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Monday, December 20, 2010

Review: The Facebook Effect

Despite the huge amount of hype surrounding Facebook, I still get occasional questions from engineers asking me if I think Facebook would be successful. Perhaps if they had read David Kirkpatrick's The Facebook Effect, they would already have anticipated my answer: "Facebook is already successful, and whatever happens next, that success will not go away."

The book starts with a story of how political organizers have used Facebook to effect a change in the world. I think that's the very definition of success for any kind of startup: the product it has created has changed the world. Netscape, for instance, didn't make the kind of money Google and Facebook ever made, but it also changed the world, and the founders at Netscape have parleyed that success into important roles, including one described in this book.

The Facebook origin story has been documented in lots of places, including The Social Network. Kirkpatrick goes beyond that, however, and covers several other social networks, including Friendster, ConnectU, and of course Orkut and its predecessors. He even has a plausible theory as to why Facebook succeeded over all the others, though of course as a non-engineer he discounts the importance of the design and engineering efforts in letting Facebook scale beyond many of those competitors. I knew Facebook had a solid engineering team when they hired Jeff Rothschild, and several other folks that I had worked with in previous startups, but the numbers I had heard in 2007 were nothing short of astounding: Facebook was serving at that time 5 times Google's daily page views with 3% of Google's machine infrastructure. That's 5 times all of Google properties, not just search. You can dismiss Facebook's problem as being easier than search (and I will dispute that: search serving can be treated as being fundamentally stateless, while Facebook has a lot of state), but just the sheer volume and efficiency is impressive.

All this history is there. The investments, the hiring and firing of various insiders (though obviously, some of the most juicy gossip can only be heard from insiders), but of interest to most people will be page 272-273, where various financial numbers are disclosed about Facebook's business. They add up to some very impressive numbers, and the entire chapter puts paid to many myths and answers questions about how Facebook makes money. I'll admit to being surprised at some of the answers myself! I'm starting to think that despite having a track record of advising people to take a "smaller" package at Facebook over a "larger" package at Google, I might still have under-estimated how much potential is still to be unlocked over at Facebook (meaning that yes, earlier this year when I bought some Facebook stock at $7 a share I should have bought more).

The book does cover many of the fracas between privacy advocates and Facebook's founding and management team. It should come as no surprise that I side with Facebook on this: given how most people happily sell their purchasing habits to their local grocery store for $0.50 discounts on milk and other items, I have yet to see behavior which reflects that people actually believe in privacy about information they put online. If you don't want it spread around, it doesn't belong online.

All in all, I should have bought this book and read it earlier this year, rather than waiting in line at the hold queue at the library. Recommended.

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