Facebook – China is Number 1 Priority

Although Facebook is blocked in China, there is still deep interest in how Facebook managed to become what it is today. The closest the general public has come to learning about the Facebook story, was through the Social Network movie. The movie portrayed Zuckerberg as an obnoxious genius, who would not let anything, including his best friend, get in the way of building the biggest social network in the world. However, few of us really know the true story and what Zuckerberg is really like. Someone who does is David Kirkpatrick, journalist and author of the Facebook Effect, a biography of Zuckerberg and Facebook. Kirkpatrick was in Beijing last week to share his knowledge and thoughts.

Aptly held in Beta Café, inside the Tencent and Innovation Works building, Kirkpatrick joined a panel of social media company heads such as Zynga, Kaixin001 and Happy Elements. The Chinese social media companies were eager to pick Kirkpatrick’s brains about how Facebook became so dominant and sustainable.

Parker set up the pieces

Kirkpatrick explained that Sean Parker, the founder of Napster played a pivotal role in Facebook’s success, “Parker knew much earlier than Mark, that Facebook could go everywhere.” Parker, having experienced being ousted as founder himself, set up Facebook finances so that Mark could not be pushed out as well.

Destiny to impact the world

Only 27 years old, Zuckerberg is at the helm of a US$5 billion revenue company which Kirkpatrick exclaims is “just bizarre” and deservedly commands huge respect. Kirkpatrick also reveals that Mark has no self doubt about himself but still does not come across as arrogant. There were many times when investors wanted him to sell the company so they could make a big profitable return, but Mark was “headstrong and refused to sell. He knew his destiny to impact the world.”

Kirkpatrick also said that Mark has changed little from when Facebook was a US$9 million revenue company till today. He still thinks about things the same way and doesn’t really care about the money, but he still likes the idea of beating Bill Gates in terms of wealth. A long way to go though, since Gates is still the world’s second richest with US$54 billion and Zuckerberg is the 52^nd richest with US$13.5 billion, although Gates is 55 and Zuckerberg is 27 years old according to Forbes.

Biggest challenge is being too big

When asked what Facebook’s biggest challenge is, Kirkpatrick believes it is being too big and bureaucratic, where it reaches the point like Google where it can’t make decisions and makes big mistakes. “Facebook can’t stop innovating, otherwise its dead.” Said Kirkpatrick.

To understand if it is possible, Zynga’s Andy Tian asked if any company has met the challenge of being able to scale up but stay nimble. Kirkpatrick believes the obvious examples are Apple, Microsoft and Oracle. The reason is because all were lead by autocratic leaders which aggressively fulfil their vision.

Kirkpatrick says that Mark himself is too obsessed with product and doesn’t want to get involved in other things, therefore he delegates responsibilities to people like Sheryl Sandberg, the COO of Facebook. This could be dangerous, if Zuckerberg only makes decisions based on product and not other issues like policy or privacy.

China – #1 Strategic Priority

This is where the Chinese social media heads became anxious, the entry threat of Facebook into China. Already many Chinese social networks are losing power. RenRen and Kaixin001 are on the decline but Sina Weibo is on the rise.

Kirkpatrick says that Mark himself has declared figuring out China and how to get in, his number one strategic priority. He has visited the mainland a couple of times and had some noteworthy company visits and is studying Chinese. In order to break through the barriers, Mark will compromise and partner with a strong local player like Baidu or Tencent.

Is Facebook worth US$200 billion?

Of course going public means less control and more scrutiny, but it is inevitable that Facebook will go IPO and is speculated to in the first half of 2012. The only thing to put out the IPO fuse will be an SEC ruling to allow more than 500 owners of a privately held company. Zuckerberg is hoping for this.  Recent private market share trades have valued that company at between US$70 billion to US$84 billion.

Of course Kirkpatrick is a little biased, but Facebook is one of the most anticipated IPO’s in history. Kirkpatrick believes that there is enough pent up demand that will put Facebook’s value at least at US$100-$125 billion and possibly US$200 billion by the end of the year. Given the uncertain global economic climate, Facebook may be better off holding off the IPO.