Original subtitles

If you would tell us your name and the spelling so we get it right.

Mark Zuckerberg. M-A-R-K Z-U-C-K-E-R-B-E-R-G.

Would you describe yourself as the founder of Facebook? Yeah.

CHEERING AND APPLAUSE

In just seven years Mark Zuckerberg has gone from college student to multibillionaire.

I'm off to meet him. I would say to Mark Zuckerberg,

you are a defining entrepreneur, you're one of the top ten entrepreneurs who has ever existed.

Zuckerberg's brainchild, Facebook, has found its way into the personal lives of 800 million people.

When you put technology behind the power of who we are as people, the world changes.

That is the power of what we do.

Once in a while a business comes along, which defines an era,

by doing something very new and very big.

In this case changing the way that hundreds of millions of people talk to each other.

What makes Facebook unique is that its founder has so quickly created

not just a business but a whole new global culture.

If you go back most people in the world had no voice right, they had

no podium where they could share things but now everyone does.

He's right. Even the Queen is on Facebook as well as half the population of Britain,

making Facebook the most visited website in the UK.

It's phenomenally powerful but the biggest issue for Facebook is it becomes too popular.

Zuckerberg's creation has produced lawsuits, accusations of

privacy invasion and even inspired a Hollywood movie.

Do you see any of your code on Facebook? You stole our whole idea.

Now Facebook's using the detailed personal information its users

have given it to build its own advertising machine.

But can that justify the astronomical values being put on the company

ahead of a possible stock market floatation?

I don't think it's crazy at all to say Facebook will be worth a 100 billion, Facebook is hot!

Sorry. I'm kind of nervous. We have the President of the United States here.

With exclusive access to Mark Zuckerberg, we ask whether

Facebook's phenomenal growth means compromising his student dream of a more connected world.

'My name is Barack Obama and I'm the guy'

who got Mark to wear a jacket and tie.

LAUGHTER AND APPLAUSE

And I'm very proud of that.

Today thousands of software developers, venture capitalist and entrepreneurs

have come to rub shoulders with Facebook's star for its annual conference in San Francisco.

The biggest act on the bill is still just 27 years old but no-one doubts he's the boss.

CEO Mark Zuckerberg!

CHEERING AND APPLAUSE

Yeah!

Yeah!

Come on!

Hey welcome to F8. We're going to change the universe!

Zuckerberg himself waits in the wings, enjoying his very own warm-up act.

What the hell are you doing? Er...

I'm Mark Zuckerberg. No, I'M Mark Zuckerberg.

The real Mark Zuckerberg is no longer the new kid on the block.

By now, I think that most people see that social networks are going to be a ubiquitous tool used by billions

of people around the world to stay connected everyday.

In Britain alone, 30 million people have registered on Facebook.

It's free. You just give your name and e-mail address and ask other Facebook users to be your friend.

You can add information about your background and tastes and upload a photo to your own profile page.

Once you've got a few friends, Facebook makes it easy by suggesting

more people you may know from what you've told it about yourself.

You may be surprised how many friends you can accumulate. The average user has 130, many have a lot more.

200 or 250 something around there.

About 264.

500 odd.

Between 600-700.

About 700. Close to 1,000.

1,921 friends.

More than I have in real life, definitely.

The only content on Facebook is what its users have put on there, so Facebook stands or falls

on their willingness to keep posting new material for others to see.

You want us to share. Mmm. Why?

Well, the mission of the company is to make the world

more open and connected because we believe that

everyone will have a much better experience when they're doing different things with their friends.

When there's more information out or you can discover great content through your friends

or you can discover new food that you want to eat or places to run or anything like that,

your world becomes a lot richer.

Zuckerberg practises what he preaches, sharing a lot about his personal life

on his own Facebook page, which anyone can see.

He shows pictures with his long-term girlfriend, Priscilla Chan,

lists his favourite movies and books and records the life of his dog, Beast.

Come on, Beast, you got this, you got this!

Can we get some Eye Of The Tiger?

LAUGHTER

Our development is guided by the idea that every year

the amount that people want to add and share and express is increasing.

It seems to be true, in September Zuckerberg was able to announce a new record.

For the first time ever, in a single day, we had 0.5 billion people use Facebook.

0.5 billion people.

APPLAUSE For many, it's now as much a necessity as a choice.

There is social pressure to join it and if you're not part of it you don't get invited to certain things.

I always said I'd never us it but since I've got it, I've ended up using it more and more and more.

What makes it so addictive is that you are... It's like living a second life.

No-one e-mails any more but everyone's posting on Facebook.

Facebook not only attracts massive numbers of users - 800 million at the last count -

but more surprisingly, every day half of them log on to the site making it the stickiest on the internet.

Now Zuckerberg wants them to get even more attached.

We're not trying to make it so that people spend more time on Facebook,

we're trying to make it so that the time that you spend

is so valuable that you want to keep on coming back every day.

Facebook has signed up more people than live in the United States

and European Union combined, including me.

Questions about how we communicate on it, about privacy and sharing and about Zuckerberg himself

will come into sharp focus as the company heads towards a likely stock market flotation next year.

There's speculation it could be worth a $100 billion but Facebook will only

be worth that if Zuckerberg can keep the trust of ordinary users.

Thank you.

CHEERING AND APPLAUSE

That's why his own story and motives are key to the company's prospects.

Zuckerberg's Facebook journey began just seven years ago at Harvard University.

He was studying psychology and computer science.

When not in lectures he was forming his vision of a more social internet.

I remember hanging out with my friends and going to the local pizza place and talking about,

you know, in the future, you're going to be able to share all the stuff that you want and you're going to

be able to have access to it, know all the things that you're doing and all these different experiences.

But we just figured someone else was going to do it. Who are we to go build this?

We were 19 years old, we were in college, we knew nothing about companies

but we want this to exist.

We've focused on it probably more than anyone else and we're one of the companies

that's helping to bring this about. It's really cool and who'd have thought, right?

Harry Lewis taught Zuckerberg computer science. Decades earlier, he also taught Bill Gates.

The thing I would say about Zuckerberg is that

he was very eager to learn and very sceptical

about whether anything we were teaching him was actually

the right things for him to learn.

I think Bill Gates had exactly the same feeling. It was not disrespect for what was being taught

but maybe not exactly what he was interested in and so on.

So he was absorbing everything and not paying any attention to it at the same time.

Zuckerberg's invention of Facebook began with a false start.

At the time a facebook was just the name of this kind of printed album of students photos and details.

Zuckerberg used his fellow students' facebook pictures

to make a mischievous website, to rate their looks.

Kind of as a prank my roommates and I came up with this idea that

we'd go through and take all the pictures off of all the facebooks and make a site that

juxtaposed two of the same gender and let users click on the one that they thought was more attractive.

He called it Facemash.

Within hours of going online, there were complaints to the university authorities.

So you have a website that pisses off the administration.

I almost got kicked out of school for that.

HE LAUGHS

Yeah, that was a little chequered point in our history.

Joe Green was Zuckerberg's collaborator and roommate.

You can see Mark's mind at work, figuring out these social dynamics.

The Facemash was literally up for four or five hours and was like

the most used site on campus on a Sunday afternoon.

Harvard had been planning to put its facebooks online but shelved

the idea because of privacy issues highlighted by Facemash.

Harvard issued a statement that because of privacy concerns that I'd raised from this prank,

their online facebook would be delayed indefinitely.

So I was like well you know that's a bit like ridiculous like

these websites aren't that hard to make so I'll just kind of throw one together

in a week or a week and a half and we'll have our online Facebook.

So I did and that was "Thefacebook."

Thefacebook, as it was called, got round the privacy problem by inviting

people to post their own information, which they were eager to do.

Within a few days thousands of people were, were on it at Harvard and I remember in

?the first week alone I'd come home from classes and see that

10% of students at Harvard were logged on at any one point in time. Then that was just really cool.

So then by the second week we'd all these people

from other colleges around us like MIT and other colleges

in the neighbourhood were e-mailing in asking if we could release Facebook at their schools too.

Zuckerberg wasn't your typical geek. He was as interested in

how people were using Facebook as in its computer code.

Is it the human side that drives you on this rather than the technological, the computing side?

It's really both. I took a lot of computer science classes and I was formerly a psychology major

and I think that those two things together really represent the DNA of what Facebook is.

We're a technology company and we design social products and there are a lot of

technology companies and a lot of people who think about social issues

but there aren't a lot of people doing both.

The genius is when you get a really creative person who can take different disciplines,

different subject matters and find where the opportunities are and spend lots of time being

creative with them and, and that certainly something that Zuckerberg took advantage of while he was here.

There aren't many 20-something's whose lives have been turned into

a Hollywood movie but Zuckerberg's has.

This site's life.

You know what? Let's go get a drink and celebrate.

The truth about Facebook's origins will always be compared to the story told in The Social Network.

This movie is, like it or not, the de facto myth to how Facebook was created.

I've covered this story for years

and I still have to think, "Now is this how it happened?

"Or is this how the movie said it happened?"

And that likely will always be true.

"As of yesterday evening," Zuckerberg said,

"over 650 students had registered to use thefacebook.com."

The movie centres on Zuckerberg's legal battle with his two fellow students, the Winklevoss twins.

If I was a drug dealer I couldn't give free drugs to 650 people in one day.

This guy doesn't have three friends to rub together.

In highlighting the Winklevoss case, the movie underplays the existence at the time of other social networks.

Even before he went to Harvard, Zuckerberg had worked on a website

at his school, which included an online student facebook.

And millions were already signed up to the social networks Friendster and Myspace.

In Britain, Friends Reunited had 16 million users - social networks were a feature of university life.

At campuses across the country tons of students were thinking up Facebook.

Maybe they didn't call it Facebook but at Brown University there was a site at Columbia University

there was a site, at the University of Texas there was a site and on and on and on and on.

The Winklevoss twins really did dispute ownership of Facebook and have done for years.

Our idea was stolen

by Mark Zuckerberg and we're basically trying to retrieve that back.

Can I get a large coffee, please?

Four years later Facebook settled with the Winklevoss' for $65 million, while still denying their claims.

Zuckerberg's former roommate Joe Green now runs his own online business but at college he

turned down an offer from Zuckerberg probably the best business offer ever

made to anyone this century on parental advice.

There was a moment when no-one knew what we'd be seeing

seven years down the line and you were invited to become part of it?

Yeah, I was asked to be a sort of part of it, cofounder

and I ended up... Zuck likes to jokingly call the billion dollar mistake but I,

combination of, erm... We got into a bit of trouble for Facemash

and my father's a professor and wasn't super-thrilled about that.

What was the conversation you had with your dad?

You know he was just, "You shouldn't be doing any more of these Zuckerberg projects."

But it's all good now.

With its Harvard origins, simple design and Zuckerberg's determination

never to let it crash, Facebook became the student network.

Zuckerberg began to wonder if it could be a real business

and whether he should drop out of college to find out.

I don't think Mark's family was hugely resistant to him

dropping out and trying this idea.

Of course any parent wants their kid to get a college degree

even if they've become a billionaire probably you know many parents would say, "It'd be good for you."

But I think that does begin to wane after the second or third billion, perhaps.

As the summer vacation arrived, Zuckerberg moved from east coast

to west swapping university life for a new one in California at the heart of the technology business.

There's only so long that you can build a high-tech company in

a college dorm surrounded by pizza boxes and piles of laundry.

There comes a time when you have to move to Silicon Valley

be surrounded by pizza boxes and piles of laundry here instead.

This is where Zuckerberg ended up, a small house in Silicon Valley 30 miles south of San Francisco.

He was joined by his Harvard friends. The students were pleased

to find that this being California, the new home included a pool.

Go! Go! Ahhhh!

I didn't die. I know.

The Social Network movie shows how they used it.

OK. Ready...

Zuckerberg was starting to make media contacts.

So I took a phone call with this young guy

and there was all this noise

in the background and he told me it was because he was living in a house in Palo Alto with his friends

and they were all in the backyard

and he had all kinds of things, stretched out in the backyard.

He had a zip line across the backyard and they were all hanging out.

Those who studied Facebook's history say this was only part of the story.

DOORBELL RINGS

That's the doorbell. I didn't know we had a doorbell. Andrew...

The movie's portrayal of Facebook Palo Alto experiences is not accurate.

It was a serious bunch of guys that had a sense of mission from the beginning.

They worked incredibly hard, they also partied hard.

Zuckerberg was serious about Facebook but the tales of poolside parties weren't pure Hollywood mythology.

The owner's inventory when the students left lists barbeque ashes dumped in a flowerpot,

a pool filter shattered by broken glass, damage to a chimney from a zip wire.

I think it's probably fair to say there wasn't all work that summer.

# Disco sounds, it's all on the west coast... #

By the autumn, Facebook had reached 200,000 users.

Every day it needed to rent

more computing power and that meant looking for some serious investment.

Facebook had reached a critical juncture.

How big did Zuckerberg want it to be?

He started making contact with Silicon Valley's venture capitalists.

He was in shorts and flip-flops, I mean there wasn't anything formal about it.

He got a meeting with veteran investor, Ron Conway.

I asked him how big can this company get?

He said, with a 100% conviction, "We can get to 300 million users."

Zuckerberg landed a first investment of $500,000.

He hired an office above a Chinese restaurant.

Within a few months Facebook reached its first million users.

18 months after the founding of Facebook a light bulb went on

in Zuck's mind and said, "Wow! This thing's growing at thousands of percent a month.

"This is a real company." Partying wasn't interesting any more.

In 2005, the year after it was launched, Facebook hit five million users.

The big investment companies in Silicon Valley's Sand Hill Road started paying serious attention.

Are you getting courted by

big companies that what to buy this?

Yeah, a few but it's a lot of work

to maintain it and to grow and add new stuff so there's not a lot of time to talk to people.

Soon the very biggest players in technology didn't just want to invest

in Facebook, they wanted to buy the entire business.

In 2006, Zuckerberg refused an offer from Yahoo for $1 billion.

Everyone around the company, a lot of the investors and the executives were you know, it was like,

"You could sell this for $1 billion. What the hell's wrong with you?"

It takes an almost sort of insane degree of vision

and self-confidence to be able to sort of weather through that storm.

The next year Zuckerberg took a big gamble, freeing Facebook from the

world of universities by opening it up to anyone with an e-mail address.

Suddenly 50,000 new users a day were joining. Dude, what's up? Dude, you're on TV?

Facebook was courted by Microsoft with an offer that made a billion look like an insult.

When Microsoft in 2007 offered $15 billion for it, he wasn't interested in taking that either.

That to me is the most amazing story because when he was 23 years old he could have made over $4 billion

personally, by selling it. He didn't even consider accepting it. I think that shows what kind of a guy he is.

The kind of offers that were coming in to you were like

15 billion from Microsoft, how does a 23 year old manage to say no to that?

Well, the hardest one was when Yahoo offered us a billion dollars

because that was the first really big offer and at the time I knew nothing about business.

So I knew nothing about what a company would be worth and I had to

make this argument to people that somehow this was going to be the

right decision and from the people who weren't in it for the long-term, I think a lot of them left.

And then we got a new wave of people who were really committed,

so that by the time that Microsoft and others tried to buy the company, we'd already made those decisions.

We knew we weren't going to sell the company and that we were going to build it.

It's one thing to run an insanely successful start-up.

I want to find out how Facebook works as a big business.

And how it plans to grow even bigger by using the personal data

its users give it whilst still retaining their trust?

This is its headquarters south of San Francisco at the end of a residential street in Silicon Valley.

Senior Manager Dan Rose gives me the tour. This is Facebook.

Looking round the office it's hard to guess who's on work experience and who's a top exec.

This open kind of format where people

don't sit in offices really lends itself to collaboration. Where would Mark's office be then?

Well, Mark actually sits at a desk right over here just like everyone else. What, this is him?

This is him here, yeah.

With the famous hoodie? Yeah, There's his hoodie and a Mark Zuckerberg doll on his desk.

So he wants to sit out here, no office.

Yeah and he collaborates with everyone just like the rest of the company.

As Facebook has grown, Zuckerberg's tried to hang on to the energy and flexibility of a start-up.

"Move fast and break things"

is its unofficial motto.

Zuckerberg's still closely involved in the details.

He spends an enormous amount of time in the office.

One of the ways that he really operates is to engage with

our engineers and our product leaders

around the design of the new products that we're building.

But when he's not in the office, he's usually at home on Facebook

talking to all of our employees about different things that we're working on.

Andrew Bosworth is Facebook's chief engineer.

he has to run it past the boss.

He's less concerned with the code He lets us deal with that.

But in terms of the look and feel and certainly

all the integration of the products

he's a strong voice and when

you're launching a product at Facebook, the Zucker view is kind of those things that

you really work towards and your product is really buttoned up and,

he uses all the products while you're being developed and gives notes like very kind of like

lengthy notes over the weekend so writing four or five paragraphs of things we need to do differently.

And tries to provide the high-level direction so we understand

why he's doing things the way he's doing them.

Everyone at Facebook's expected to move fast.

New programmers get a chance to write computer code that contributes to the site in their first few days at work.

I'm given some tasks to work on and I've already actually

pushed codes on to Facebook's website.

Within two weeks of working here.

So I told all my friends and my mum, "Hey, check out this little piece of code. It's now mine!"

It was really exciting. So what would I see if I went on and I go, "This bit's Eric's!"

I change how some of the text looks in the top right corner of one of the boxes.

It's kind of smaller stuff but

it's still seen by like 750 million people, right?

When we push it out and you see it on the live site, it's just so rewarding.

It's mind-boggling.

Facebook has the classic Silicon Valley office style - the food is free, you can get your washing done,

there are games to give your brain a rest from programming...

..or you can RipStik and work on a coding problem at the same time.

Finally, if your keyboard breaks in the early hours, you don't have to wait for the IT dept to open.

Useful.

Investors had always fought for the chance to buy into Facebook,

without worrying too much about how it was going to make money.

But by 2008, with more than 100 million users,

it was time to think seriously about harnessing its huge audience to a profitable business model.

But how?

Well, there was one company in Silicon Valley that was legendary for having built

an audience BEFORE finding a way to make money on a grand scale.

Google.

Zuckerberg approached one of its star executives.

Poaching Sheryl Sandberg is seen as one of his biggest coups.

We had one dinner out at this little restaurant called Flea Street Cafe.

After that we just literally had dinner

at my house and Mark would say sometimes you know,

"I'm so sorry I can't invite you over for dinner."

But at the time he only had

I think a one... Not even a one bedroom, like a one-room apartment.

He didn't have any furniture, like he had a futon.

He thought that would be awkward, which it would have been.

We spent hours, dozens and dozens of hours on,

over weeks, just making sure that this was the right fit because it...

That's what's important, right?

There was no question about, "Is she good enough?

"Or is the company good enough?" It was all like just, "Are we trying to do the same thing?"

Eventually there was agreement and Sandberg switched from Google to Facebook.

Enter Sheryl Sandberg. Sheryl was necessary at that company

because she knew exactly how to build a company from start-up phase to grown-up phase.

She'd done that very effectively at Google and most important, Sheryl had chemistry with Mark.

Sandberg knew exactly how Google had made a fortune from advertising.

On the very day Facebook was launched at Harvard, Sandberg was explaining to

BBC viewers why Google's advertising system works so well.

With Google you on the web searching for information

and we give you an ad as part of that search.

So it's integral to what you're already looking for.

Google offers advertisers the chance to put their message

in front of people who are ready to buy at that very moment.

One example - Panama hats. Let's say I was looking for Panama hats today.

Here I go Panama Hats Direct. A very specific search looking for a very specific product

and the advertiser is able to find me and I'm looking for that product.

Sandberg's challenge was to come up with Facebook's version of the Google money machine.

We don't compete in the search market, we're not competing for the Google ad dollars

in search marketing in the sense that when you are looking

for a product, you don't actually come to Facebook, you go to Google.

According to Sandberg, Facebook ads like TV or magazine ads

are there to tempt you with new products and ideas.

Where we are is actually in demand-generation.

So when you think about your TV ads, TV ads that are shown to you,

other ads that are shown to you, you're not in active searching mode for something to buy.

You're not fulfilling demand - you're actually generating demand,

something you didn't know you wanted.

And when you think about what people are doing on Facebook, they're much more in discovery mode.

So could the fact that Facebook users aren't searching for products or services be an advertising advantage?

Some outsiders are sceptical.

Professor Ben Edelman studies online businesses.

They're hoping that advertisers will bet on the future value of a customer

even if in the short run

the customer actually doesn't buy much of anything at all.

If one accepts ephemeral value, value that's hard to measure, possible future value as reasons

to conduct the advertising, then it certainly is possible to justify.

Of course that could justify just about anything.

Advertise on the far side of the moon and when the aliens finally get to you,

they'll know what they need to buy.

In comparison with Google, Facebook undeniably holds one trump card, which is already proving profitable.

Facebook is probably the most valuable

marketing research tool that's ever existed.

In a way, it's the most valuable research tool for anything about people that has ever existed.

Facebook lets advertisers reach large numbers of just the kind of people they want

by tapping into the information they've revealed about themselves whilst they're using the site.

When you place an ad on Facebook, which anyone can do from a normal laptop,

you get the chance to narrow down the whole of the Facebook population

and target just the people you think will be interested in your product.

So supposing you run a beauty salon and you've got a special offer for brides.

Facebook offers you access in the UK to 30 million people.

Now we're going to narrow it down and say, we're looking for the women.

Estimated reach is now telling me it's 15 million, about half of that.

So then we're trying to find the word that will target the right people,

so we're going to type in, in interests, the word 'beauty.'

And that's now brought the number down to just under half a million.

And now, because I'm targeting brides, I can be even more specific,

I can go down to the relationship status box

and here I target those women who are 'engaged.'

And suddenly we've brought that number right down to 27,000 people.

And that is the way that the adverts can be targeted precisely to the core demographic you want to reach.

The advertisers don't know who you are, doesn't know what your name is

or where you live, but it knows you as a number

and it can use that number.

Although anyone at home can place an ad on Facebook,

there's a new kind of agency turning out Facebook ads on an industrial scale.

TBG is a London company specialising in Facebook ads.

Its boss, Simon Mansell,

believes he's part of a big change in advertising.

It's turned much more from an art form to more of a science

and that's sometimes where some big traditional companies have struggled

because they were artists and now they have to try and be scientists.

TBG doesn't rely on creatives to guess what people will respond to,

instead its software runs mass experiments on many possible versions of a Facebook ad.

Even though the ads are small,

there's three different parts of the ad -

the headline, the image and the little piece of copy for most Facebook ads

and there's 12 different targeting criteria.

Age, gender, relationship status, that kind of thing.

So once you've multiplied those up, there's thousands of different permutations.

TBG typically tries 27,000 variants on an ad.

Charlotte Knights is working on a campaign for Heineken, promoting a sponsored music festival in Poland.

Initially, we can see this image here is outperforming this image.

Then TBG decides who should be shown which version of the ad.

What our software does is it would work out which ad variant works best for which audience.

So it might be that a 25-year-old in New York City who likes cats

responds differently to a 33-year-old male in London who likes dogs.

Facebook knows about its users from what they have done on the site.

So your ad can specifically go towards this specific age group, this specific gender,

this kind of person and if you say, "I like Heineken, oh, I had a really nice Heineken earlier,"

then it will take it from that.

Facebook's advertising revenue's expected to top $3 billion this year,

but there are still some in the ad business who question Facebook

as a new advertising medium.

The primary interaction here is the social interactions,

it's a social network, it's not a commercial network

and therefore I think you use it commercially at your peril.

The potential of Facebook is more, in my mind, as a public relations medium

than it is as an in-your-face advertising medium.

Elliot Schrage deals with public policy for Facebook.

I asked him what he made of Sir Martin Sorrell's point

that people come to Facebook for social and not commercial messages.

I think we're well on our way to finding a very protective balance

of providing people with information they want to receive from friends,

recognising that most people, when they're in their course of the Facebook experience,

are not focused on purely commercial activities.

Indeed, if you compare us to any online service, any newspaper,

I think the percentage of space devoted to commercially related

or commercially orientated messages is tiny.

Now, if the first part of Facebook's strategy is to sell ads using its targeting ability,

the second it to invite businesses themselves on to Facebook

and they can set up their own pages.

Pages act pretty much like people on Facebook,

but instead of being friends with a business you can choose to 'like' it.

When you say you 'like' it, you're allowing it to send you messages, as you would a friend.

And if it strikes you as an odd thing to do, well, have a look at this.

Nearly 35 million people have pressed the 'like' button for Coca-Cola.

Rather than being the passive recipients of ads,

when people connect to Facebook pages, they're choosing to link themselves to brands and products.

Managing those relationships is a new kind of marketing.

Here in New York, Buddy Media helps big businesses talk to millions of people who 'like' them on Facebook.

If you're one of the top advertisers in the world,

we work with eight out of the top ten global advertisers.

You may have 400 brands

and you may do business in every country in every language

so what you need is the ability to really manage all this content globally.

And you cannot do it without software and then on top of that we tell them what's working,

what's not working. How do you really optimise what's going on?

How you get the right content to the right people?

Companies try to get chatting to their Facebook fans because when anyone responds,

what they've said and the company's name will automatically spread to all their Facebook friends.

So now Pretzel Crisps is doing things like

posting the recipes of ways to eat pretzels

and asking questions and asking people to comment on these recipes.

You can see people are starting to engage, in this case 174 people have actually engaged,

in this conversation about these recipes.

Which you'd never be able to do anywhere else.

Marketing people call it 'word of mouth at scale.'

Social media for the last million years has been about just word of mouth

so even when the wheel was created, people said,

"Wow, the wheel is here, you've got to check this thing out!"

And so that obviously spread like wildfire,

but it took time to go, you know, within a community and then to another community.

With Facebook, it spreads instantaneously.

You don't have to be a multinational to want to communicate to your customers on Facebook.

Representing small enterprises on Facebook has become a new cottage industry.

You do guitar lessons? We'll do repairs and obviously sell...

Beverley Ames-Rookes runs Facebook pages for small businesses.

What's really nice with Facebook is you can listen to what people say about your business

and then you can interact with them.

Today she's trying to sign up new clients in her Surrey village.

I can do it all, your Facebook banner,

I create your albums, update your albums for you.

Beverley, hi, hello. Emily. How was it? How did it go in there?

'Beverley creates a page for each client and then posts news and comments as that business

'to Facebook users and on other social networks.'

She can find herself communicating as a shop, a pub,

or even an exotic holiday resort in Asia, which she has at least visited.

I felt the atmosphere, I know when the DJs are playing, I know when there's live music.

I know the local beers so I can talk easily on behalf of those venues.

In the last couple of days, take us through what you've actually said.

All right. "Banana Tempura Caramel Toffee Ice Cream!

"Who's feeling naughty?" As you can see,

it pushes for a response and what you're trying to do is to get people to interact with you.

OK, so Helga says, "Sounds yummy, hope I can try it in August."

Suzee Jones says, "September for me!!" And Kitty White, "Original!!!"

With lots of exclamation marks. I don't know what Kitty is making of that one.

'Each time someone comments, the resort's mentioned to that person's friends.'

That will show up that they've commented on a page

so all of a sudden we've got a bit of exposure on somebody's profile.

Facebook claims that when a business is brought to someone's attention by a friend,

it's a much more powerful form of recommendation than an ordinary advert. But is it?

You're similar to your friends and the ads that your friends respond to, you respond to also, so yes,

people come in clusters,

yes, what your friends bought, you might buy,

but you might have bought it anyway.

To what extent can Facebook truly take credit for that?

After targeted advertising in Facebook pages,

the next part of Facebook's business armoury is its amazing ability to keep users glued to the site.

Facebook sessions typically last around half an hour and most users come back often.

I probably spend about half an hour a day on Facebook.

Everyday, a few times a day. Not more than an hour total a day.

I spend two hours on Facebook a day.

Probably about three hours a day. About three-and-a-half hours a day.

Three, four hours during the day.

I don't think I have it that bad, I know people who go on it every hour.

At Facebook, we're pushing to make the world a more open place.

Facebook users are kept hooked partly as a result of a decision Zuckerberg made four years ago

to open the site up to other software developers.

This year, there are more people than ever at Facebook's developer conference.

Facebook isn't just a website, it's also what's known in techy circles as 'a platform.'

This means that software developers from other companies

can write programmes which then run on Facebook.

Apps, in other words, and the reason Facebook likes that is because it provides more to do,

but also because these apps create a kind of technology eco-system

with Facebook right at the core.

Now there are more than a million different developers who build things on top of Facebook

and are trying to bring these great experiences to people.

And, you know, we think to ourselves we're just a small company and we have, I'm sure,

all these people who are using our products but we have 500, 600 engineers building all this stuff.

Companies like Microsoft or Google have tens of thousands of engineers. We're tiny compared to that.

So how can we ever possibly build all the stuff that we want to see get out there

and the answer is build an eco-system and make it so that

all these developers, whether it's a student in a dorm room who hasn't had a job yet

or a big company or a company that we've never heard of in some other country can build this stuff.

And that's the part that's so cool about it.

When Zuckerberg opened Facebook to developers,

nobody guessed that the runaway success would be Facebook based games.

London is home to the world's second biggest social gaming company.

Kristian Sergestrale, the co-founder of Playfish, employs 350 people

to make games for his 100 million regular players.

Facebook has created the level of infrastructure

which means you can visit your real friends' houses,

interact with your real friends' characters,

give them gifts and so on.

And you can work on things together

which simply brings an entirely new dimension to computer games.

And in some ways almost takes games back to where they came from.

So it's as much about interaction as it is about what's going on in the screen.

In the company's San Francisco office, two of its customers

have come in to show how they play a couple of the most popular games.

Michelle Maruyama is a violinist and has been playing Restaurant City for two years.

I sometimes really enjoy playing right after I come home from work,

if there's a conductor I don't like or something.

But if I'm just home all day practising,

you can just stop once an hour and check on your restaurant.

The games are designed to keep you hooked with timed penalties if you don't keep checking in.

It's definitely a chore and it definitely cuts into your spare time.

I know that I used to read the New Yorker pretty much cover to cover every single week

and I know that I absolutely do not do that any more.

John House plays Pet Society, which has attracted up to 21 million users a month.

You have a virtual home

and you have your one virtual pet

and you have a bunch of friends that you can visit.

Playfish pets have their own peculiar biological functions.

They poop, and they poop different types of poop so there is the carrot cake poo.

There's the creme egg poo.

There is the snake poo from the wizards' school.

These kinds of special items are the key to a new revenue stream for Facebook

because game players can pay real money for virtual goods.

They pay by sending money to Facebook to buy credits.

It's already a business worth hundreds of millions of dollars.

John was so pleased with his special duck poo that he paid a pound for a virtual case to display it in.

And Facebook takes a third of that, but John has no complaints.

You know what? For that giant duck poo, it's worth it.

Facebook's strategy, including games and Facebook pages, has attracted ever-growing numbers to the site,

but the company has an even bigger ambition on the wider web.

Today, millions of websites have links to Facebook on them

and if you use these links with your Facebook identity,

you can communicate with your friends on Facebook even if you're on an entirely different site.

For Mark Zuckerberg, it's the fulfilment of a grand ambition

to provide the pipes through which the world's social connections can start to flow

and in the process, Facebook's beginning to colonise the whole of the web.

Zuckerberg's dorm project has come a long way in seven years,

not just as a piece of technology, but as a change to the way many people relate to each other.

It's easier to communicate with people,

but it also makes communicating less personal.

Let's say I was with my boyfriend, instead of paying attention to him, I'm on my Facebook.

It's an idyllic representation of who you are which I think can get misinterpreted by yourself even.

Probably 80% is the real me on there, the rest of it's just what I want people to see.

My dad posts on my wall sometimes. I have to delete that. He will just post "I love you sweetie!"

I'm like "Dad!" But that's sweet. It's nice but it's a little too much.

Today, Facebook seems unstoppable. A huge social world online that runs in parallel with the real world.

Many Facebook users already spend more time with their Facebook friends

than meeting real friends, but do their personas on Facebook reflect their real selves?

Jaron Lanier is one of the pioneer inventors of virtual reality.

He says Facebook's version of our lives is too rigid and one dimensional.

What's happened with Facebook in particular

is this sort of flattening where everybody's stuff looks the same,

everybody's just filling out a form.

It's so strange. It used to be that when you filled out forms,

it was acknowledged that that was the fake aspect of your life.

You fill out forms to apply for school

and you fill out forms at the doctor's office,

but nobody would say, "This is who I really am,

"if you want to know me, know my forms."

There are signs of a backlash against the assumptions of Facebook.

So how much is the attraction of Facebook an escape?

We're in terrible economic times,

terribly reduced prospects and you see a lot of young people

investing tremendous pride in their online personas or their online lives

and yeah, you have to wonder if Facebook, Twitter and the rest

are serving as a sort of bread and circuses, as a distraction,

as a way to ignore the real world in front of one's nose.

BJ Fogg is a psychologist who studies online behaviour.

A lot of people stay in touch on Facebook that wouldn't have stayed in touch otherwise.

It's giving us a lot more relationships that are weaker

and it's taking our strongest relationships

and it's weakening those.

Because if you have 800 friends on Facebook, you're not going to

have time to put the energy into the most important relationships.

Facebook wants its world to be like our real social world, but the Facebook world

now includes brands and businesses as part of the conversations.

Facebook says that just makes it more like real life, but are those

commercial messages a part of life that users want to find on Facebook?

Mark's vision of the world

is one where we're better if we are more open and connected.

My life is improved by knowing what you're doing,

if I care what you're doing and if I've chosen to connect to a Starbucks,

I want their announcements, just like I friend someone, I've chosen this.

We have social ads and we have non-social ads, right,

and so you can either for example see an ad from Coca-Cola

that is just Coca-Cola saying drink Coca-Cola.

Or you can see an ad where your friend who likes Coca-Cola,

the ad is just this person likes Coca-Cola

and which one do you think people who use Facebook prefer?

They want to see something about their friends, they want to learn about what their friends are doing.

But when Facebook has tried to mix social messages with advertising in the past, it's run into trouble.

We've built a little product called 'Beacon' that's going to allow you to do this from your own website.

Beacon told people's friends what they were buying.

There were furious complaints and Zuckerberg withdrew it with apologies.

We really think about the trust issues.

A lot of people right now are upset with us over these changes and I take that really seriously.

After a series of such controversies, a pattern has emerged.

Facebook tends to do a three steps forward, one step back launch approach.

It often launches products that really push us, tests the water,

so to speak, and then Facebook pulls back and begins to roll it out again more slowly.

So if you look, for example, at the products

that caused the most tension say three or four years ago,

all of those products exist in various facets of Facebook today and nobody's talking about them

because at this point culturally we're all comfortable with them.

Today there's another Facebook idea that users might be uncomfortable with.

If you click a like button on a business' Facebook page, that business can pay Facebook

to display a little box in the right hand column of your friends' pages

with your picture and the logo of the business, telling them you've liked it.

Facebook calls it a sponsored story and you can't opt out.

So if you found your name and face in a sponsored story would you say, "Harmless enough?"

Or would you feel you'd been used in an ad without anyone asking your permission?

If I press a like button on a brand, that could pop up as a sponsored story.

I might not know about it, I certainly wouldn't necessarily agree to it.

But when you press a like button on a brand or on an ad

or on a page, you're saying "I like this".

I'm not saying I advertise this.

Well, I suppose when you... So let's pause.

It's an interesting...

I mean, you're asking a profound question - what's advertising?

When I press a like button on an ad, I'm trying,

on the Facebook system, I'm affirmatively communicating that I'm associating myself

with whatever I'm liking and what that does is it creates a story.

But you can call it a story, many people would call it an advertisement

and Facebook is getting paid for those by the companies.

I think... I...I...I...

It's a ranking mechanism, I don't know if I would call it an advertisement.

Sponsored stories highlight the critical dilemma for Facebook.

How far can it go in using personal information without its users feeling exploited?

It says it gives users full control over their privacy,

but it also believes a more open world would be better.

Do you fundamentally believe that people will gradually become more open,

that they'll regard privacy with less concern?

No, I don't think that... It's not that people won't care about privacy.

I think privacy is a really fundamental thing and I think everyone cares about it.

I think the big cultural change is that now more and more people are finding that

they can build a reputation, they can help discover stuff, get credit for that,

they can be part of discovering other people's stuff.

And I just think that people are seeing every day that that's awesome.

And that's why I think the world is moving in that direction.

But people every day also wake up and I think are like,

"What stuff do I want to have out there and what don't I?" I don't think that will change.

But how much do Facebook's business needs create a tension between privacy and sharing?

They've chosen terminology and at least as important,

they've chosen a user interface design that encourages sharing.

They've set their defaults in a way that makes it seem like this is

the right and normal and natural thing to do.

I'm not so sure it really is, I'm not so sure that it's been

the way of things or needs to be the way of things

for every picture you take to be distributed to hundreds or thousands or tens of thousands of people.

And yet they've tried to convince us that's the new normal and that's the way it should be.

They've always said, "Facebook's about helping you share, with the people around you".

So if my privacy settings are set to open,

Facebook as a company, as a business model, will do better?

Oh, yeah, absolutely, and if you were an investor in Facebook, you would insist on that.

You would insist on that. It's like, we become a bigger company, faster,

wealthier faster the more people share and the more they share openly.

So as a business strategy, as your investor, I insist this is how you design the interface.

Facebook insists its advertising model

does not depend on its users agreeing to be less private.

Our goal is to make it so that people share what they want to.

And we believe that over time, people are going to want to share more things.

That's a big trend that we see happening in the world, but we don't benefit from being ahead of it.

If we have people share things that they don't want to,

they'll stop using our service and not like us.

Facebook's revenue is expected to more than double this year,

to $4 billion.

If its challenge was to come up with a way of making money

that played to its strengths, well, it's done a pretty good job.

Is it now set to rival Google?

Well, earlier this year, Google responded with the most sincere

form of flattery, launching its own social network, Google +.

We are pretty excited about the capability of Google +.

We think we can make sharing even easier than it is today.

I think you're going to see a much better experience as we continue to innovate.

Google + already has 40 million users and the means to recruit more.

You now have effectively a two-horse race.

Google is a very rich, very global company that has a number of engines to drive traffic

into its social network, notably Gmail, YouTube and Google search products.

And all three of those tools can be used by Google to drive people toward Google +.

Is that a threat for you now, Google +? Do you take that seriously?

Yeah, Google's a great company and I think we want to look at and learn from

everything that they do, but at the same time, you know,

people have shared a lot on Facebook and they already have told a lot of their life story on Facebook.

And we think that we have by far the better tools for doing that.

This year, we're taking the next step.

We're going to make it so you can connect to anything you want in any way you want.

Facebook is widely expected to float on the stock market next year

as the biggest tech business to do so since Google.

If it is worth $100 billion, that would make it bigger than McDonald's or Amazon and twice as big as Tesco.

This is a very young company, it's just starting to figure out

strategies for making money and I think advertising is only one component of that.

So if this company were to truly want to start monetising

I think that $100 billion may start to feel tiny.

Facebook's long-term value may depend on users' concerns about privacy

and whether they feel comfortable sending Facebook their information.

The big issue is privacy.

I just have an inkling that closed networks, networks that are more private,

that are more restricted ultimately actually become...

may become more interesting.

My advice to Facebook would be you've got to maintain the trust of your users,

that's the number one asset. If you lose that,

you're vulnerable to Google and others winning this game.

And that's where Zuckerberg himself is vital to Facebook.

He could be worth $17 billion after a stock market floatation,

but as long as most users believe in his sincerity,

they'll probably accept whatever changes Facebook throws at them

because by all accounts he hasn't changed much.

Mark drives the same four-year-old Acura

that I recommended that he get a few years ago.

Like, you know, and still lives, you know...

He's finally bought a house, but it's not like he bought some crazy mansion.

He bought a house in Palo Alto.

But, you know, really being, you know, one of Mark's stated interests on Facebook is minimalism.

He doesn't care for material possessions at all.

He actually wears the same jeans and the same t-shirt and jacket everyday.

In fact, one of the things I first did when I came to the company

is told a lot of people, "He has a lot of those jackets, don't worry, he's not wearing the same jacket

"every single day, it's just many versions of the same jacket.

Zuckerberg just wants to keep a low profile

and get on with what he loves - designing new features for the site.

But even inside Facebook, people can't help treating him like something of a celebrity.

It's really cool when I see Zuck eating in the same cafeteria as us.

Does he queue?

I stood behind him in line once and... Did you chat?

I was scared, I was nervous. I wanted to say, "Hey, Zuck!" But it didn't come out.

I've seen him in his conference room. The first day I came in there I got to see him

and then I had some friends come for lunch yesterday and I took them by the conference room

and I was like "That's Mark Zuckerberg! I get to look, he saw me!" So it's amazing.

Zuckerberg will have to learn to accept the world's attention.

His very lack of showmanship could be an asset,

reassuring users of Facebook's good faith as it grows in influence and income.

Half of Britain already uses Facebook,

but can Mark Zuckerberg keep making us share intimate details

about our life whilst driving Facebook forward as a business?

It's a difficult balancing act and if he gets it wrong,

more of us will be asking not what Facebook can do for us, but what we are doing for Facebook.

Subtitles by Red Bee Media Ltd

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