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How Facebook Made its biggest pivot post IPO #Threadmill

Facebook made its biggest pivot post its successful IPO – a feat very few entrepreneurs and leaders can pull off.
Here is a great threadmill by Dan Rose bringing the story from the trenches.

Zuck taught me the best leaders are willing to swim upstream when the stakes are high, and swallow their pride when it’s time to change course. Admit mistakes but don’t dwell on them. Whatever your strategy, be decisive and go all-in. And lead from the front at all times.

May 18, 2012 – there was a crisp blue sky at FB’s campus as we rang the opening bell. Emotions ran high as we took a brief moment to celebrate our hard work. The stock traded up for the first few hours. Then it traded down for the next 12 months…
Facebook’s IPO coincided with a paradigm shift in technology. The majority of our usage and revenue transitioned from desktop to mobile practically overnight. Facebook’s journey to a mobile-first company started with a strategic error and ended with a pivot. Here’s the story:
Mobile initially presented us with a number of challenges, and our instinct was to innovate our way around them. The heart of our strategy was HTML5, which turned out to be a flawed approach. We spent 2 years sprinting down the wrong path before reversing course. Why?
1/ Our engineers coded in PHP, a web-based language that didn’t translate to native mobile apps. Rather than write native apps for 5+ mobile platforms (this was 2010/11), we used web-based HTML5 so we could write once, read everywhere (just like the web).
2/ Our web gaming platform was thriving which validated our aspiration to be a platform provider. But there was no obvious way to translate our web platform to mobile. Apple rejected our platform aspirations, so we decided to fork Android and build our own OS + HTML5 wrapper.
3/ Our web platform also generated 30% of our revenue (payments + ads), and the rest of our revenue was from ads in the right-hand column of our website which didn’t exist on mobile. It was not obvious how we would be able to make money in a mobile world.
We created a dedicated team to focus on mobile. My team led OEM, carrier and developer relations for a “social OS.” Bret Taylor led our development efforts and Zuck drove our strategy. We were proudly all-in, which is often the right approach in a world of limited resources.
But there were 2 big problems with our approach: HTML5 apps performed worse than native apps, making our products slow/laggy. And mobile started consolidating around iOS and Android as developers and users wanted fewer platforms. We were swimming upstream with a broken paddle.
All of this came to head around the time of our IPO. 6 months after we went public the stock was trading at 50% of our initial offering price with no bottom in sight. It was clear we were on the wrong path and running out of time. We couldn’t bury our heads, we had to take action
Zuck pivoted the company overnight. He shut down our HTML5 efforts and mobile OS aspirations. He put all of our engineers through emergency bootcamp to learn how to code for native iOS and Android. He promoted Boz from our consumer team to rethink ads in a mobile context.
It takes time to move a giant ship, and those next 12 months were very tough. Zuck prioritized app performance over everything else, including revenue and innovation. Our products needed to feel modern and snappy before we could even consider monetizing or adding new features.
Zuck insisted that every product review start with mobile-first designs. And while our apps were being re-written, we started to think about putting ads in News Feed. Our bar was very high – the ads needed to feel as relevant as any other content from your friends.
We originally thought the key to ads relevance would be social context, but this was wrong. Relevance was driven by auction liquidity and targeting (more ads to choose from = better odds of showing a good ad). Once we reached critical mass, users embraced seeing ads in their feed
One year after our IPO we finally turned the corner on mobile and never looked back. Growth and engagement exploded as everyone got smartphones. Users clicked on relevant ads which brought in more advertisers which made the ads more relevant – our revenue flywheel was spinning.
Our mobile app strategy turned out to be way more powerful than our web platform, and the revenue we lost from web games was quickly replaced by News Feed ads. Zuck didn’t give up on his platform aspirations, he just refocused his energy on the next paradigm shift in AR/VR.
Zuck taught me the best leaders are willing to swim upstream when the stakes are high, and swallow their pride when it’s time to change course. Admit mistakes but don’t dwell on them. Whatever your strategy, be decisive and go all-in. And lead from the front at all times.

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