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Mark Zuckerberg Must Step Down as CEO of Facebook

Last Friday I appeared on Fox Business, Varney & Co. to discuss why social media stocks are tanking.  During the segment which lasted just over four minutes we focused mainly on Facebook

Chris Dessi on Fox Business Varney & Co.

I had prepared to speak about Groupon, Zynga, Angieslist, & LinkedIn. But since we all know that the world is watching Facebook that’s where the focus remained.  During the segment a few points were raised that I thought were really poignant.  Co-Host Monica Crowley asked “did Facebook go public too early?” I don’t think so, and I’m even quoted saying that I “remain bullish on Facebook.” I said this mainly because Facebook has so much data that they couldmonetize, and I believe that the company has become part of the fabric of our culture.  We offer up more information about ourselves than ever before.  I have a masters degree in direct marketing, and for direct marketers data is the holy grail.  However, what I didn’t get to say during the segment is that I think Mark Zuckerburg should take a page out of Sergey Brin and Larry Paige’s book and hire an IPO ready CEO or promote a more senior executive from their hugely talented executive team. It seems to me that Sheryl Sandberg should be the obvious choice for Zuckerberg?

Image representing Sheryl Sandberg as depicted...

Sheryl Sandberg

Google founders Larry Page and Sergey Brin recruited Eric Schmidt to run their company in 2001 under the guidance of venture capitalists John Doerr and Michael Moritz.

Here’s Why: Facebook has changed the world.  The manner in which we aggregate and disseminate information as a culture has definitively changed.  Mark can continue to change the world for the better even after stepping aside and allowing a new CEO to honor his feduciary responsibilities to his stock holders.  The new CEO can figure out unobtrusive ways to monetize the data that we have all provided him.

The LA Times notes that Mr. Zuckerberg has shown his age and inexperience during his corporate dealing to take the company public:

“Zuckerberg’s indifference to traditional corporate etiquette — he wore sneakers and his trademark hoodie for Facebook’s first big investor meeting — is viewed as disrespectful of the corporate world he needs to win over.

“His behavior is what I would expect of someone his age — the hoodies and everything else,” said Chris Whalen, senior managing director at Tangent Capital Partners in New York. “He’s trying to appeal to his audience instead of being responsible to his investors. His job now is to run the company.”

Whereas when it comes to Sheryl Sandberg CNN Money has been quoted as saying:

Before landing the job at Facebook, Sandberg served as chief of staff for the Treasury Department and became a top executive at Google (GOOGFortune 500). She currently sits on the boards of The Walt Disney Company (DISFortune 500) and several nonprofit organizations.

Zuckerberg recruited her to bring order to his fast-growing but sometimes chaotic company. She is widely viewed as his right-hand woman, running Facebook’s corporate and sales operations while Zuckerberg focuses on product development.

I believe that in order to continue to grow Mark Zuckerberg should step down and allow Sandberg to run Facebook. There are so many ways to gingerly make money the options are almost endless:

For example: I see nothing wrong with charging businesses to have a Facebook page. Nor do I see anything wrong with charging for some services for users.  He may lose some users – but he has almost a BILLION people on the network. It think it would be OK, and keep the Facebook stock going – allowing him to continue to innovate in other ways.

So how does Facebook currently make money?  

1. Advertising  (CPC or CPM) (85%)

2. Partnerships (15%) mostly Zynga.

Advertisers love the ability to target based on the detailed and extensive information that we provide to Facebook by simply engaging in the platform (our likes, our education, our geography etc)

Facebook just introduced mobile only product

  • To show ads on users mobile devices – this could prove to be hugely powerful as mobile users are growing astronomically

Sponsored Stories

  • They turn your friends activity actions into promoted content – basically the advertiser does not control the message, it’s about the actions that your friends are already taking – so for example, if you’re Michael Kors and you’re looking to increase your exposure on Facebook, you can pay to have a percentage of all checkins to Michael Kors featured in a Sponsored Stories slot in the right-side column. Your content wouldn’t be shown directly, but the actions of a user’s friends would appear. Users seeing their friends “liking” or checking in to Michael Kors will drive increased trust and increased traffic.

Promoted posts for brand pages

  • Brands are now asked to pay (small amounts – $10 pr $15) to essentially bypass Facebook Edge-rank algorithm that prevents the overcrowding of your Fans news feed with your content

Promoted News Feed:

  • Posts for non fans.  Facebook is testing this and currently allowing brands to pay to be in the newsfeed of fans that have not liked their page. In the segment I speak about the cognitive dissonance that Mark Zuckerberg is dealing with right now. These promoted news feeds are in danger of compromising the user experience. This is going to be a very fine line for Facebook.  They can’t scare off users with ads, but they MUST monetize better.  I’m not sure if this is the right solution. This could cause a stir among purists.

Partnerships: 15% 

  • While Zynga lots of heat for adding the swoon of Facebook stock can be credited for helping them to diversify their revenue stream the most.  In fact, Facebook is already more diversified than Google by virtue of having this revenue stream outside of pure advertising dollars.   The only catch is that it makes Facebook v-e-r-y dependent upon Zynga.  The worst catch22 of all.  Facebook gets a cut of all revenue that Zynga makes on the social network.  They also dump a great deal of revenue back into Facebook in order to generate those users who are addicted to their games like FarmVille.
    Image representing Zynga as depicted in CrunchBase

    Zynga

So please, Mr. Zuckerberg step down.  Allow for this company to continue to thrive and allow for those who are versed in leading a publically traded company to do just that. Run the company. They won’t dilute your vision. We get it – you’ve changed the world. Thank you. You’ve done it.  Do it now while we all still love you (coming from the guy who still owns and operates Facebookshouldhireme.com).  We can’t wait to see what else you come up with – but you won’t be able to focus on the future if Facebook turns into a penny stock.  You won’t have a company anymore, and then where are you?