Noticeably absent from the mounds of coverage of how Facebook’s $19 billion acquisition of WhatsApp came together is any mention of the social network’s Chief Operating Officer Sheryl Sandberg. There’s no mention of her here, or here, or here, or here.
Her absence, at least publicly, seems to suggest that Facebook CEO and founder Mark Zuckerberg no longer needs adult supervision. Quite the opposite, in fact. Though Zuckerberg is still three months away from his 30th birthday, over the last few years he has blossomed into a very impressive mogul. Gone is the caricature of him as a hoodie-wearing, socially awkward CEO profusely sweating under questioning. He’s grown into a cocksure leader, solid operator, and gutsy deal-maker, even if the casual dress still remains. Looking at him today, he can rightly be called the first mogul of social media.
It’s important to understand that not all CEOs are de facto moguls. There’s a swagger moguls have that transcends simply being the boss or being rich. Moguls are visionary, decisive, and a bit ruthless, at least with their business objectives. They are concerned not with industry or domestic but rather world domination, and usually have grandiose mission statements to describe their business (“Connecting the world” in the case of Facebook; as another example, “Organizing the world’s information” for Google). And they also usually have absolute control of their companies through majority control of its voting shares. Not unlike the traditional family-run media companies — think News Corp’s Murdoch family, Comcast’s Roberts family, Cablevision’s Dolan family, or Viacom’s Redstone family — Zuckerberg has an ironclad grip on Facebook’s board and strategic direction through his 57% control of its voting shares.
In the WhatsApp deal — and the $1 billion Instagram purchase before it — Zuckerberg exhibits all the pillars of moguldom.
In terms of vision, it’s been known since Facebook went public that it was losing influence among younger users and lacked a mobile strategy. So Zuckerberg developed an internal obsession to reorient Facebook’s product line to allow advertisers to better reach the 945 million users who access the site on mobile devices at least once a month. The result: Facebook generated $1.25 billion in mobile advertising last quarter, accounting for 53% of all ad revenue.
With regards to younger users, as SunTrust Robinson Humphrey analyst Robert Peck wrote of the WhatsApp deal in a note Thursday, “Strategically, Facebook moves closer to its goal of connecting the world, and embraces a robust platform with 450 million users that is mobile first with strong penetration with the young demographic.” Translation: This deal gives Facebook access to nearly half a billion people worldwide.
Facebook, as Deutsche Bank analyst Ross Sandler wrote in a note, “continues to demonstrate savvy-ness beyond its years as it pivots its business model, footprint and strategy to mobile.” So, too, does Zuckerberg.
Both the Instagram and WhatsApp deals underscore Zuckerberg’s decisiveness and ability to strike quick, utterly unafraid to suffer near-term consequences for long-term gain. Part of this is, of course, owed to Zuckerberg’s voting control, which allows him to act near-unilaterally on decisions regarding acquisition targets and prices paid. To be sure, Zuckerberg personally handled the Instagram negotiations — a Wall Street Journal story outlining how that deal came together ran under the headline, “In Facebook Deal for Instagram, Board Was All But Out of The Picture.”
Zuckerberg was kind enough to enlist investment bank Allen & Company for the WhatsApp deal, but he still served as primary negotiator, finalizing it over chocolates at his house on Valentine’s Day. (For more on what Zuckerberg’s control over Facebook means for shareholders and deal-making, check out this post from Felix Salmon of Reuters and this one from Slate’s Matthew Yglesias.)
The parallels between the Facebook–WhatsApp negotiations and those of Comcast–Time Warner Cable are uncanny. Both Facebook and Comcast circled their prey for years, doing due diligence but for the most part watching from the sidelines, waiting for events to unfold. And when the time came to move, both companies did swiftly. Zuckerberg said on a conference call yesterday that it took 11 days to ink the WhatsApp deal. Comcast Chief Executive Brian Roberts, perhaps the best deal-maker in media, said it took 10 days to finalize the $45.2 billion acquisition of Time Warner Cable.
Moreover, despite howls from critics about overpaying, the reason Facebook’s offer for WhatsApp and Comcast’s offer for Time Warner Cable are so robust is simple: They completely eliminate the possibility of a rival usurping them with a richer bid. It is playing defense by playing offense. Both companies are willing and can afford to pay prices that their competitors can’t. Indeed, according to a report in Fortune, Google offered a mere $10 billion for WhatsApp. (An article in The InformationThursday said Google was willing to match Facebook’s offer.) Similarly, before Comcast stepped in, rival Charter Communications had offered $132.50 per share for Time Warner Cable.
In the case of WhatsApp, much like Instagram, Zuckerberg also took out a competitive threat to its own business.
“We think WhatsApp and Facebook were likely to more closely resemble each other over time, potentially creating noteworthy competition, which can now be avoided,” SunTrust’s Peck wrote.
That’s the ruthless part of the mogul equation. Zuckerberg simply is not going to let a competitor, entrenched or upstart, stand in the way of his goals. He won’t allow anyone to get one over on him. The tweaks Facebook is making to its newsfeed algorithm essentially serve the same purpose, just more subtly. They are a reminder to businesses that Facebook is the boss of them, not the other way around.
As Facebook’s origin story illustrates, Zuckerberg has never shy about shoving aside anything that threatens his turf. It’s the final trait all true moguls share, the potential to be villainous. Rupert Murdoch is the archetype of this caricature.
But the fact that the WhatsApp deal broke the same day that Facebook’s infamous supposed co-founders Cameron and Tyler Winklevoss launched a price index for Bitcoins called the “Winkdex” is especially fitting. Juxtaposing the two bits of news underscores just how big of a mogul Zuckerberg has become, and where Facebook might be had he not.