There is a nagging concern for potential Facebook shareholders: the guy running the company doesn't care that much about making money.
Mark Zuckerberg has done an incredible job building Facebook into a product that 900 million people use every month and 500 million people use every day.
Because of that truly massive user base, Facebook's valuation has soared over the years: reaching $100 billion on private markets just weeks before it IPOs.
Despite that momentum, Facebook's advertising business has actually stalled over the past couple years.
Ad revenues continue to decelerate, and the payments business – how Facebook makes money off of games like Farmville – actually shrank during the first quarter of this year.
Revenues and revenue growth are so disappointing, in fact, that Henry Blodget says that reasonable multiples don't support that $100 billion valuation.
Yesterday, we outlined the problem with Facebook's business: The ad units it sells are inferior to TV ads and search ads.
But maybe there is a deeper issue with Facebook. Maybe Mark Zuckerberg doesn't care enough about money to run a $100 billion company.
This thought has occurred to us before, but it came screaming back when a friend of Zuckerberg's answered a question on Quora: "What is Mark Zuckerberg's true attitude towards money?"
This friend, early Facebook employee Ezra Callahan, wrote the following (we've bolded two sentences that you should pay particular attention to):
When I worked with Mark Zuckerberg, money was certainly not his primary motivator. He lived an absurdly spartan lifestyle. Well after the point that Facebook's valuation passed $1B, Mark still lived in a small, crappy apartment and slept on a mattress on the floor. All he really cared about was work and he spent most of his waking hours at the office, so it didn't seem to matter much to him to furnish his apartment or spend money on much of anything (food, clothes...anything really). He didn't move into a real house until just a couple years ago when Facebook's security team and advisers more or less forced him.
Mark's main motivations were pretty clearly based around materially changing the world and building technology that was used by everyone on the planet. It's not like he didn't know that if he was successful, he'd become incredibly wealthy - and I wouldn't go as far to say that he would've done everything he's done if there wasn't a big financial payout from it all. But that always seemed like a happy side-effect of his true goals. My impression back then was that if he had to choose, he'd rather be the most important/influential person in the world rather than the richest. And I think that's visible in how he directed the company to focus on user growth and product impact rather than revenue or business considerations. Even today, while Facebook makes a ton of money, it could probably make magnitudes more if that were its primary goal.
Certainly, Zuckerberg himself has been clear that money does not motivate him or Facebook, which he alone controls – and will continue to control after the IPO.
He said as much in Facebook's IPO prospectus.
He wrote, "we don’t build services to make money; we make money to build better services."
Zuckerberg's distaste for financials concerns is also obvious in the way he's set up the company. Sheryl Sandberg's title may be COO, but she's essentially the CEO of the company's business side, running the entire sales and monetization operation on her own. Zuckerberg has also almost entirely divorced himself form the IPO process, delegating it to his very capable CFO, David Ebersman.
Zuckerberg also likes to talk about how the only reason Facebook is a company – and not just a project or a non-profit organization – is that the he thinks a corporation is the best organization humans have come up with to motivate a group of people – employees and people with money – toward a common goal.
Now that Facebook is going public, Zuckerberg's implicit offer to shareholders seems to be: I want to make Facebook a world power. To do that, I need to pay top people and buy companies and fend off competition. To do that, I need a high stock price that keeps going higher. To have a high stock price that keeps going higher, I need a healthy and growing money-making operation. Therefore, I will care enough about money-making that I will hire someone I trust to care about it. Now leave me alone.
This is a different offer from the ones other successful tech entrepreneurs have made with public shareholders. Larry Page doesn't want to be evil, but he likes money a lot. He has several big jets and is now investing in a company that will mine asteroids. Bill Gates's huge super complex of a house and charitable work make it very clear he values his own wealth. Jeff Bezos was careful not to rush Amazon into profits at the expense of long term growth, but he personally cares about money; he also wants to use it to launch rockets into space.
Steve Jobs doesn't seem to have cared all that much about money. He lived in a relatively modest home in an upper middle class neighborhood in Palo Alto. He dressed simply. He cared about making beautiful products that consumers loved.
But the difference between Jobs and Zuckerberg is the difference between who gives their companies money.
While people may love Facebook, they don't pay hundreds or thousands of dollars to use it the way consumers pay Apple to use its products.
The people who pay Facebook are advertisers, and Zuckerberg does not seem to care if they love the experience or not. He's hired someone to do that for him.
Truly, Zuckerberg's motivations for Facebook can be traced all the way back to the beginning.
Still at Harvard, he told a buddy over instant messenger: " Well I don't know business stuff. I'm content to make something cool."
Potential shareholders have to decide if that's an arrangement they can live with.
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