Mike Isaac

Recent Posts by Mike Isaac

What Mark Zuckerberg Needs to Address in His First Post-IPO Appearance

After months of radio silence, CEO Mark Zuckerberg will appear at the TechCrunch: Disrupt technology conference on Tuesday, fielding questions about the myriad problems his company currently faces in his first appearance since he took Facebook public in May.

It’s about time. Facebook stock is in free fall — more than halved from its initial listing price at $38 per share — and investors are freaking out. Wall Street responded accordingly with its share of finger-pointing, calling for the heads of executive management.

Questions of blame aside, this is Zuckerberg’s first chance to address some of the biggest questions hanging over his company’s head, with the potential to assuage at least some investor concern.

Here are a few topics I think he should speak to — after that, delivery is on him.

Strategy: Short Term vs. Long Term

Since Facebook first filed its S-1 to go public, Zuckerberg has made no bones about his lack of regard for the Street. “We don’t build services to make money,” Zuckerberg wrote in his founder’s letter last February. “We make money to build better services.” Essentially, it was a message saying that Zuckerberg wouldn’t put short-term fiscal gains ahead of the long-term well-being of the company.

The grim reality of being public, however, has set in. Investors have shown waning confidence in the company’s monetization prospects through the sinking share price. Despite the continued insistent focus on the long-term, Zuckerberg needs to address the here-and-now, what Facebook can do in the short-term.

Why? Because despite whatever grand plan Facebook management has for the company, the reality is that a tanking stock price affects a company in palpable ways, from internal struggle to strain on external partnerships. Shrugging off concerns can only work as a strategy for so long.

How, for instance, can Facebook use its newly gotten IPO gains to get ahead? What sort of immediate acquisitions will the company focus on? Is Facebook in the business of acquiring teams for talent, or for technology?

From there, Zuckerberg could then elaborate further on his vision for Facebook, and how the company’s biggest initiatives — especially Open Graph and working with third-party developers — will benefit Facebook in the long run. While this is obviously more comfortable territory for him, the public needs a better idea of how Facebook plans to get there.

Monetization, Mobile and Otherwise

Everyone already knows Facebook’s scale is massive — the company comes closer to the billion-user mark with each passing day. But despite the scale, there’s still that other lingering problem: Revenue.

Right now, Facebook’s ARPU (average revenue per user) isn’t as impressive as some of its peers (like, say, Google), hovering in the dollar to buck-and-a-quarter range. What’s more, user growth is slowing in North America and Europe, where the ARPU is highest, while the fastest-growing areas of user growth — places like Asia and what Facebook calls the “rest of the world” region — typically have some of the lowest ARPU numbers.

Add to that the growing trend of users flocking to mobile devices, a platform that Facebook readily admits it has not effectively monetized. That’s certainly a problem for Facebook when sources of user growth like developing nations rely primarily on low-cost mobile devices to access the company’s services.

And as my colleague Peter Kafka has stated so aptly before, Facebook is still figuring out its whole advertising game. It doesn’t have, for instance, a Google AdWords-like product, essentially a straightforward way of showing advertisers where their ad budgets are going.

But that’s a whole other rabbit hole. Can Zuckerberg plainly and clearly explain what’s in store for Facebook’s advertising strategy for monetizing mobile, or shed light on any potential ad products that we aren’t privy to? That’d be nice.

Supporting the Troops

If you’re an employee inside of Facebook, the last three months have sucked. I’ve heard tales from exasperated Facebook employees who go home from work only to hear from friends and family how awful they’ve heard the company is doing. It’s a wear on internal morale — something that could seriously affect attrition rates.

That’s especially true considering the additional pressure over the next 18 months, as employee shares continue to come out of lockup. Those sitting on millions from when they first signed on could essentially cut and run to a new outfit, either joining a competitor or perhaps taking the money to float a new start-up of their own.

What Facebook needs is a public rallying cry, something beyond the internal all-hands meetings Facebook holds regularly, in which Zuckerberg has reportedly reassured his employees, while acknowledging that the stock slide was “painful” to witness.

A strong declaration of solidarity that, yes, things are tough, but the company has banded together to weather the storm, could help ease the scrutiny his employees face from everyone on the outside.

And it would also be a reminder to prospective Facebookers that the company is still hiring actively, and that it’s still a desirable place to work for a young, upstart engineer.

Admit It: You Blew the IPO

Lastly, there’s the botched IPO that will live in infamy. All we’ve heard is Wall Street and media chatter, with Facebook staying largely mum on the topic. No explanation on why it went down the way it did, no retrospective on what the company would have done differently. (The most we’ve heard was from CFO David Ebersman on Facebook’s first earnings call in July, parroting the “long-term” party line: “We’re disappointed in the way the stock has traded. But we’re focused on long-term.”)

Basically, the public wants to be leveled with. Insight as to why things went south the way they did could ease tensions with retail investors who feel scorned from the offering, particularly when buying into Facebook seemed like a sure bet from the start. It won’t necessarily yield any immediate returns, but it could stanch further bleeding, keeping some from cashing out sooner rather than later.

It’s the elephant that has been in the room for months. Talk about it.

Mark Zuckerberg: CEO

Ultimately, much of Zuckerberg’s appearance will boil down to something intangible: The way he carries himself.

Will his performance onstage carry with it the gravitas of a CEO in control of his company, a commanding presence who knows how to lead? Has the young tech prodigy moved past the days of sweaty public nervousness? It’s unclear what to expect, exactly: I haven’t seen him at an event in the flesh in more than a year.

But one thing’s for sure: He needs to nail it.

Latest Video

View all videos »

Search »

Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work