You know what’s great about blogs? Anyone can become a reporter.
You know what’s horrible about blogs? Anyone can become a reporter.
People in the former category are insightful insiders like Fred Wilson or Ben Horowitz or even former attorney Michael Arrington. People in the latter category are like John C. Abell.
I try to give everyone with a proper byline some level of professional courtesy but this article by Abell on Reuters’ blog today was probably the stupidest thing I’ve read in years. And I say that as someone who regularly defends Business Insider.
It’s entitled “Facebook Needs A New CEO”.
Let’s start with the obvious thing that most people who have ever covered tech companies before know: Founder CEOs unequivocally have the most success, and the general school of thought in the Valley for the last six or so years has been that you are almost always better off not ousting a founder, even if that founder is doing a horrible job.
Next obvious point: CEOs are just one piece of the puzzle. Look at Yahoo, which is on its fifth CEO in its recent bloody, embarrassing history. Lo and behold just ripping one out and installing another didn’t magically solve the problems!
That’s just the headline. Okay, maybe he wrote a provocative headline to get page views. Let’s keep reading.
First paragraph starts by saying the company actually exceeded revenue expectations. Oh, you’re right, Abell, FIRE THE BASTARD!
The writer proceeds to say the company’s market cap has been slashed in half in just 10 weeks. And he might have a point there, if that were true. Except it’s not. He is going by Google Finance’s market cap of Facebook which — as people have been pointing out for weeks — isn’t accurate at all. Google has the share count wrong, and the real market cap is actually much higher. It’s now $70 billion, and the IPO market cap was $104 billion. By my math, that’s more like a 30 percent decline, pretty far from half.
Abell thinks Facebook needs a new CEO? I think Reuters needs a reporter who understands how to calculate market capitalizations.
Next graph: “This is a bad, bad situation for Facebook’s early shareholders…” Who are those investors precisely? The average Facebook shareholder holds the stock for exactly four days. The ones who are not flipping in and out will likely hold it for the long term, and could very well be just fine. After all, this is a site with 1 billion users and more than $10 billion in the bank. We are in very early days of Facebook as a public company.
But putting that point aside, can we reference who put Facebook in this situation? There’s little evidence it’s all on Zuckerberg. While the company and its bankers might bear some blame for changing the number of issues and the price just before it priced, as I’ve written before, the biggest problem was NASDAQ’s botched, untested trading system, and the fact that its CEO was in Menlo Park and then unreachable on a plane as the exchange failed to execute orders much of the day. When orders — far higher than the opening price — couldn’t be executed, it led to a feeding frenzy media pile-on about how awful Facebook was. We can’t say what Facebook would be trading at without this boneheaded screw up. Maybe it would still be down. But to ignore it as a major factor, at best, shows a lack of reporting.
Abell continues: “The masses need a hero. That hero is not Mark Zuckerberg. He needs to get out of the way — not because we can judge him a disaster based on a single’s earnings period,” [I assume he means "single earnings period"] “but because he isn’t playing to his strength.”
That strength, says the guy who I’m sure has never even met Zuckerberg, is being a “spiritual leader and chief innovator in a hoodie” not serving as CEO.
First off, precisely how do you think Facebook got to this size? Eight years of Zuckerberg being “a spiritual leader,” riding around Menlo Park on a magic carpet, chanting? No. He was hiring and firing until he found a solid executive team to back up his weaknesses. He was making intense judgment calls in light of multiple user and employee uprisings. He was saying no to $1 billion acquisitions that would have made him richer than most people could ever imagine. He was utterly changing the rules by which all startups operate in Silicon Valley through adept use of the secondary markets. He was building a site of unprecedented global size in a matter of years.
Those are things a CEO does. And Zuckerberg did them better than anyone else of this generation. What he wears has nothing to do with it, John Abell. You could put on a suit and tie, and you still apparently wouldn’t know how to calculate a market cap.
Just because the shares have traded hands from venture capital funds, who actually know Zuckerberg and the industry, to short term traders, who are holding Facebook stock for an average of four days at a time, doesn’t mean that Zuckerberg is suddenly the one who doesn’t know how to be a CEO. One of those things has changed in the last few months — and it’s not Zuckerberg.
Abell goes on to say: “There are plenty of people who could manage the Facebook business.” (Oh really? Then why do we only have one Facebook?), and that Mark “needs to focus on product strategy, not investor relations.” Um…well, great point, because that’s pretty much exactly what he’s doing. In fact, the biggest complaint by Wall Street is that Zuckerberg plainly spends the bulk of his time on product and not visiting Wall Street. That was pretty widely documented throughout the road show, so much so that people were surprised that he was on the earnings call yesterday and at how vocal he was.
I’m not sure if John Abell has heard of Facebook President Sheryl Sandberg — and astoundingly, she’s not mentioned once in this post about how much Facebook needs someone to manage the business side of the company — but most people who have done any research on this company have noted that the two are a complementary one-two punch, with Zuckerberg focusing on product and Sandberg focusing on ads, revenues, and doing the bulk of investor outreach.
But how should you know that, Abell? This dynamic has only been at the company for years and only been widely reported pretty much everywhere.
Abell continues to talk about how hard it is to be a public company CEO, and how one person can’t do anything. Again, that’s pretty much why Facebook divides the big jobs between two people. (Still no mention of Sandberg…)
Then he continues: “One quarter — the first, mind you — does not a verdict make…” (So why are you writing a post the day after the first quarter, saying he should be fired?)
He continues to blame Zuckerberg for believing the company could be worth $100 billion, as evidence of how bad he is as a CEO. Still no mention of NASDAQ’s role in that whole debacle… What are facts at this point? Abell has a point to make!
Then there’s this gem: “I don’t think the Street would see a change in Zuckerberg’s status as a knee-jerk negative; founders go sideways all the time, for a variety of reasons, none necessarily associate with failure.” Um… OK, name one.
Lucky us! Abell will name five!
He cites Bill Gates as an example. Yes, Gates who ran Microsoft for a very long time. Not one quarter. And I’m quite sure shareholders at the time noticed.
He then brings up another example, Dick Costollo succeeding Evan Williams at Twitter. “Williams now focuses on product direction.” Um, no he doesn’t. That’s Jack Dorsey you are thinking of. Williams no longer has a day-to-day operational role at Twitter, at all. Nice homework. Regardless of whichever one he was trying to reference, neither stepped aside, both were ousted and it was hugely distracting to the company. Costolo spent the bulk of his first year on the job reconciling three different cultures. Not a model to follow.
Third example to bolster Abell’s argument: “Larry Page stepped aside for a while to let Eric Schmidt take the lead.” That is in no way what happened. Stepping aside was hardly Page’s choice, and he wasn’t happy about it. This was back in the era when investors believed you had to have a “grown up CEO” to go public — a long time trend that Zuckerberg was one of the first to buck. Saying Page “stepped aside for a while” is like saying Al Gore “stepped aside” in the aftermath of 2000 election to let George Bush “take the lead for a while.”
His next example is the ousting of Steve Jobs. Yes, because most industry watchers think the subsequent Apple CEO clown show was great for shareholder value. Isn’t that what he’s arguing here? That this will be better for Facebook investors if Zuckerberg steps aside?
His final example is — and I’m not making this up, I swear, you can go read the post — Craig Newmark of Craigslist. Craigslist, a site that has never sought to grow rapidly, monetize to its full potential, or come anywhere close to even consider ever going public. (And it’s worth noting developers aren’t too happy with Craigslist these days either.)
Abell ends this magnum opus with this line: “Get out of the line of fire and retreat to the lab.” (At this point, I’m actually wondering if he actually thinks software is produced in a “lab.” It’s possible given what has come before.) “It’s the perfect time to get wired in again.”
I have no real clue what that last bit means, but I have a horrible feeling it’s a reference to that ridiculous Aaron Sorkin movie. In which case, Abell and I can agree on that one point: if Jesse Eisenberg is currently running Facebook, he should resign immediately and allow Mark Zuckerberg to take back the job he was born to do.
[Image courtesy Wikimedia]