Facebook will soon have its third chief financial officer in less than two years, the company announced today via a leak to the Wall Street Journal. Gideon Yu, the man who came back from Dubai empty handed, is out. The hunt for his successor is starting now.
Facebook says this is about getting a CFO with public company experience (“We have retained Spencer Stuart to lead our search for a new CFO and will be looking for someone with public company experience.”). Which is complete nonsense (and poorly thought out nonsense at that), because Yu, after a short stint at YouTube and an even shorter stint at Sequoia Capital, was the treasurer and SVP Finance at Yahoo. Which is very much a public company.
So why is he leaving? We have to speculate for now, but perhaps he’s not convinced the company can get another round of financing at the valuation the board wants to see. Or it could be any of a thousand other things. But it most certainly isn’t because he doesn’t have public company experience.
Less than two years ago Facebook CEO Mark Zuckerberg said of Yu “I consider it kind of a coup that we were able to recruit him here…He’s just excellent.”
I wonder why he didn’t add “I just hope for his sake that Facebook isn’t too successful, because if we IPO at some point, he’s out.”
Yu is just the most recent Facebook exec to leave the company. Here’s a list of at more than ten that have left since 2007 (not included on the list is Chief Privacy Officer Chris Kelly, who is expected to leave this year to run for Attorney General in California):
Gideon Yu, VP and CFO – left 3/31/09
Net Jacobsson, director of business development –left, March ‘09
Owen Van Natta, chief revenue officer – left in Feb ‘08
Adam D’Angelo, co-founder and CTO left in May ‘08
Matt Cohler, VP of product development and #5 employee – left in June ‘08
Katie Geminder, Director of Product, left sometime after Jun ‘07
Jeff Hammerbacher – left in July ‘08
Ben Ling, head of developer platform – left in Aug ‘08
Dustin Moskovitz, Facebook cofounder– left in Oct ‘08
Rudy Gadre, VP and General Counsel, January 2006 – April 2008
Mike Sheridan, CFO, left in June 2007
They are growing their traffic like a weed but their revenue is anemic by comparison. As the present rate they will continue to need to raise huge amounts of capital to keep up with it all.
They will NOT go public. This is all a game to get a decent price from Microsoft.
expected revenue of $400m+ in 2009 isn’t all that shabby.
Agrees with Michael
I disagree. It is the bottom line that counts.
I can create a $400 million company in one year if I received funding of $500 million and I started selling dollar bills for 80 cents each.
If Facebook loses more money the more users it has, that is very shabby.
Show me the money … the bottom line money that is.
When a CFO leaves, it usually is bad news.
yeah, financial performance isn’t the issue here. Gideon wasn’t in charge of revenue, just keeping track of it. My guess is this has to do with fundraising.
@Candara This is the best comment I HAVE EVER SEEN ABOUT FACEBOOK , PERIOD!!!
Everyone including TC facebook lovers need to reflect on your comment for a minute to see that 500 million invested and 400 mil. in revenues after 6 years, is VERY SHABBY!!!
When you sit back and turn off all the media hype, noise and BS, you realize that FB is not all that special a story.
There are more interesting companies with 1/100th the capital raised making REAL BOTTOM LINE PROFITS. Well said!
Also agree with Candara, bottom line is facebook does not have a sustainable business model. It has a lot of users, tremendous user growth, but revenue that is not keeping up with growth. Essentially it seems that Fbook is using the underpants gnomes business model: Step 1 Collect underpants, Step 2 ? Step 3 Make Money.
My prediction for 2009 was a shift in focus from growth to value creation and facebook will IMHO have trouble shifting:
http://experien...growth-to-value
Also agree with Coff99 that there are a lot more smaller companies that are creating tremendous value from a much smaller userbase.
I completely agree. What the use of having a Million members site but cannot monetize it to the point of making money and go public.
Nat
http://www.loopcity.com
From my understanding Facebook has an operating deficit that they need to finance (http://snurl.com/eyi3u) toot suite. From that standpoint they need to figure out a way to raise capital quickly, and if they aren’t able to secure the line their looking for then they don’t have many other options other than an IPO. In this case it couldn’t be interpreted as anything other than a “forced” IPO, and the resulting market value will be punishing.
Maybe the guys that have left don’t believe that FB can secure the money without massive dilution and have left and sold off part (or all) of their Facebook options in the private market.
This is getting interesting.
“tout de suite” – it’s french.
My understanding is that they are sitting on $400m and will be close to break-even this year.
Interesting that this news comes on the heels of last weeks FB board meeting…
Yes, but one cannot grow revenue by 70% at the same time that their traffic and correlated expenses are growing by 1200%!
This has nothing to do with the fact that their CEO is…what?…22? Nothing at all. He’s highly skilled for his age. Flip-flops are the new wing tips. Boy genius. Boy genius who, admittedly, ripped off his idea somewhere else, but genius none-the-less. Okay, fine so he just flipped his front page to look like another service that used to have a bike messenger as CEO, BUT GODDAM IT HE KNOWS WHAT HE’S DOING! LEAVE HIM ALONE!!!
Exactly. Thanks for saving me the key strokes.
you know, perhaps FB needs a CEO with some public company experience.
ouch!
not ouch, just pointing out the ridiculousness of FBs official statement.
Agreed – Facebook has grown to a point, from a pure operational standpoint, that Mark has to turn over the reins.
Great analysis! Great leaders know when to step aside and let someone more qualified take their companies to the next level. Michael Dell anyone? Mark needs to move over to let his company bloom and the board and any other advisers need to stop coddling the boy. Set it free and give it a chance to reach its potential …whatever that is.
Hard foul
Michael Dell has an amazing record as CEO
Exactly. There should be a new general rule in Silicon Valley – when a startup reaches a certain stage (size) and starts to accept outside VC funds the CEO/Founder should have to re-apply for his/her position and have their application scrutinized based on their experience and merits.
For instance, would a 20-something guy straight out of college be hired to run a company ‘worth’ billions of dollars? I think probably not.
Nobody has to make the investment. I think our present times are proving more rules and gov. are not the answer
Who would invest in FB given their inability to turn a profit after raising over a half-billion $. They will likely have to find another bailout option other than the public sector…I hear the govt. is offering cash for non-profits.
Agreed. Zuck is in way over his head.
What does his age, or the fact that he is skilled “for his age” have anything to do with anything.
People don’t walk up to facebook and use it because of who the CEO is or because he is “skiled for his age.” People use it for the utility.
agree completely. but the message that Yu is out bc he doesn’t have public company experience is complete bullshit.
Yahoo? Really? Is that still a company? Look where he drove that company…
Exactly?!? Why do people keep saying that they don’t understand what FB is good for??? What is THAT ABOUT??! CLEARLY THEY’RE JUST TRYING TO TAKE FACEBOOK DOWN! Tell me there’s no value to being unceremoniously shoved back into historical relationships with the awkward high school crowds you spent your early adult life trying to escape from. You’re telling me there’s no monetization strategy in that?!? Hell, I use Facebook to open my Corona Lights when I don’t have a bottle opener!!! MY GOD PEOPLE, LET THE POOR BO..I MEAN CEO DO HIS WORK!
Genius boy?
Dude, get serious.
FB =Â Right place + right time + having no problem ripping colleagues off.
it takes a lot of skill to be in the right place at the right time.
I disagree. It takes skill to turn being in the right place at the right time into a successful and PROFITABLE business.
This he does not have…
Well, they’re still not monetizing because they want to concentrate on growing their monopoly before somebody else does.
Once caught in the social FB fabric, it seems to be really hard to get out of it.
And once they will have reached World domination, they will start make people pay for their addiction. Even poor kids in Africa
Dude,
That is what Friendster and MySpace was trying to do. Didn’t last, did it?
Dude said…
monopoly before somebody else does.
Dude, I am no FB user, but in a free market, you’re allowed to do that without coercing anyone by physical force and that is exactly what Mark Zuckerberg has done and he should be applauded for that. Users joined FB out of their own volition, which Mark didn’t force them with a gun to do so.
Dude said…
… it seems to be really hard to get out of it.
Umm! Bullshit. Again Mark is not holding any user with a gun. Join FB is you wish to, and leave whenever you want to. There is no coercive physical force being used at all to threaten users not to leave. Your argument is akin to cigarette smokers who had suffered terminal cancerd where they blamed the tobacco companies for making them addicted where they couldn’t stop smoking. They could have stopped smoking anytime they wanted to.
Dude said…
And once they will have reached World domination, they will start make people pay for their addiction.
Once a business man reached a world domination in any sector , then he/she should be applauded for doing that. An example is Bill Gates or Brin/Page. They reached their dominant positions by not using physical coercion over consumers but by brilliant management and sales skills. No guns held over the foreheads of the consumers.
There is a turf war going on at FB. My bet is on the woman who’s in charge
smart bet.
Maybe it also has to do with M&A activity ….
The failed twitter acquisition, the failed google talks etc…
Without a sale — to Big Media (Viacom, Comcast, Time Warner etc.)
to Big Tech (Google, MS, ? )
There is a dangerous time for FB — twitter is readily being equated with FB among power users who are not in the tech industry , AND google still has products on the edge of social networking.
Further, Yahoo and AOL pretty much form upper bounds on FB’s valuation.
FB saying it “will be looking for someone with public company experience” is *very* different from saying “Yu is out bc he doesn’t have public company experience.”
The former doesn’t mean (nor necessarily imply) the latter.
That is how journalists or bloggers misinform the public.
High attention attracting article or post implies more $$$$…
well said… they’re not SAYING they ousted Yu due to lack of public company experience. They’re just IMPLYING that.
My best guess is that Yu saw the company take a wrong turn and Zuck didn’t like his suggestions on how to get it right. The upcoming need for funding and a cost structure that potentially grows faster then revenues might have something to o with it (since we’re talking about the CFO).
My sentiments exactly.
php does that
My guess is that the investors are or will be angry soon and that Zuckerberg will be replaced within the next months.
Anyway, probably like many other people I’ve lost faith in Facebook’ and I’m moving to twitter+flickr. Life goes on.
(just as a side note: maybe stealing someone else’s idea was not such a good idea after all…)
This article proves that TC and Mike will call it like it is, even when you think all they do is praise a company.
This is really saying a lot about what these CFOs are seeing on the inside. In the corporate world, these types of moves would cause a public stock to fall hard. I think Facebook will carry strong through these adjustments.
One word – Karma!
Money quote from Arrington: "perhaps FB needs a CEO with some public company experience." http://www.tech...comment-2678278
Lunch topic for the next 2 weeks there Mike? lol.
Mark Z. can sell out his share in Facebook at anytime, be a liquid billionaire and then start a new site.
I don’t understand why so many comments got it like FB is loosing something here.
If this guy starts a new site in 6 months, we all will be there to take a look and it also would be successful. You don’t get 200 Million users off a mistake or luck, the talents that grew the users will also grow them somewhere else.
The Facebook board knows this.
Who’s buying his shares?
That worked for Kevin Rose.
oh wait
Uh…Is joe public going to buy his shares?
I am a little flabbergasted by this statement FB going public. Can somebody please explain how can somebody go public with nothing to offer, I mean in terms of real world monetization. Even a virtual goods business or paid app platform (ideas conjured by sheer randomness) makes some sense… but why go public when the only way you know to make money is sell stock of unknown value… seems like another financial scheme
Agree with almost everything being said here. This is BS. I heard recently that there are still Facebook employees trying to sell stock. Want to know the current valuation? $1 Billion and still no buyers for all the stock.
There seems to be a common mis-perception that Zuck is calling all of the shots. Their board is nothing to sneeze at. He’s the mouth-piece, and a very smart guy, but he’s not pulling all the levers at FB.
Things are getting iffy, no doubt, but they aren’t trying to level costs with users, they’re just trying to find the magic formula that turns the user-base into a huge pile of cash, and when they do, revenue will leap. This won’t be linear growth, it will be exponential.
Tisk tisk to TC for turning “we’re looking for someone with” to “Yu didn’t have”. Just sayin.
i see this misconception all the time. he is a puppet in the bigger picture.
I see Facebook as a symbol of the current state of the American economy. An economy that is tragically built on dreams, bubbles and unsustainable business models.
The “invisible hand” of the free market is now going to fix that. Everything will be fine.
Holla! Facebook is getting a bail out from King Obama like the auto, bank and insurance industries!
Facebook is rich!
Interesting. Almost makes me think twice about the future of facebook. Feel like the insiders might know something we don’t. Did people leave google like this?
Mixed feelings about fb, but on another note-
Why is so many “entrepreneurs” find joy when another fails. And then you wonder why “your great idea” never takes off. Good post Mike
I use FB and Twitter. Both mostly structured for PLAY and not BUSINESS. FB especially must be working on something incredible to even think about asking for more funding. Too bad not thinking what we have thought. Something far LARGER out there than even FB dreams of. They better hurry and JUST DO IT before they become a supernova.
It is very troubling to see a high turnover of CFOs. As a former securities attorney, this is usually a sign of trouble. I wonder what the reasons were for all of these CFOs to leave.
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What about me? I left Facebook in December 05. I guess I’m such a loser that I get left out of lists like these.
FB is going to be big, agreed they have monetization problems, but with some smart ideas that won’t be a problem for too long.
So my question is: What pic is Arrington going to use when he inevitably has to make the ‘Facebook Fail’ post? I really think the only pic that could capture it would be the WTC collapse. Maybe it wouldn’t be in the best taste, but it’s gotta be on that scale. I can already hear those giant steel beams groaning. It’ll be just a spectacular run-for-your life collapse. The wreckage will be legendary. I guess all we’ll be able to do is see who is blown clear and watch TC interview the survivors.
darn…Facebook sounds like they got it rough for now
http://www.shaw...wry.com/?p=3740
Three questions:
1. How much cash does facebook currently have left?
2. What is their estimated monthly burn?
3. How much money could they generate if they turned all their revenue generation ideas on over the next month or two. i.e large homepage ad, job board, etc..
Just another entry on the TEAM AMERICA movie Song
America…
America…
America, FUCK YEAH!
Coming again, to save the mother fucking day yeah,
America, FUCK YEAH!
Freedom is the only way yeah,
Terrorist your game is through cause now you have to answer too,
America, FUCK YEAH!
So lick my butt, and suck on my balls,
America, FUCK YEAH!
What you going to do when we come for you now,
it’s the dream that we all share; it’s the hope for tomorrow
FUCK YEAH!
McDonalds, FUCK YEAH!
Wal-Mart, FUCK YEAH!
The Gap, FUCK YEAH!
Baseball, FUCK YEAH!
NFL, FUCK, YEAH!
Rock and roll, FUCK YEAH!
The Internet, FUCK YEAH!
Slavery, FUCK YEAH!
CREDIT CRUNCH, FUCK YEAH!
FACEBOOK not profit= 16 Billions USD, FUCK YEAH!
MORE THAN 10% UNEMPLOYMENT AT THE VALLEY , FUCK YEAH!
What´s next?
Look, if you have a few hundred million users, do you think there might be some good ways to monetize?
Just stick around a few more minutes and see what happens.
LOL the whole ship is going down!
Companies already know Facebook is a waste of advertising dollars and they avoid it like the plague. Haven’t you noticed? All the advertising on that site anymore is get rich quick pyramid schemes. Bye Bye Nike advertising on there.
When I go on Facebook, I’m there to look at pictures, that’s about it. I’m not searching for products or recommendations. I’m not clicking on any of the stupid ads. In fact, my eyes have trained me not to see them!
Wow, if they’re going to do an IPO, now is NOT the time, LOL!
I love the Facebook fans on here, who keep telling us to wait, big things are coming, etc, etc. Just do a search and you’ll see Facebook has been touting, “big things to come” for the last 3 years! Give me a break!
Facebook needs to focus on its business model and ask the question “How can WE make money?”, not “How can we find money?”. Meanwhile, find a way to get rid of operating costs while maintaining innovative pace. Difficult task but it seems that Facebook is in a difficult situation.
I personally feel that Zuck is in over his head. I hope I’m not right b/c I like FB and I have been a user since Jan. 2005. However having developed a magazine community website myself in 2005, I can imagine if that community had grown to millions. There has to be a point where Zuck just doesn’t have a clue what to do next. He is also not a boy genius, he created a good product, at the right time, and the market sees value in that product.
He is in uncharted territory. For example, MySpace is now losing market share…mature products must adapt to innovation. Has Facebook reached maturity already? or has it reached its bubble? Either way, like all business, FB must attend to good business practices to survive this market.
Another little voice who didn’t read the statement as implying that the now-ousted guy lacked public-company experience. Sure, it could have been worded differently to make it more clear, but it would be blindingly stupid to write and approve something with a surly implication that is so easily proven wrong. What’s the old line, something like never attribute to malice that which can be attributed to incompetence. That aside, in any semblance of a broader scheme, it’s a trivial point that distracts from what may be broader issues. Wouldn’t have hurt to have a scrap of context, info relating percentages of top people who’ve left reasonably similar companies in a reasonably similar time-frame.
Now that is interesting… (Testing Facebook Connect)
By the same token.. what good is TechCrunch?
Whats is revenue?
I see FB like a GM..big, bloated, serving a utility with a declining value. They legitimized the concept en mass, but cannot make a profit.
There were 6 social media networking vendors in the B2B space a year ago, now there are over 100 working with the largest corporations. None work with Facebook and none pay a cent. They will not pay a cent to Facebook in the future.
Businesses can use FB’s aggregating value for free and if they try to ask for money for this, there are hundreds of micronetwork communities that can reach target markets for them..
Consumers will not pay to play and the spray and pray advertising model is nothing but disruptive and on the decline in Internet Marketing.
They have some tough work ahead – some sort of JV is likely where MSFT et. al get free access to API’s and users profiles.
I wouldn’t buy FB on an IPO valuation..don’t think there would be a good time to get in over the next 2 years IMHO.
hey …. it seems like FB or atleast we’re related app guys r celebrating april fool’s day … i just got added by barack obama as his czn … =P
oh … forgot to mention …. he dint actually add me as his czn …. i just got a feed saying tht he did …. my bad.
I used to be a facebook user, I am only 24 and have deactivated my account… when I did use facebook I mainly used it to stay in touch with people in college I didn’t see…. now I don’t really have a need and I don’t like the massive amounts of email i receive from the groups I joined back when…. with that said I have been thinking about the consumer services offered like FB and twitter… I like the ideas and I think lots of people get use from them ( I am not really one of them, I haven’t really jumped on the twitter bandwagon) but I know some people do. However, internet advertising is slowing down and something new needs to emerge. FB needs to be the company to find that because they NEED a good business model… as far as Mark Zuckerberg, he had a great idea and people love it but it has not become a great profitable business, same with twitter. the creativity is there but the business genius is not, that is why a new CEO may be needed
Regardless of the model, FB has enough Goodwill and growth to command a $20 bill. IPO valuation only to see it skyrocket to $50 billion that same day when the average investor can buy in. When FB goes public, it’s a telltale sign our markets have turned for the better.
Why not just charge your users $1 a month. Assume you lose 1/2 of them, but by my calculation that is still over $1B in revenue.
Or why not enable some kind of fee for premium services, ie pay $5 a month to be allowed to post more than 4 pics a month. It would dramatically reduce server costs.
does anyone know how much facebook execs take home in salary? and then what is the deal with stock?
facebook used to be the hot thing… now it’s twitter. That’s life baby.
–
http://twitter-...zz.blogspot.com
There were a number of comments to the effect that Mark Z. is inexperienced and needs to go… I think it is highly unlikely that the venture capitalists who funded this venture agreed to terms which allow Mark Z. to have voting control of the company (through 50%+ ownership or supervoting shares which give him more than 50% voting power). Unless they did, the board has the power to remove him if they feel it is necessary. I would speculate that he is still running the company because the board thinks he is best suited for the job.
I would be curious to hear what others have to say about this.
I also agree that FB future is not as bright as it seems. They will really have problem monetizing.
Whaaaaats revenue got to do…got to do…got to do wit it?
Whaaaaats revenue but uh sec ond hand emoooootion???
I disagree. It takes skill to turn being in the right place at the right time into a successful and PROFITABLE business.
How much money could they generate if they turned all their revenue generation ideas on over the next month or two. i.e large homepage ad, job board, etc..
Maybe even those who work at Facebook are starting to realize that it’s crap.