Is Facebook’s Plan to Connect the World Good Business or Just Naive?

Source: Facebook, Inc.

Source: Facebook Inc. (https://www.facebook.com/isconnectivityahumanright/isconnectivityahumanright.pdf)

Critics have suggested that Facebook (NASDAQ:FB) founder and CEO Mark Zuckerberg has never been much of a businessman. There’s no denying that the Harvard dropout is a genius — becoming a self-made billionaire by age 23 can go a long way toward gaining the respect of the business and investment community — but the nature of his success was frowned on by many observers.

Facebook went public in May 2012 at time when there was a lot of hype and a lot of lost money in social media. Investors had witnessed or experienced the flops that were the Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA) initial public offerings, and even on a good day regarded Facebook dubiously.

Wall Street’s so-called grudge against Zuckerberg may best be symbolized by his now ubiquitous hoodie. Zuckerberg notoriously showed up for a meeting with potential investors wearing what many in the business world considered offensively casual attire, and the act sparked concerns that the freshly minted Internet tycoon wasn’t taking his position seriously. Some suggested that he should stick to programming or product design — but as the company grew and demonstrated its ability to monetize, most just shrugged it off.

Despite lacking any experience before becoming captain of one of the largest ships to sail the Internet, Zuckerberg has proven himself to be a competent navigator and leader. He has done so by fostering a nebulous quality that is hard to value and still harder to find in many CEOs at major companies.

When the first iteration of Facebook launched in 2004, Zuckerberg didn’t necessarily set out to build a multibillion-dollar business: He set out to change the world. To that end, the business is just a means, and he leads it as something of a resident bleeding heart who has surrounded himself with smart, like-minded people.

When confronted, most of Facebook’s management will dismiss pressure to monetize and instead wax poetic about their mission, “To give people the power to share and make the world more open and connected.”

Just a year ago, it was easy to dismiss this notion as naive, and many investors did. Facebook’s IPO was a notorious flop. Shares opened for trading on May 18 at $38 per share, and some combination of deflating hype, technical malfunction, and market voodoo drove shares down more than 32 percent by June 5; by September, the stock had lost more than 50 percent of its value.

The price action was, perhaps, a wake-up call for Zuckerberg. The company cracked down on monetization and punctuated several quarters of strong financial results with a report in July that drove the company back up to its IPO valuation of about $100 billion. A rigorous focus on becoming a world-class advertising platform with demonstrable revenue streams was what it took to convince Wall Street to drink the Kool-Aid.

Facebook 2Q'13

Source: Data from Facebook Inc.

Now, with the approval of the market, Zuckerberg has increased liberty to pursue the sort of far-reaching, world-changing things that, ostensibly, he has always wanted to do.

So what does that ambition look like?

Most recently, it’s an initiative call Internet.org with a mission to provide Internet access to the 5 billion people on the planet — 65 percent of the global population — who currently do not have it. Facebook published a report called “Is Connectivity A Human Right?” that discusses the issue and the project. Summing up his position, Zuckerberg wrote:

“I’m focused on this because I believe it is one of the greatest challenges of our generation. The unfair economic reality is that those already on Facebook have way more money than the rest of the world combined, so it may not actually be profitable for us to serve the next few billion people for a very long time, if ever. But we believe everyone deserves to be connected.”

And he demonstrated why this project is more than just a social good:

“In a detailed analysis, McKinsey has shown that the internet now accounts for a larger percent of GDP in many developed countries than agriculture and energy. It has also accounted for 21% of GDP growth in developed countries in the past five years, increasing rapidly from just 10% over the past 15 years. About 75% of the gains are experienced by companies outside of the technology industry. And the internet creates jobs, with 2.6 new jobs being created for every job lost to gained efficiencies.”

Facebook has partnered with companies like Samsung (SSNLF.PK), Qualcomm (NASDAQ:QCOM), Nokia (NYSE:NOK), and Ericsson (NASDAQ:ERIC) on the project, according to Reuters.

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