Facebook has been hit with public outcry over some of the changes it has made to the social networking site over the years, but the real risk, according to comments made by Chief Operating Officer Sheryl Sandberg at a Churchill Club event in Palo Alto, Calif., on Thursday night, is that it doesn't do enough when it comes to innovation. She was responding to a question from Charlene Li, founder of the consulting firm Altimeter Group, as to whether Facebook goes too far when it introduces major changes to the site. "If Mark were here, I know that he'd say: 'The risk is that we don't do enough,'" said Sandberg. She acknowledged that users protested, for example, against the news feed and the home page redesign but said that in both cases, user engagement—and number of users overall—rose. "We'll know when we're not doing the right thing when users don't continue to grow, and when engagement doesn't grow."
Twitter vs. Facebook Facebook approach to innovation is markedly different from Twitter's, where much of it is determined by its users. They spurred the creation of the "@" reply function on the micromessaging service, for example. And while Twitter isn't a major threat to Facebook's share of the social network market just yet, Sandberg acknowledged its importance. "Twitter is part of the same movement," she said, referring to the sharing of real-time information, adding that "they have a very different approach to it, which is fundamentally based on anonymity and broadcasting. Ours is fundamentally based on identity and sharing."
On Advertising Facebook revolutionized online advertising, according to Sandberg, because it paved the way for ads that encourage two-way social interaction between consumers and advertisers. For example, many of the ads on Facebook encourage you to take a poll, play a game, or answer a question. "I think when the Internet came out, everyone thought it was going to change marketing…and really what happened is a lot of the things that were going on before moved online. So you used to do a TV ad, you did a banner ad—but it was still that one-way communication of one to many," she said . "Our ads are really two-way and really social. That's, I think, the real difference." And while its ad format offers advertisers something unique, it also helps that Sandberg is sitting on a pot of gold—Facebook's database of over 350 million users—which allows the social network to connect advertisers with their target audience. This has made the difference for Facebook amid an economic climate where online ad spending has declined for two consecutive quarters this year.
A lot has changed at the Palo Alto-based startup since Sandberg joined in 2008 after leaving Google, where she helped develop the search engine giant's moneymakers, AdWords and AdSense. The company can now boast that it's cash-flow positive thanks in large part to its self-serve ad business—and that it owns the lion's share of the U.S. social network market. And if Sandberg's comments are any indication, the company has no plans to stop innovating anytime soon.
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