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CNN 10

Part Two of Four Part Series on Facebook

Aired February 21, 2019 - 04:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CARL AZUZ, CNN 10 ANCHOR: Welcome to CNN 10. I`m Carl Azuz introducing part two of our four part series on Facebook. The highly successful and

controversial company is celebrating its 15th birthday this month. And on the heels of yesterday`s report that focused on its founder, today`s

special examines the decisions that were made that grew the company into what it is today and contributed to some of the challenges its faced.

The social media application didn`t always look like we know it today. It used to be more static. If you wanted to see what someone was up to, you

had to click on his or her profile. Now of course, information is fed to you but what`s become a defining part of the product has had a bumpy road.

Breaking and developing news stories are just a click away at CNN.com. Meantime, for us Laurie Segall takes us back inside a social media

behemoth.

(BEGIN VIDEO CLIP)

LAURIE SEGALL, CNN SENIOR TECHNOLOGY CORRESPONDENT: It was June 2006. Yahoo offered $1 billion to buy Facebook. At the time, it seemed almost

incomprehensible.

MARK ZUCKERBERG, FOUNDER AND CEO OF FACEBOOK: Most of the management team really thought that we should sell. I remember I had one late night

conversation with one of my closest advisors where he sat me down. It was probably 11 o`clock and he said Mark, if you don`t sell the company you are

going to regret this decision for the rest of your life. And - - and it was just really intense.

SEGALL: What did you think when he said that?

ZUCKERBERG: When Dustin and I made the decision to not sell the company, within 18 months every single person on the management team left.

SEGALL: Did you ever question yourself? That you`re making the right decision?

ZUCKERBERG: Oh yes. Because, I mean, I was - - I was 22. I didn`t - - I didn`t have an - - an exact plan of what was going to happen. It was

incredibly scary.

SEGALL: Was it crazy, arrogant, confident?

ZUCKERBERG: It`s all of those things and that is the curse of the autocrat. It is this wild cocktail of vision, willpower, a little bit of

arrogance, a little bit of confidence, and saying, you know, thank you but I believe something else.

SEGALL: An arrogant or perhaps hubris that many have said let Facebook into to some of the serious troubles it`s facing now. But then, it was a

vision for what would come next that played out three months later. September 2006, the birth of Newsfeed.

ZUCKERBERG: People would simply go to somebody`s profile, then they would go to the next person`s profile and the next person`s profile and

Facebook`s like, ah ha. We need to actually bring this all together and just show you what`s going on with your friends. Especially those friends

that are most important to you and that of course was the dawn of the now famous algorithm.

SEGALL: Newsfeed would completely overhaul the site giving a real time feed of your friends and your family.

UNIDENTIFIED FEMALE: Here I am gearing up for this fantastic launch and all the engineers are so excited.

SEGALL: Facebook`s former PR director remembers how everything changed in a minute.

UNIDENTIFIED FEMALE: We saw this group that became a million people protesting against Newsfeed using Newsfeed.

SEGALL: The backlash was extreme.

UNIDENTIFIED FEMALE: The phone started ringing off the hook. Thousands of emails of people saying what have you done? What have you done? What have

you done to my Facebook?

UNIDENTIFIED MALE: I think they were alarmed by Facebook taking their activity and publishing it. You know, it was one of these first privacy

scares on Facebook.

SEGALL: But Newsfeed survived and it thrived.

UNIDENTIFIED MALE: Ultimately became the thing that is of a core Facebook, the Newsfeed. It`s not one of the core of Facebook but it`s the core of

every social media application we used.

SEGALL: It was Facebook`s first hint of privacy issues. Down the line, the stakes only got higher as the platform connected the world. Welcome to

December 2007. Also known is that time Facebook ruined Christmas.

UNIDENTIFIED FEMALE: There was a guy who bought a diamond ring for his wife. And all of his friends, it flashed up on their screen.

UNIDENTIFIED MALE: Including his wife.

UNIDENTIFIED FEMALE: His wife - - Christmas ruined he said.

SEGALL: It was Facebook`s first big privacy scandal.

UNIDENTIFIED FEMALE: Thousands were outraged. People were really ticked off.

SEGALL: Ticked off, by Facebook`s first real attempt at making money. It was an ad product called Bacon.

UNIDENTIFIED MALE: A Facebook user can log into e-commerce sites using your Facebook identification and then when you buy something all your

friends are going to find out about it. And Facebook was like, this is such a cool innovative way to get, like, involved in commerce and not be

doing boring old advertising.

SEGALL: To say they got it wrong was an understatement. This soon after the Newsfeed outrage. But like many bets Zuckerberg made that paid off,

this was different.

UNIDENTIFIED MALE: The story of Facebook Bacon was the time where Facebook got really (inaudible).

SEGALL: It was a privacy and PR disaster. It took the company a month to react.

UNIDENTIFIED MALE: Facebook, yesterday apologized and said that now you can entirely opt out of this program.

SEGALL: But the loss of trust was damaging. It was officially time to bring in the operator that many believe Zuckerberg needed to help run

Facebook. That person was Sheryl Sandberg. At the time you`re 38 years old. You`re managing 4,000 employees at Google. Leaving for a company

that barely had any revenue and you felt like this was the opportunity.

SHERYL SANDBERG, COO OF FACEBOOK: I felt like this was a great opportunity. A lot of people said to me, what are you doing? Facebook was

really small. It didn`t seem to be growing that quickly and I told them, I`m going to work with and for someone I really believe in who I think is

trying to do something really important.

SEGALL: Those early years with Sheryl at the helm would lead to tremendous growth, as would Facebook`s next move. It would eventually be called

Platform.

UNIDENTIFIED FEMALE: It was the first time that Facebook was opening the site to allow outside technology companies and/or intern cases individual

developers to build something that would work with the site.

SEGALL: It would prove to be one of the most important moves the company made and down the line would leave to fundamental questions and concerns

about how the company handled user data. Giving third party developers the ability to create their own applications by accessing Facebook user data.

SANDBERG: Facebook Platform is why you can follow your friends play lists. It`s why you can see your friends birthday on your calendar and remember.

I think the early form of Platform was sharing more data.

SEGALL: The architects were focused on the good as it went live in 2007. It was a money maker the moment it went live and would leave to tremendous

innovation and growth. But years later, it would become the root of one of the company`s biggest scandal.

SANDBERG: So there`s always, you know, a "Catch 22" whenever you`re giving a voice to people who didn`t have a voice before.

SEGALL: They soon discovered policing content was complicated. An issue that would only grow as Facebook grew. And moving into 2012, Zuckerberg

was close to 1 billion users and gearing up for the company`s massively anticipated IPO.

UNIDENTIFIED FEMALE: Questions are coming out, is Facebook really living up to the hype.

SEGALL: But there was a problem, smart phones were on the rise and Facebook wasn`t a mobile first app. It was easier to access it from a

computer. So Zuckerberg did something atypical. He bought a company during what was known as the "quiet period". Why the need to go on a

buying spree?

ZUCKERBERG: It was really connected to this whole transition to mobile phones being the main way that we use technology.

SEGALL: Instagram was one of the most downloaded applications on the Iphone.

UNIDENTIFIED MALE: Zuckerberg went out and just put, like, a humongous money - - amount of money on the table and bought Instagram and everyone

said you`re crazy. What are you doing? That`s a bad idea and actually though it turns out to be a brilliant idea.

SEGALL: A billion dollars, they got it cheap.

UNIDENTIFIED MALE: Yes. Yes. They did get it cheap.

UNIDENTIFIED FEMALE: I think there are a lot of people that doubted whether or not this was really a good acquisition and if you look back now.

It makes so much sense.

SEGALL: It was an investment in Facebook`s mobile strategy and it helped the company bolster its portfolio ahead of the IPO.

UNIDENTIFIED FEMALE: Facebook is set to go public this week in what could be the biggest IPO in history.

ZUCKERBERG: Going public is an important milestone.

SEGALL: With the world watching, everything that could go wrong went wrong.

UNIDENTIFIED FEMALE: Stock that maybe picked a bad week to go public. Facebook-Faceplant.

UNIDENTIFIED MALE: The beginning of the wildest period - -

SEGALL: The stock tanked and continued to for 109 days.

UNIDENTIFIED MALE: I mean, it was the definition of rollercoaster in every way.

SEGALL: And during all of this the one person we didn`t hear from was Mark Zuckerberg.

UNIDENTIFIED MALE: It was echoed a tiny little bit, you know, when Mark and Sheryl were quiet for three plus days after the Cambridge Analytica

crisis. I think Mark at the time, just firmly believed that we`re going to focus on building our stuff instead of talking about our stuff.

SEGALL: Until Zuckerberg spoke for the first time at this point, it was a highly anticipated interview.

UNIDENTIFIED MALE: Welcome to Tech Rich Disrupt and thanks for coming.

ZUCKERBERG: Thanks for having me.

UNIDENTIFIED MALE: This is, you know, defining moment you`re an ice skater stepping on for the - - the long skate and you know you`ve got to nail it.

ZUCKERBERG: Performance of the stock has obviously been disappointing. We already see that mobile users are - - are more likely to be daily active

users of Facebook.

UNIDENTIFIED FEMALE: He said, you know, we`re going to be focused on mobile and anyone who doesn`t bring to my office mocks, prototypes that are

based on mobile rather than desktop, will be kicked out.

ZUCKERBERG: We have almost 500 million mobile users.

SEGALL: They made the shift and it would pay off. Eventually the stock price went up. Zuckerberg`s bet on Instagram also paid of in a big way.

(END VIDEO CLIP)

END