Assessing the fate of the 'Facebook Way'

Facebook's dedication to maintaining a start-up atmosphere even as it becomes massive has persisted far longer than many thought it would. But in 2011, is the end near for this business philosophy?

Caroline McCarthy Former Staff writer, CNET News
Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.
Caroline McCarthy
9 min read
Facebook CEO Mark Zuckerberg's strategy of maintaining a start-up attitude has persisted even as his company becomes massive. James Martin/CNET

We didn't always want to admit it, but in 2010 the world accepted that Facebook--the company that introduced us all to such mundane pursuits as photo tagging, virtual farmsteads, and the voyeuristic tracking of the lives of people we only half-knew in high school--has changed the world.

Yet Facebook has also begun to pioneer something different: a corporate structure and philosophy intimately tied to the mind of its young CEO, Mark Zuckerberg, and the company's roots as a tiny cadre of coders in a college dorm. We'll call this "the Facebook Way." And in 2011 as Facebook continues to grow bigger (it kicked off the year with a $500 million investment from Goldman Sachs and Digital Sky Technologies, after all), we may get an answer to the question: Will the Facebook Way continue to work? Will this turn out to be one of the great business philosophies that other companies emulate, or will it prove to be a consequence of a still-young company's own naivete?

Rooted in a belief that there is something almost magically advantageous about the earliest and most difficult days of a company's history, Facebook has fought to maintain the feel of a small start-up, combating the potential for corporate sprawl and carefully constructing an environment that embraces minimalism to the point of forced scarcity. The Facebook way has meant that the company has staved off thus far what many predicted would be an inevitable transformation into a corporate behemoth--out with the beer pong, in with the suits.

"It really doesn't feel like it's a large organization at all," said Facebook product manager Justin Shaffer, who joined the company when it acquired a start-up he founded, Hot Potato. "It really runs like a start-up. From the outside, looking in, I couldn't full appreciate it until I got here."

In November, when a Reuters report detailed a Google "hiring spree" of 2,076 job openings, Facebook representatives were quick to point out in conversation that this was a higher count than the total number of employees at Facebook. And the company, according to a chat late last year with Chief Technology Officer Bret Taylor--who joined Facebook when it acquired his company FriendFeed, which he'd left Google to found--plans to keep its engineers in Silicon Valley rather than opening an extensive network of satellite offices because Facebook likes to house its coding resources in one place. An engineering center in Seattle that Facebook opened in the middle of last year is dedicated to operations other than central product development, Taylor explained.

Plus, as has been famously documented over the past few months, CEO Mark Zuckerberg's strategy for hand-picking ace developers and product managers hasn't been turning to the ranks of a Google or Microsoft, but rather to purchase small start-ups specifically for the talent of a few engineers there. Many of the heads of those start-ups had previously bailed on big companies, making their return to a big company seem puzzling at first. None of these companies--Hot Potato, FriendFeed, Drop.io, Divvyshot--had experienced rocketing success, but none of them were old enough to pronounce dead in the water. Unlike Google, which has been known to turn acquisitions into products (Writely became Google Docs, GrandCentral became Google Voice, Android became...Android) these purchases were for the people behind them, not the products. All of them have since been shut down, with the exception of the larger FriendFeed, which Bret Taylor said had just enough loyal users to make it worth keeping around (though with development halted).

This led to some serious criticism of the Facebook Way. Was Zuckerberg's strategy effectively snuffing out innovation before it happened, giving talented but challenged entrepreneurs a "get out of jail free" card and some sweet pre-IPO stock options?

Facebook employees who have experienced both massive dot-com environments and tiny start-ups hint that the Facebook experience is more similar to the latter. "When I started at Google, Google was about the same size that Facebook is now, and I was there as it grew to, I don't know, 25,000," said Carl Sjogreen, a former Google employee and member of Facebook's platform product management team. He'd been at the helm of a start-up called NextStop in between the two; Facebook acquired it, shut it down, and brought Sjogreen, his co-founder, and a third engineer on board.

"One of the things that's been really striking for me is that Facebook feels much more like a 'large start-up' than a 'small big company,' which makes the transition much easier from running something on my own."
-- Carl Sjogreen, Facebook, member of platform product management team

"I saw that transition, and then went to the other extreme of a six-person start-up, and am now kind of back to a larger company," Sjogreen continued. "But one of the things that's been really striking for me is that Facebook feels much more like a 'large start-up' than a 'small big company' which makes the transition much easier from running something on my own."

Two years ago, pundits were wringing their hands over Facebook, looking at the then-unprofitable company's finances and the tumultuous financial climate, with many suggesting that it was time for Zuckerberg to step aside in favor of a more seasoned CEO. There appeared, too, to be friction at the company as some of its experienced leaders--former Amazon exec Owen Van Natta (who had thought that Facebook should sell early), ex-YouTuber Gideon Yu--departed after suspiciously short tenures. But had Zuckerberg listened to any of these critics and stepped aside, the Facebook Way likely never would have taken root as a stable, post-start-up corporate culture, and the company quite likely couldn't have experienced the success that it can now boast.

While Zuckerberg has filled the business operations ranks of Facebook with more big-company veterans, like Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman, he's filled Facebook's engineering team with like-minded people, those who struck out on their own and persisted even when they could have enjoyed a more comfortable, predictable lifestyle inside a massive technology company. He needed to repopulate his inner circle. Partially because of second-market trading that let early employees cash out rather than stick it out because of an IPO on the horizon, some of the CEO's closest confidants resigned; Zuckerberg's original co-founders, for the most part, had already departed. Luckily, he found plenty of takers.

"I think it's just culture. It's sort of obvious, not that it wouldn't be, but if you look at how Mark grew up, his hacker culture and lifestyle is deeply embedded, born right out of a dorm room at Harvard," Justin Shaffer said. "I'd pretty naturally stay up until 5 a.m. writing code if I didn't have other obligations...(working at Facebook) really just feels like an extension of that. I had been here for probably about a month before we had a hackathon."

Ah, the hackathon, the official sport of the Facebook Way, that company cultural institution in which engineers crack open the Red Bulls, order Chinese food in bulk, and engage in a sort of mindset that mimics Zuckerberg himself in Facebook's early days. They devote an entire all-nighter to the art of the "hack"--a word emblazoned on Facebook headquarters' front doors, a mantra intended to connote the Facebook developer's devotion to coding forcefully and competitively so as to produce real change with limited resources. The hackathon has become part of Facebook's public persona, too: A bigger, fancier version of the event was how Facebook chose to initially debut its third-party developer platform in the spring of 2007.

In hackathons, the input of the individual Facebooker is emphasized. "I was like, 'I think we need Groups on the iPhone now,' so literally in one night we wrote the whole Groups interface," Shaffer, who had been tasked with the Facebook Groups revamp upon arriving at the company, said of his first hackathon.

"Hack" also implies a sense of control and manipulation over something much bigger than the individual doing the hacking, the both humbling and prideful idea that he or she is wrestling with a significantly larger problem or concept, and a triumph of the small and innovative over the established and stodgy.

"I think the No. 1 challenge in a start-up is building the best possible thing you can build with almost everything stacked against you. You have less money, less people, less clout, less marketing resources," Carl Sjogreen said. "There's a sort of honesty in making tough prioritization decisions. I think it's a very healthy attitude even inside a larger company. I think it's rare, the examples are rare, where more people working on stuff has in and of itself led to a better outcome or product. There's just a clarity of purpose in not having enough people to do the job."

New year could bring new challenges
It's a valiant mission statement. But in 2011, the Facebook Way will invariably face new challenges and Zuckerberg's team will have to work much harder to make their philosophy work, not just their product.

For one, even with Facebook's billion-dollar valuation and rising ad revenues, the "acqui-hire" model that's brought Zuckerberg so many fellow hacker-entrepreneurs can't keep pace with the rest of the company.

"It's not sustainable, long-term," said Alan Chung, the founder of a software start-up called Zenbe, pointing to the financial premium that comes with paying millions of dollars to effectively hire a few engineers. Under Chung's auspices, Zenbe sold the intellectual property from its Zenbe Mail product to Facebook last summer along with three engineers, and saw some of the talent worked into the Facebook Messages overhaul that was launched in November.

Current Facebookers insist that the company will find a way. "I do know Mark (Zuckerberg) has talked about this publicly as a part of our recruiting process, as bringing entrepreneurial folks inside the company, and I don't see any reason why that wouldn't continue," Carl Sjogreen said.

Further complications may stem from the fact that while the Facebook Way may work for Facebook's engineering core, minimalist resources don't translate to other areas of the company particularly well--especially those where tight relationships with third parties are involved. You can't really use "hack" as a mantra for advertising sales or, heaven forbid, the legal team. Thus far, Facebook has kept this at bay through the use of satellite offices: A New York sales office that could house as many as 600 employees is expected to open soon, and Facebook's public relations and marketing teams in its Palo Alto, Calif. headquarters are housed in a separate building from engineers.

But, invariably, more and more engineers will need to be hired, and Facebook will find it more difficult to maintain a start-up atmosphere. A Time magazine profile of Zuckerberg when he was named 2010's Person of the Year revealed that Facebook is already looking to a bigger office space, a campus rather than a single building. It may be very soon: "We are exploring options for a long-term location to fit our growing business needs," spokesman Larry Yu explained to CNET via e-mail last month. "We are in the due diligence phase on one potential site, but it would be premature to offer any specifics."

And Facebook, to attract the best engineers, has to remain talked-about as the best place to work, particularly as stock option packages grow thinner. Though it's adopted many of the industry perks that Google made famous--free meals for all employees, for example--Facebook's rise has marked a shift in Silicon Valley engineer culture from its predecessor in all things digitally innovative. At the matured Google, prospective engineers are presented with a company with a scattered suite of products and endless resources. They're faced with a culture that has always emphasized wheatgrass smoothies over Red Bull, even in its younger and more "hack"-worthy days, where pet projects outside of the Google behemoth are encouraged, and where being an engineer means being a tiny, intricate part of a sprawling complex that, bit by bit, is indexing the entire world. (It should be pointed out that Google's most public attempt to build an "in-house start-up," Google Wave, flopped after several months. Its lead developer has jumped ship to Facebook.)

In a decade, or half a decade, the engineer attitude in Silicon Valley may shift again. It may shift away from Facebook's caffeine-induced, harder-better-faster-stronger pulse and back to a more intellectual developer culture in which Ph.D.'s are preferred over brilliant young renegades. Or it may do something totally different. And the Facebook Way as we know it may reach the end of its path.

Or Zuckerberg may persevere in his belief of hacker-above-all, and his team may find a way of continuing the excitement and change-the-world attitude of the Facebook Way even if it reaches a point where it seems like there is nothing left to conquer. Should this be the case, a young CEO who has consistently bested expectations will have "hacked" yet another problem that few thought he could.