.

HE LAUGHS

Yeah, that was a little chequered point in our history.

Joe Green was Zuckerberg's collaborator and roommate.

You can see Mark's mind at work, figuring out these social dynamics.

The Facemash was literally up for four or five hours and was like

the most used site on campus on a Sunday afternoon.

Harvard had been planning to put its facebooks online but shelved

the idea because of privacy issues highlighted by Facemash.

Harvard issued a statement that because of privacy concerns that I'd raised from this prank,

their online facebook would be delayed indefinitely.

So I was like well you know that's a bit like ridiculous like

these websites aren't that hard to make so I'll just kind of throw one together

in a week or a week and a half and we'll have our online Facebook.

So I did and that was "Thefacebook."

Thefacebook, as it was called, got round the privacy problem by inviting

people to post their own information which they were eager to do.

Within a few days thousands of people were, were on it at Harvard and I remember in

the first week alone I'd come home from classes and see that

10% of students at Harvard were logged on at any one point in time.- Then that was just really cool.

So then by the second week we'd all these people

from other colleges around us like MIT and other colleges

in the neighbourhood were e-mailing- in asking if we could release Facebook at their schools too.

Zuckerberg wasn't your typical geek. He was as interested in

how people were using Facebook as in its computer code.

Is it the human side that drives you on this rather than thetechnological, the computing side?

It's really both. I took a lot of computer science classes and I was formerly a psychology major

and I think that those two things together really represent the DNA of what Facebook is.

We're a technology company and we design social products and there are a lot of

technology companies and a lot of people who think about social issues

but there aren't a lot of people doing both.

The genius is when you get a really creative person who can take different disciplines,

different subject matters and find where the opportunities are and spend lots of time being

creative with them and, and that certainly something that Zuckerberg- took advantage of while he was here.

There aren't many 20-something's whose lives have been turned into

a Hollywood movie but Zuckerberg's has.

This site's life.

You know what? Let's go get a drink and celebrate.

The truth about Facebook's origins will always be compared to the story told in The Social Network.

This movie is, like it or not, the de facto myth to how Facebook was created.

I've covered this story for years

and I still have to think, "Now is this how it happened?

"Or is this how the movie said it happened?"

And that likely will always be true.

"As of yesterday evening," Zuckerberg said,

"over 650 students had registered to use thefacebook.com."

The movie centres on Zuckerberg's legal battle with his two fellow students, the Winklevoss twins.

If I was a drug dealer I couldn't give free drugs to 650 people in one day.

This guy doesn't have three friends to rub together.

In highlighting the Winklevoss case,

the movie underplays the existence at the time of other social networks.

Even before he went to Harvard,Zuckerberg had worked on a website

at his school, which included an online student facebook.

And millions were already signed up to the social networks Friendster and MySpace.

In Britain, Friends Reunited had16 million users - social networkswere a feature of university life.

At campuses across the country tons of students were thinking up Facebook.

Maybe they didn't call it Facebook but at Brown University there was a- site at Columbia University

there was a site, at the University of Texas there was a site and on and on and on and on.

The Winklevoss twins really did dispute ownership of Facebook and have done for years.

Our idea was stolen

by Mark Zuckerberg and we're basically trying to retrieve that back.

Can I get a large coffee, please?

Four years later Facebook settled with the Winklevoss'

for $65 million while still denying their claims.

Zuckerberg's former roommate Joe Green now runs his own online business but at college he

turned down an offer from Zuckerberg probably the best business offer ever

made to anyone this century on parental advice.

There was a moment when no-one knew what we'd be seeing

seven years down the line and youwere invited to become part of it?

Yeah, I was asked to be a sort of part of it, cofounder

and I ended up... Zuck likes to jokingly call the billion dollar mistake but I,

combination of, erm... We got into a bit of trouble for Facemash

and my father's a professor and wasn't super-thrilled about that.

What was the conversation you had with your dad?

You know he was just, "You shouldn't be doing any more of- these Zuckerberg projects."

But it's all good now.

With its Harvard origins, simple design and Zuckerberg's determination

never to let it crash,Facebook became the student network.

Zuckerberg began to wonder if it could be a real business

and whether he should drop out of college to find out.

I don't think Mark's family was hugely resistant to him

dropping out and trying this idea.

Of course any parent wants their kid to get a college degree

even if they've become a billionaire

probably you know many parents would say, "It'd be good for you."

But I think that does begin to wane after the second or third billion, perhaps.

As the summer vacation arrived, Zuckerberg moved from east coast

to west swapping university lifefor a new one in California at the heart of the technology business.

There's only so long that you can build a high-tech company in

This is where Zuckerberg ended up, a small house in Silicon Valley 30 miles south of San Francisco.

He was joined by his Harvardfriends. The students were pleased

to find that this being California, the new home included a pool.

Go! Go! Ahhhh!

I didn't die. I know.

The Social Network movie shows how they used it.

OK. Ready...

Zuckerberg was starting to make media contacts.

So I took a phone call with this young guy

and there was all this noise

in the background and he told me it- was because he was living in a house in Palo Alto with his friends

and they were all in the backyard

and he had all kinds of things, stretched out in the backyard.

He had a zip line across the backyard and they were all hanging out.

Those who studied Facebook's history-say this was only part of the story.

Zuckerberg was serious about Facebook

but the tales of poolside parties weren't pure Hollywood mythology.

The owner's inventory when thestudents left lists barbeque ashes dumped in a flowerpot,

a pool filter shattered by broken glass, damage to a chimney from a zip wire.

I think it's probably fair to saythere wasn't all work that summer.

# Disco sounds, it's all on the west coast... #

By the autumn, Facebook had reached 200,000 users.

Every day it needed to rent

more computing power and that meantlooking for some serious investment.

Facebook had reached a critical juncture.

How big did Zuckerberg want it to be?

He started making contact with Silicon Valley's venture capitalists.

He was in shorts and flip-flops, I mean there wasn't anything formal about it.

He got a meeting with veteran investor, Ron Conway.

I asked him how big can this company get?

He said, with a 100% conviction, "We can get to 300 million users."

Zuckerberg landed a first investment of $500,000.

He hired an office above a Chinese restaurant.

Within a few months Facebook reached its first million users.

18 months after the founding of Facebook a light bulb went on

in Zuck's mind and said, "Wow! This thing's growing at thousands of percent a month.

"This is a real company." Partying wasn't interesting any more.

In 2005, the year after it was launched, Facebook hit five million users.

The big investment companies in Silicon Valley's Sand Hill Road started paying serious attention.

Are you getting courted by

big companies that what to buy this?

Yeah, a few but it's a lot of work

to maintain it and to grow and add new stuff so there's not a lot of time to talk to people.

Soon the very biggest players in technology didn't just want to invest

in Facebook, they wanted to buy the entire business.

In 2006, Zuckerberg refused an offer from Yahoo for $1 billion.

Everyone around the company, a lot of the investors and the executives- were you know, it was like,

"You could sell this for $1 billion?

"What the hell's wrong with you?"

It takes an almost sort of insane degree of vision

and self-confidence to be able to sort of weather through that storm.

The next year Zuckerberg took a big gamble, freeing Facebook from the

world of universities by opening itup to anyone with an e-mail address.

Suddenly 50,000 new users a day were- joining. Dude, what's up? Dude, you're on TV?

Facebook was courted by Microsoft with an offer that made a billion look like an insult.

When Microsoft in 2007 offered $15 billion for it, he wasn't interested in taking that either.

That to me is the most amazing story

because when he was 23 years old he could have made over $4 billion

personally, by selling it.

He didn't even consider accepting it. I think that shows what kind of a guy he is.

The kind of offers that were coming in to you were like

15 billion from Microsoft, how does a 23-year-old manage to say no to that?

Well, the hardest one was when Yahoo offered us a billion dollars

because that was the first really big offer and at the time I knew nothing about business.

So I knew nothing about what a company would be worth and I had to

make this argument to people that somehow this was going to be the

right decision and from the people who weren't in it for the long-term I think a lot of them left.

And then we got a new wave of people who were really committed,

so that by the time that Microsoft and others tried to buy the company, we'd already made those decisions.

We knew we weren't going to sell the company and that we were going to build it.

It's one thing to run an insanely successful start-up.

Six

Six years

Six years ago

Six years ago Facebook could have been sold for billions. By holding

his nerve, Zuckerberg made sure that the company stayed with staff

members and early investors. They can cash their shares at a high

price, late in the company's development.

In another error, Facebook would have come public early in the'S

development, probably in a billion or $2 billion evaluation. Then it

would have spent the next few years enriching public investors, instead

a lot of the products and the growth will have been harvested.

Bad news for outside investors if the company growth slows, but great

news for the original venture capitalists and staff members with

shares. To find out how Zuckerberg runs

Facebook as a big business, I asked senior manager, Dan Rose to give me

This open kind lends itself to collaboration.

Well, Mark actually sits at a desk right over here just like everyone else. What, this is him?

This is him here, yeah.

With the famous hoodie? Yeah, There's his hoodie and a Mark Zuckerberg doll on his desk.

So he wants to sit out here, no office.

Yeah and he collaborates with everyone just like the rest of the company.

As Facebook has grown, Zuckerberg's tried to hang on to the energy and flexibility of a start-up.

"Move fast and break things"

is its unofficial motto.

Zuckerberg's still closely involved in the details.

He spends an enormous amount of time in the office.

One of the ways that he really operates is to engage with

our engineers and our product leaders

around the design of the new products that we're building.

But when he's not in the office, he's usually at home on Facebook

talking to all of our employees about different things that we're working on.

Andrew Bosworth is Facebook's chief engineer.

Before anything gets launched, he has to run it past the boss.

He's less concerned with the code He lets us deal with that.

But in terms of the look and feel and certainly

all the integration of the products

he's a strong voice and when

you're launching a product at Facebook, the Zucker view is kind of those things that

you really work towards and your product is really buttoned up and,

he uses all the products while you're being developed and gives notes like very kind of like

lengthy notes over the weekend so writing four or five paragraphs of things we need to do differently.

And tries to provide the high-level- direction so we understand

why he's doing things the way he's doing them.

The

The shares

The shares will

The shares will hit the stock market soon, that could change

their motivation. Do you think that they will say,

now is the time to start being the entrepreneur myself? When it comes

to the time, the thing is, it is not necessarily a bad thing if they

go off. We have seen with the likes of Microsoft, Google, Apple, the

comparatives to Facebook, that you had that. That the company did not

suffer as a result. If people are concerned about doing other things

and don't have their focus on the game, you don't want them in the

company. So that is not an ongoing threat to the company if they lose

the odd billionaire secretary. Facebook has the classic Silicon

Valley office style. The food is free... You can get your washing

done... There are games to give your brain a rest from programming.

Or you can RipStik and work on a the early hours, you don't have to

At first, the growth had investors being a loud to beg for this

company to float. They were think being making serious money, but

how? There was a company legendary for building an audience before

finding a way of making money on a grand scale, Google. Zuckerberg

approached one of its star executives. Poaching Sheryl

Sandberg is seen as one of his at this little restaurant

at my house and Mark would say sometimes you know,

"I'm so sorry I can't invite you over for dinner."

But at the time he only had

I think a one... Not even a one bedroom, like a one-room apartment.

He didn't have any furniture, like he had a futon.

He thought that would be awkward, which it would have been.

We spent hours, dozens and dozens of hours on,

over weeks, just making sure that this was the right fit because it...

That's what's important, right?

There was no question about, "Is she good enough?

"Or is the company good enough?" It was all like just, "Are we trying to do the same thing?"

Eventually there was agreement and Sandberg switched from Google to Facebook.

Enter Sheryl Sandberg. Sheryl was necessary at that company

because she knew exactly how to build a company from start-up phase- to grown-up phase.

She'd done that very effectively at Google and most important, Sheryl had chemistry with Mark.

Sandberg knew exactly how Googlehad made a fortune from advertising.

On the very day Facebook was launched at Harvard, Sandberg was explaining to

BBC viewers why Google's advertising system works so well.

With Google you on the web searching for information

and we give you an ad as part of that search.

So it's integral to what you're already looking for.

Google offers advertisers the chance to put their message

Sandberg's challenge was to come up with Facebook's version of the Google money machine.

We don't compete in the search market, we're not competing for the Google ad dollars

in search marketing in the sense that when you are looking

for a product, you don't actually come to Facebook, you go to Google.

According to Sandberg,Facebook ads like TV or magazine ads

are there to tempt you with new products and ideas.

Where we are is actually in demand-generation.

So when you think about your TV TV ads that are shown to you,

other ads that are shown to you, you're not in active searching mode for something to buy.

You're not fulfilling demand - you're actually generating demand,

something you didn't know you wanted.

And when you think about what people are doing on Facebook, they're much more in discovery mode.

So could the fact that Facebook users aren't searching for products

or services be an advertising advantage

Some outsiders are sceptical.

Professor Ben Edelman studies online businesses.

They're hoping that advertisers will bet on the future value of a customer

even if in the short run

the customer actually doesn't buy much of anything at all.

If one accepts ephemeral value, value that's hard to measure, possible future value as reasons

to conduct the advertising, then it- certainly is possible to justify.

Of course that could justify just about anything.

Advertise on the far side of the moon and when the aliens finally get to you,

they'll know what they need to buy.

In comparison with Google, Facebook undeniably holds one trump card,which is already proving profitable.

Facebook is probably the most valuable

marketing research tool that's ever existed.

In a way, it's the most valuable research tool for anything about people that has ever existed.

Facebook lets advertisers reach large numbers of just the kind of people they want

by tapping into the information they've revealed about themselves whilst they're using the site.

When you place an ad on Facebook, which anyone can do from a normal laptop,

you get the chance to narrow downthe whole of the Facebook population

and target just the people you think- will be interested in your product.

So supposing you run a beauty salon and you've got a special offer for brides.

Facebook offers you access in the UK to 30 million people.

Now we're going to narrow it downand say, we're looking for the women.

Estimated reach is now telling meit's 15 million, about half of that.

So then we're trying to find the word that will target the right people,

so we're going to type in, in interests, the word 'beauty.'

And that's now brought the numberdown to just under half a million.

And now, because I'm targetingbrides, I can be even more specific,

I can go down to the relationship status box

and here I target those women who are 'engaged.'

And suddenly we've brought that number right down to 27,000 people.

And that is the way that the adverts- can be targeted precisely to the core demographic you want to reach.

The advertisers don't know who you are, doesn't know what your name is

or where you live, but it knows you as a number

and it can use that number.

Although anyone at home can place an ad on Facebook,

there's a new kind of agency turning out Facebook ads on an industrial scale.

TBG is a London company specialising in Facebook ads.

Its boss, Simon Mansell,

believes he's part of a big change in advertising.

It's turned much more from an art form to more of a science

and that's sometimes where some big- traditional companies have struggled

because they were artists and now they have to try and be scientists.

TBG doesn't rely on creatives toguess what people will respond to,

instead its software runs mass experiments on many possible versions of a Facebook ad.

Even though the ads are small,

there's three different parts of the ad -

the headline, the image and the little piece of copy for most Facebook ads

and there's 12 different targeting criteria.

Age, gender, relationship status, that kind of thing.

So once you've multiplied those up,- there's thousands of different permutations.

TBG typically tries 27,000 variants on an ad.

So it might be that a 25-year-old in New York City who likes cats

responds differently to a 33-year-old male in London who likes dogs.

If

If it

If it sounds

If it sounds creepy, this is where it is heading. It is big data. This

is going to be a big user of advertising, Facebook will be

helpful. People know what people are doing, where people's heads are

at and the advertisers can take this data and tweak the marketing

message and this is worth more than you can possibly imagine.

With a massive network of personal information as its key business

assets, Facebook embarks on the stock market flotation earlier this

year. Facebook, expected to go to market

at a value of about �60 billion. In order to sell shares on the

stock market. Facebook had to summit -- subbit previously private

details to the financial regulator. There is much to boast about, the

extraordinary growth in users, the multi-billion dollar advertising

revenue, but for all that, some are sceptical about the company's real

potential. I have done calculations about the

growth that Facebook would have to achieve it would have to be about

8% revenue year on year. They managed that last year and Google

manages 80% revenue growth. So you are looking at them hitting a lot

of things, getting it right. Only then would the current price fairly

value them. But some analysts have more of a

gut reaction to Facebook's commercial potential.

The biggest worry is not the mathematics, but the worry is that

I have never met someone who has clicked on a Facebook advert.

Facebook has produced a video, if you think nobody has clicked on

adds, Sheryl Sandberg will set you rite.

The advertising revenue has gone from 200 million, to 3 .2 billion

last year. We have made progress, but we have just begin.

If there is a weakness in the advertising pitch, it is on mobile

phone devices where almost half a billion people use it. There is not

much room for adds on the screens, as the company admitted, they said

that on mobile, the ability is unproven it could affect revenue

and financial results. Facebook's concern about mobile was probably

behind the recent spending of $1 billion on Instagram.

They have paid a lot for an app that does not appear generate money.

Facebook says it kill still appear in its counterform. Some are

wondering if this is a technology bobble.

Ififies Facebook can make adds work on mobile, there is a wider

dedebate about Facebook and advertising. Started last year by

Sir Martin Sorrell. There is a primary social reaction,

not a commercial network. Therefore, I think that you use it at your

peril. The potential for Facebook is more in my mind as a public

relations medium than in your face Elliot Schrage deals with

that people come to Facebook for social and not commercial messages.

I think we're well on our way to finding a very protective balance

of providing people with information they want to receive from friends,

recognising that most people, when they're in their course of the Facebook experience,

are not focused on purely commercial activities.

Indeed, if you compare us to any online service, any newspaper,

I think the percentage of space devoted to commercially related

or commercially orientated messages- is tiny.

Now, if the first part of Facebook's strategy is to sell ads using its targeting ability,

the second it to invitebusinesses themselves on to Facebook

and they can set up their own pages.

Pages act pretty much like people on Facebook,

but instead of being friends with abusiness you can choose to 'like' it.

When you say you 'like' it, you're allowing it to send you messages, as you would a friend.

And if it strikes you as an odd thing to do, well, have a look at this.

Nearly 35 million people have pressed the 'like' button for Coca-Cola.

Rather than being the passive recipients of ads,

when people connect to Facebook pages, they're choosing to linkthemselves to brands and products.

Managing those relationships is a new kind of marketing.

Here in New York, Buddy Media helpsbig businesses talk to millions of people who 'like' them on Facebook.

If you're one of the top advertisers in the world,

we work with eight out of the top ten global advertisers.

You may have 400 brands

and you may do business in every country in every language

so what you need is the ability to really manage all this content globally.

And you cannot do it without software and then on top of- that we tell them what's working,

what's not working. How do you really optimise what's going on?

How you get the right content to the right people?

Companies try to get chatting to their Facebook fans because when anyone responds,

what they've said and the company's name will automatically spread to all their Facebook friends.

So now Pretzel Crisps is doing things like

posting the recipes of ways to eat pretzels

and asking questions and asking people to comment on these recipes.

You can see people are starting to engage, in this case 174 people have actually engaged,

in this conversation about these recipes.

Which you'd never be able to do anywhere else.

Marketing people call it 'word of mouth at scale.'

Social media for the last million years has been about just word of mouth

so even when the wheel was created, people said,

"Wow, the wheel is here, you've got to check this thing out!"

And so that obviously spread like wildfire,

but it took time to go, you know, within a community and then to another community.

With Facebook, it spreads instantaneously.

You don't have to be a multinational- to want to communicate to your customers on Facebook.

Representing small enterprises on Facebook has become a new cottage industry.

You do guitar lessons? We'll do repairs and obviously sell...

You do guitar lessons? We'll do repairs and obviously sell...

Beverley Ames-Rookes runsFacebook pages for small businesses.

What's really nice with Facebook is you can listen to what people say about your business

and then you can interact with them.

Today she's trying to sign upnew clients in her Surrey village.

I can do it all, your Facebook banner,

I create your albums, update your albums for you.

Beverley, hi, hello. Emily. How was it? How did it go in there?

'Beverley creates a page for each client and then posts news and comments as that business

'to Facebook users and on other social networks.'

She can find herself communicating as a shop, a pub,

or even an exotic holiday resort inAsia, which she has at least visited.

I felt the atmosphere, I know when the DJs are playing, I know when there's live music.

I know the local beers so I can talk easily on behalf of those venues.

In the last couple of days, take usthrough what you've actually said.

All right. "Banana Tempura Caramel Toffee Ice Cream!

"Who's feeling naughty?" As you can see,

it pushes for a response and what you're trying to do is to get people to interact with you.

OK, so Helga says, "Sounds yummy, hope I can try it in August."

Suzee Jones says, "September forme!!" And Kitty White, "Original!!!"

With lots of exclamation marks. I don't know what Kitty is making of that one.

'Each time someone comments, the resort's mentioned to that person's friends.'

That will show up that they've commented on a page

so all of a sudden we've got a bit of exposure on somebody's profile.

Facebook claims that when a business- is brought to someone's attention by a friend,

it's a much more powerful form of recommendation than an ordinary advert. But is it?

You're similar to your friends and the ads that your friends respond to, you respond to also, so yes,

people come in clusters,

yes, what your friends bought, you might buy,

but you might have bought it anyway.

To what extent can Facebook truly take credit for that?

After targeted advertising in Facebook pages,

the next part of Facebook's business- armoury is its amazing ability to keep users glued to the site.

Facebook sessionstypically last around half an hour and most users come back often.

I probably spend about half an hour- a day on Facebook.

Everyday, a few times a day. Not more than an hour total a day.

I spend two hours on Facebook a day.

Probably about three hours a day. About three-and-a-half hours a day.

Three, four hours during the day.

I don't think I have it that bad, I- know people who go on it every hour.

At Facebook, we're pushing to make the world a more open place.

Facebook users are kept hooked partlyas a result of a decision Zuckerberg- made four years ago

to open the site up to other software developers.

This year, there are more people than ever at Facebook's developer conference.

Facebook isn't just a website, it's also what's known in techy circles as 'a platform.'

This means that software developers from other companies

can write programmes which then run on Facebook.

Apps, in other words, and the reason- Facebook likes that is because it provides more to do,

but also because these apps create a kind of technology eco-system

with Facebook right at the core.

Now there are more than a million different developers who build things on top of Facebook

and are trying to bring these great experiences to people.

And, you know, we think to ourselves we're just a small company and we have, I'm sure,

all these people who are using our products but we have 500, 600 engineers building all this stuff.

Companies like Microsoft or Google have tens of thousands of engineers We're tiny compared to that.

So how can we ever possibly build all the stuff that we want to see get out there

and the answer is build an eco-system and make it so that

all these developers, whether it's a student in a dorm room who hasn't had a job yet

or a big company or a company that we've never heard of in some other country can build this stuff.

And that's the part that's so cool about it.

When Zuckerberg opened Facebook to developers,

nobody guessed that the runaway success would be Facebook based games.

London is home to the world'ssecond biggest social gaming company.

Kristian Sergestrale, the co-founder- of Playfish, employs 350 people

to make games for his 100 million regular players.

Facebook has created the level of infrastructure

which means you can visit your real friends' houses,

interact with your real friends' characters,

give them gifts and so on.

And you can work on things together

which simply brings an entirely new dimension to computer games.

And in some ways almost takes games back to where they came from.

So it's as much about interaction as it is about what's going on in the screen.

In the company's San Francisco office, two of its customers

have come in to show how they play a couple of the most popular games.

Michelle Maruyama is a violinistand has been playing Restaurant City- for two years.

I sometimes really enjoy playing right after I come home from work,

if there's a conductor I don't like or something.

But if I'm just home all day practising,

you can just stop once an hour and check on your restaurant.

The games are designed to keep you hooked with timed penalties if you don't keep checking in.

It's definitely a chore and it definitely cuts into your spare time.

I know that I used to read the New Yorker pretty much cover to cover every single week

and I know that I absolutely do not do that any more.

John House plays Pet Society, which has attracted up to 21 million users a month.

You have a virtual home

and you have your one virtual pet

and you have a bunch of friends that you can visit.

They poop, and they poop different types of poop so there is the carrot cake poo.

There's the creme egg poo.

There is the snake poo from the wizards' school.

These kinds of special items are the key to a new revenue stream for Facebook

because game players can pay real money for virtual goods.

They pay by sending money to Facebook to buy credits.

It's already a business worth hundreds of millions of dollars.

John was so pleased with his special duck poo

that he paid a poundfor a virtual case to display it in.

And Facebook takes a third of that, but John has no complaints.

You know what? For that giant duck poo, it's worth it.

Facebook's strategy, including games- and Facebook pages, has attracted ever-growing numbers to the site,

but the company has an even bigger ambition on the wider web.

Today, millions of websites have links to Facebook on them

and if you use these links with your Facebook identity,

you can communicate with yourfriends on Facebook even if you're on an entirely different site.

For Mark Zuckerberg, it's the fulfilment of a grand ambition

to provide the pipes through which the world's social connections can start to flow

and in the process, Facebook's beginning to colonise the whole of the web.

Zuckerberg's dorm project has come a long way in seven years,

not just as a piece of technology, but as a change to the way many people relate to each other.

It's easier to communicate with people,

but it also makes communicating less personal.

Let's say I was with my boyfriend, instead of paying attention to him,- I'm on my Facebook.

It's an idyllic representation

of who you are which I think can get misinterpreted by yourself even.

Probably 80% is the real me on there, the rest of it's just what I want people to see.

My dad posts on my wall sometimes. I have to delete that. He will just post "I love you sweetie!"

I'm like "Dad!" But that's sweet. It's nice but it's a little too much.

One

One thing

One thing that

One thing that there's never been is a map of everybody in the world

and their relationships with each other. By giving each person the

responsibility for their own story, the point in that graph, together

you have this amazing map of people. Is this a solid asset or could

Facebook fade away when the next online craze comes along?

Facebook's scale is unprecedented. It is bigger than anything we have

seen before. I think that there is something powerful about the

network effect that it then has, all my friends are on it, therefore

I must be on it. That makes it difficult for another competitor to

replace it. It is difficult to say that Facebook has a strangle hold

and that it cannot be replaced is not the case when Myspace had the

same early connection, but the people have disappeared overnight

it does not take Mitch once an exoddus starts. Facebook wants its

Facebook says that just makes it commercial messages a part of life

is one where we're better if we My life is improved

if I care what you're doing and if I've chosen to connect to a Starbucks,

I want their announcements, just like I friend someone, I've chosen this.

We have social ads and we have non-social ads, right,

and so you can either for example see an ad from Coca-Cola

that is just Coca-Cola saying drink Coca-Cola.

Or you can see an ad where your friend who likes Coca-Cola,

the ad is just this person likes Coca-Cola

and which one do you think people who use Facebook prefer?

They want to see something about their friends, they want to learn about what their friends are doing.

But when Facebook has tried to mixsocial messages with advertising in the past, it's run into trouble.

We've built a little product called- 'Beacon' that's going to allow you to do this from your own website.

Beacon told people's friends what they were buying.

There were furious complaints and Zuckerberg withdrew it with apologies.

After a series of such controversies, a pattern has emerged.

Facebook tends to do a three steps forward, one step back launch approach.

It often launches products that really push us, tests the water,

so to speak, and then Facebook pulls back and begins to roll it out again more slowly.

Now

Now there

Now there is

Now there is another idea that users may be uncomfortable with. If

you click a 'like' button on a business page, that business can

pay for a box on your friend's pages with your picture and logo

saying you liked it. Facebook call it is a sponsored story. You cannot

opt out. The only add that Facebook shows on mobile devices. If you

found your name and face in a sponsored story, would you say it

is harmless? Or would you feel you had been used in an add without

on a brand, that could pop up I certainly wouldn't necessarily

But when you press a like button on a brand or on an ad

or on a page, you're saying "I like this".

I'm not saying I advertise this.

Well, I suppose when you... So let's pause.

It's an interesting...

I mean, you're asking a profound question - what's advertising?

When I press a like button on an ad, I'm trying,

on the Facebook system, I'm affirmatively communicating that I'm associating myself

with whatever I'm liking and what that does is it creates a story.

But you can call it a story, many people would call it an advertisement

and Facebook is getting paid for those by the companies.

I think... I...I...I...

It's a ranking mechanism, I don't know if I would call it an advertisement.

Sponsored stories highlight the critical dilemma for Facebook.

How far can it go in using personal information without its users feeling exploited?

It says it gives users full control over their privacy,

Permission? Facebook

Permission? Facebook has

Permission? Facebook has to

Permission? Facebook has to be careful about the data is used. If

people are freaked out too much, they will leave the platform, but

we have seen a number of different privacy scares in the past, it has

not held it back so far. Do you believe that people will

gradually become more open, that they will regard privacy with less

that people won't care fundamental thing and I think

I think the big cultural change is that now more and more people are finding that

they can build a reputation, they can help discover stuff, get credit for that,

they can be part of discovering other people's stuff.

And I just think that people are seeing every day that that's awesome.

And that's why I think the world is moving in that direction.

But people every day also wake up and I think are like,

"What stuff do I want to have out there and what don't I?" I don't think that will change.

But how much do Facebook's business needs create a tension between privacy and sharing?

They've chosen terminology and at least as important,

they've chosen a user interface design that encourages sharing.

They've set their defaults in a way- that makes it seem like this is

the right and normal and natural thing to do.

I'm not so sure it really is, I'm not so sure that it's been

the way of things or needs to be the way of things

for every picture you take to be

distributed to hundreds or thousands or tens of thousands of people.

And yet they've tried to convince us that's the new normal and that's the way it should be.

They've always said, "Facebook's about helping you share, with the people around you".

Facebook insists its advertising model

does not depend on its users agreeing to be less private.

Our goal is to make it so that people share what they want to.

And we believe that over time, people are going to want to share more things.

That's a big trend that we see happening in the world,

but we don't benefit from being ahead of it.

If we have people share things that they don't want to,

they'll stop using our service and not like us.

This

This year

This year we

This year we are taking the next step. We are making it so you can

connect to anything you want in anywhere in the world.

Well, the $100 billion question for investors is how successfully

Facebook will be able to turn all of the activity and all of the

information it has, into a massive income.

This is a very young company. It's just starting to figure out

strategies for making money. I think advertising is one component

of that. So if this company were to truly want to start mon advertising,

I think that $100 billion may start may depend on

and whether they feel comfortable networks, networks that are more

that are more restricted And that's where Zuckerberg himself

but as long as most users believe in his sincerity,

they'll probably accept whatever changes Facebook throws at them

because by all accounts he hasn't changed much.

Mark drives the same four-year-old Acura

that I recommended that he get a few years ago.

Like, you know, and still lives, you know...

He's finally bought a house, but it's not like he bought some crazy mansion.

He bought a house in Palo Alto.

But, you know, really being, you know, one of Mark's stated interests on Facebook is minimalism.

He doesn't care for material possessions at all.

He actually wears the same jeans and the same t-shirt and jacket everyday.

In fact, one of the things I first did when I came to the company

is told a lot of people, "He has a lot of those jackets, don't worry, he's not wearing the same jacket

"every single day, it's just many versions of the same jacket.

Zuckerberg just wants to keep a low profile

In

In a

In a matter

In a matter of days, the world will be able to buy Facebook shares. If

they go up, Zuckerberg's student project will be worth the $100

billion or so, that is bandied about. If they don't, there will be

talk of another tech market crash and the bubble that burst.

I don't think we are in the same position we were with the.com crash.

The web was in its early stages then. Businesss were capital

intensive to set up a business. We have had ten years to learn from

the mistakes that were made then. So yes, this is a huge valuation

for Facebook, but I'm not sure it means that we are in a general tech

bubble. I think that the prospects are good. The company has 900

million subscribers, they have a trov of data, encompassing what

users do online, what they ignore. The limitations are that there is a

new generation of social media users to come online and skip

Facebook entirely. They will start with Twitter or Tumbler are or

something we cannot imagine yet. As for Zuckerberg, the company's

been structured to give him the power to outvote dis gruntled share

holders, but does it work in practise? Sooner or later the share

holders and the board can gang up. Especially if it is not performing.

As soon as you start to lose it does not take more than a couple of

games, or a couple of quarters of losses and people start to look

around for somebody to take over. That sounds unlikely, whether today,

Zuckerberg is such a superstar of business and technology, but, of

course, he's used to dramatic changes, in this, his first job.

There is a great line in the film The Social Network where

Zuckerberg's friend, encourages him to think big and says, "A million

dollars is not cool, you know what is? A billion dollars." So, Mark

Zuckerberg may say how cool is $100 billion? But that is the Hollywood

Zuckerberg, but even the real one admits it has been a ride.

We're on this journey, I just want to say it is really an honour to be

on it with all of you guys. Because, looking back seven years, who would