The Churchill Club: A Conversation With Facebook COO Sheryl Sandberg

I’m here at the Palo Alto Research Center, where the Churchill Club is hosting an interview with Sheryl Sandberg, Facebook’s Chief Operating Officer. Altimeter Group Founder Charlene Li is moderating the discussion. Below, I’ll be liveblogging my notes throughout the interview.

Q: What does Facebook mean to you personally? What are your favorite things to do? How much do you use it?
A: I use it a lot. Have used it since before I joined Facebook. Back in college I had a ‘little sis’ though a mentorship program (she was in elementary school). I couldn’t find her later on when I tried to find her. But earlier this year I got a message from a girl asking “Are you the Sheryl Sandberg”. And it was her. I’m on Facebook several times a day. It’s open all day. I stay in touch with the girls I grew up with, and the people I know now, through work and outside of work.

Q: Any favorite apps?
A: I’ve tried sowing a farm. It didn’t work for me… I got lazy and bought the stuff for $5. But there’s a lot of things that I’ve used. I’m pretty active on causes.

Q: Any feature you’ve really liked?
A: One of the things that’s helped me the most is the friend list, being able to segment your friends into lists is very helpful.

Q: What would you like to see personally that would make your experience better?
A: More applications that would integrate the things that I do every day.

Q: What do you see as new ways that people use Facebook?
A: There were two girls in Australia who got caught in a storm drain. They updated their Facebook status, and they got rescued. We are not emergency services.. I suggest you call 911. We see lots of use cases. People have found bone marrow transplants for their children. People have found long lost relatives. There’s lots of recruiting. We are trying to be a platform. We don’t pretend we should prescribe what people should share. We want to help people connect with who they want to connect with, and share with whomever they want to share.

Q: I’m getting so many invitations. What about Facebook burnout
A: it can get overwhelming. We offer lots of tools. I think people are uncomfortable with hitting ‘ignore’. I think it’s ok to hit Yes/No for things, to tell an application to stop sending you messages. My homepage on Facebook is now a very small group of my friends (segmented using friends lists).

Q: How do you see businesses using things like Facebook Pages?
A: Pages are for businesses the same way Profiles are for people. They are exploding. 10 million people fan pages every day. Starbucks has the number one fan page. 4.5 million today. Sprinkles, the cupcake store does a word of the day (get a free cupcake if you know it). People use pages to update, do special permissions. More of what you see is authentic communication. Papa John’s pizza — Papa John himself posts. He came to Facebook, took a picture with Mark. We’re seeing increasingly authentic engagement from people who run businesses.

Q: Lets talk about engagement in posting vs. dialog. Seems like companies just push, don’t talk back.
A: It’s a tool. Some people use better than others. The best use cases are companies that post frequently enough that there’s new info on the page, but not so that it’s too much. And they watch their page to see what people say. Virgin America asking people what their route should be.

Q: Do you think most of the advertisers get this.
A: I think some do. Some are coming along. They get it more than they used to. We were meeting with a CMO of a very important company that does lots of advertising. They asked about best practices. We said you should post frequently — you don’t just spend lots of time upfront. With us, spend half an hour a day, and do it frequently. He said, if we have a 12 day approval process to get something up online, is that a problem. We said it was. When I first took the job I was meting with a head of a movie studio. He said that it used to be, if you have a bad movie, you had that weekend with people seeing it — it wasn’t til the second weekend that they stopped. Now they find out it’s bad the same day, they don’t go to the second showing. I think their processes are changing. We’re working with almost all the top 100 advertisers in the country, and increasingly in the world.

Q: How on Earth do you measure this, to help them figure out what they’re getting?
A: We just announced a partnership with Nielsen — Polls. One example with Sony,a movie they were releasing.. We did studies of people who had seen the ad. If they had seen the ad they were 87% more likely to see the movie. It’s important that Nielsen is well respected and a third party.

Q: Are there some basic mistakes you see?
A: Businesses sometimes try too much. This is about very authentic communication. More and more, people are saying they want comments, so they we know about them and can address them. On the Internet, brands can’t perfetly control themselves, they have to work to create an authentic community.

Q: Is the real value the broad reach or the engagement?
A: I think it’s both. I think it’s unusual in the second category. There are other places you can get reach (Yahoo). We have engagement. We are by far the top place people spend the most amount of time on the web. The engagement is two way. When you buy ads on most parts of the web, it’s the same old communication style. Our ads are entirely different. You can engage with our ads. When the Internet came out, everyone thought it was going to change marketing. What happened is that people kept the one way communication (tv ad-> banner). Now you can do interactive ads.

Q: Give me an example? Lots of them operatite just like banner ads.
A: If you look at our homepage ads, you can leave comment, fan a page. When you take any of those actions, a lot of other ads are taking on those properties.

Q: Let’s talk about targeting. There’s so much data on Facebook. In terms of privacy how do you balance, avoid big brother feeling.
A: Privacy is never about balance. It’s an absolute. If you ask why is our usage exploding compared to everything else. We think it’s because we made it really safe. One of the things Mark said when I first met him. He told me how many people put their cell phone numbers on Facebook. Facebook is that safe. We take user privacy as the most important thing we do. We let advertisers target in a non-personally identifiable way.

Q: implications of revenue coming in. You just announced you’re cash-flow positive. You really sped things up. What happened?
A: We’re growing our users, and our ad products have improved tremendously. Our homepage ads with those engagement features are new and really working. Our adspace ads, the targeting is getting better, and people are using them more as they learn how to use them. We are trying to offer new kind of advertising in this market. And in this economy advertisers are looking for the most value.

Q: Social networks in general have reputation of ads not being that good. What was it about your ads that are so effective?
A: We think it’s interactivity and the ability to target. I don’t think people dislike ads, I think they dislike untargeted irrelevant ads.

Q:Want to talk about a new product Facebook Lite.
A: The Lite site is something I think says a lot about our approach to building products. Facebook is feature heavy. Can take a while to load we want to make it faster. If you are in a country with slow bandwidth, it is tough to use. We said we see ourselves as hacker culture — took a small team 4-5 people. Rather than take features out, we’ll rebuild it and only put features in. We made a whole new site. It’s not broadly used in the US. We’re seeing how this works. Adding features in as they get fast enough. Gives all of us a bar for how quickly things should load.

Q: Let’s talk about the culture. Describe the culture. How did you find yourself coming into this?
A: I think that’s Facebook’s strength. We’re a product driven company driven by extraordinary tech visionary. Mark has a very clear vision of what connectivity is, what a platform means, how a product should evolve to enable people to share. We say we want to be a great place for engineers to work, and sales, and biz dev. But we think that starts with being great place for engineers to work. We start from the product.

Q: What’s it like running a company full of engineers?
A: I sit in the middle of the engineering pit, with Mark. I think the fundamental thing you understand is that you don’t manage these people. Mark and I don’t run Facebook. We lead. But it’s run by the people who work there. We’re all aligned the culture of shipping products, getting them into the ecosystem.

Q: You talk a little bit about shocking people. You do things (news feed, other big new things) and get away with it. How do you check yourself if you’ve gone to far.
A: Mark would say the risk is we don’t do enough. The risk is that you have one big innovation, become risk averse and stop evolving. Our product looks very different than what it used to look like. With each opening up, because that’s what you see (college, open to the world, news feed, open to platform, opening to websites w/ Connect) all of these make it more open, all of these come with difficulties. What we’re trying to avoid getting scared and stopping putting out a better product. We know we watch usage. People protested news feed, but they used it more. We know we’re not doing the right thing when users/engagement stop growing.

Q: Talk about you say Facebook is trying to be as open as possible. Some criticisms are that it is a closed platform. Doesn’t have open standards, pretty locked down.
A: We want to make it open for everyone to share their information with who they want to share it with. We believe people own their data. We are a closed ecosystem — we don’t let people export their data, or let third parties do it. We do let users spread their data. You can share data with external app. We have to be tight in how we control the system to protect the privacy of our users.

Q: You say it’s for the users. People outside, everyone else. Says we’re all working together on open standards. And there’s Facebook over there. You say it’s privacy, but still, do you see these coming togehter.
A: We are making it more and more open. Facebook Connect lets you use your friends on other sites, it’s more open. Can go to ABC and take your Facebook identity with you. We have 15k Connect partners. When you talk about that competitve landscape, we are the only company among (Twitter, Microsoft google) that has privacy info to protect (my note: huh?).

Q: Talk about Google’s stealth social network. They have OpenID. define relationships through contact list, Google Talk list. Google calendar. I use Google Voice. They have sidewiki, that extends those features to any page. Different connect in that you have to get publisher to do it with that. Google can’t do a frontal assault on you, but they can come from the side.
A: Our fundamental view of the world is that the web is evolving. Goes from an anonymous identity on the web to your real identity. We think we’ve led that, but no surprise that other people are doing it, imitation highest form of flattery. We think it’s good taht there are other people evolving the social web. We believe that if we continue to iterate on the products, and stay ahead technologically, we can provide most value to users. Google has lots of different products you use that are only teid together through your Google login. We have a unified product and we’re spreading. In terms of what is the social web, we think we have the deepest understanding of it, and our product evolution shows that.

Q: Let’s talk about the future of the social web. In the future everything is much more social. We’re going to look back 5-10 years ago, and think remember when we had to go to Facebook to be social. What does it look like in the future.
A: I agree. We think people will increasingly be comfortable using their real identify. Experiences will be more personal and much faster. Think you’ll interact with Facebook rom a kiosk in the store, share it on Facebook from there. Can share from wherever you are.

Q: Twitter. Constant comparision. Do you use twitter?
A: I’ve tried it. I don’t use it very frequently. 2-3 tweets up ever. For me, I use it because I’m not trying to broadcast to the world. We think Twitter is important, a great product. We think world is moving towards realtime. Long time ago when we launched status updates people wondered why you would tell what you were doing. Now obvious. We think there will be many more products like this out there. We watch engagement. 40 million status updates a day on Facebook. We want that to continue to grow.

Q: Is twitter complimentary or competitive?
A: There are products out there by both companies that integrate. What I believe is that Twitter is part of the same movement we are part of. They have a different approach. Fundamentally based on anonymity and broadcasting. Ours is identity and sharing.

Q: Some people would say Facebook is chasing Twitter. (Public –> Private)
A: We watch how people use products on the web. Twitter did show there are people who want more open privacy settings. Was something we were working on, they showed people used it. Fundamentally we think there are going to be 3 other things like it. Like us, like it. Letting people share more information with each other.

Q: People haven’t been able to log in for a week and a half. Saying Facebook’s communication has been inadequate.
A: 150k accounts had an issue. Resolved in a week and a half> I think it was too slow. We’d like to do beter. The data was fully recovered, got them back up and running.

A: What google ads are. they’re direct response marketing. ou take people from awareness of your product down through purchase. What google does very well is the bottom part of the funnel where you know what you want, help you find it. It’s not demand generation, it’s demand fulfillment. Everyone needs to get customers. that’s why 90% of marketing is demand generation. We’re playing in that demand generation area. Top 90% of the funnel.

Q:Any secrets for helping expose brand to users on fb? I’m finding myself suggesting an ad buy to get people.
A: I think most people do start with something to push the product make people aware you’re there. You either have to get individuals to push to friends. Or do an ad buy. We see both work.

Q:I’m amazing by FB’s use in international world. There’s talk about next billion users being cell phones, bandwidth. Lots of people with only voice calls and SMS. Are these things you are looking at? What you have is not just a website, it’s social media. There’s other ways to express that.
A: We want everyone to use Facebook. We’re well aware there are ~1billion people without access to websites. We have increasing number of users who have only accessed fb from mobile phone.

Q: We’ve seen lots of people try to convert customers through wallets. Can you talk about FB wallet?
A: We believe in the platform we have. We don’t start with making money on the platform, we wanted power of having world develop for us. 250 apps with > 1 million users. Common question is how do you make money from this. People develop into our pages, we put ads on those pages. We aren’t in the wallet businesses.

Q: You have no future plans for payments?
A: We do have a credit system where you can use Facebook credits. we’re testing that with some devs. Something we’re interested in exploring, but it’s not why we did Platform.

Q: Seems like enterprise is a big market. Where are you in thinking about all these bad IT apps. FB would be a much better central piece.
A: Great question. Companies are doing this now that aren’t failing.

Q: Question about communication, skype.
A: We launched chat. Haven’t done calling or video. How we’ll prioritize is something we’ll do looking forward, no plan right now. We’re interested in communication that is many to many. When I publish something into the stream, the wall, sharing with many so less social. We could make more social by including more people. Not high on priority list, but we’d love to do it.

Q: What are challenges as COO with product so iterative?
A: One of challenges we face is that we’re moving fast. Was meeting with company we were thinking about deal with. Finally CEO of that company and I realized their team has 12 month roadmap/product cycle, we can’t tell you what our product will look like in six months.

Q: You want us to spend more time, but we really have finite amount of tiem to spend.
A: Time spent isn’t a core metric we’re focused on. We’re focused number of users, and engagement — how many people back once a day. We’re at 300 million users, 50% come back every day. Usually it’s early adopters who are most active. Now our newcomers are too. Also important metric is number of shares. We’re at 2 billion things shared per week.

Q: We’re FB devs. My question is authentic identity.. what do you do to authenticate not only identity but intent?
A: We authenticate you based on usage with your friends. We don’t look at what you post. If someone complains we do. Facebook only works if you are yourself. People ask how doy ou prevent against people who are fake on Facebook. I can go on. But then what, who am I going to connect with? Who is not going to hit ignore. Site is not useful if you’re not yourself.

Q: How does acquisition of FriendFeed factored in? Any future plans of acquisitions? How is founded team of FF integrated?
A: We’ve done two integration. Blake Ross’s company and FriendFeed. They’re small, they’re incredibly talented group of engineers. We are a culture of builders. This was a company in our ecosystem iterating the fastest. They were attracted for the same reason. They want to impact hundreds of millions people. People stood up and applauded as they walked around.

Q: I want to talk a little bit about leadership. What has been secret to your success of being a leader?
A: I think I’m lucky. I’ve been lucky to have these opportunities. Fundamentally people who can be great leaders have some qualities: one is a real sense of humility, you don’t lead people by thinking you’re better than them. That sincerity can’t be faked. Mark has that. He has a deep sense of where he thinks the world is going, what he thinks we can add. The other thing that really matters is ability and willingness to communicate authentically. Kids say it like it is. They will learn not to do that, but there’s something endearing about it. I don’t subscribe to honesty for honesty’s sake. Find a way to communicate authentically. Be ok with saying I dont have the answer…

Q: Talk about Mark. What’s it like working with him?
A: You go work for someone who is quite young. Need a close partnership. We were explicit about how to do that, we spent a lot of time together before I joined. We agreed we were going to sit together. We do first meeting monday morning, and a meeting friday. Give feedback every week. More and more we can finish each other’s sentences. He’s someone I really learn from. He is good at asking, “why not?” Worst thing about working with him is he accidentally reminds me how old I am. I was saying I am going to my business school reunion, I was asking when his reunion would be.. He asked me when mid-life crises happen?

Q: How do you balance having two young kids, work/life challenge?
A: You’re very active too, you’re posting a lot and have kids. I think this is hugely important, I think we need to keep more people in the workforce. Most of the women from our class aren’t working. 15% of C level execs in the country are women. 10 years ago it was 7%. It’s not fast enough. I think not enough women are staying in the workforce. I’m passionate about telling women you can do both. I don’t say you can have it all. But I’m glad I get to work, and I’m glad I’m raising kids. I think we’ve made more progress in workplace than in the home. Women still working a lot in the home when husband/wife are both working. So it’s like they have two jobs.I think most important thing we can do is change the home, and that is really hard. We need to applaud men for taking care of kids and we don’t do that. We need to make it more part of women’s identity to work, and less for men.

Q: You used to have a big focus on apps. Now more on FB connect, FB Fund/FB Rev. Coming year how you will deal with third parties.
A: We’re very focused on everyone. We have platform where you can build, put apps on, or you can have your own website. We recognize there are people building for Facebook who don’t have website.

Q: You talk about the evolution of Twitter/Facebook. What is your view on traditional media in the next five years?
A: They provide editorially verified news. My fear about local news going out of business. Who is going to cover the school board? I’m a big believer in this. We have challenge of getting quality of information out of WSJ and provide to citizens. The ways in which it is monetized and written is going to be different.

Q: What kind of impact, 10-20 years, Facebook and all the people in this room will have. How will it be better? What do need to do?
A: I have a sense of gratitude that I get to work in Tech. I can write like 3 lines of code. I feel lucky to be sitting in this room, where there is so much history. My son thinks the world has Tivo, that it’s on demand everywhere. We’ve made his world that much more driven by him. The things we haven’t invented today, my kids aren’t going to understand the world without. They’re going to make it harder for the moral atrocities that go on today to continue.