Publication: The Sunday Times, Classified, p C12

Date: 28 June 2015

Headline: The remarkable Mr Zuckerberg

THE

LAST WORD

WHAT gives some people brilliant

insights while others make wrong
decisions? For one thing, age seems to
improve judgment. Young people often
make wrong decisions, while older folks
find it easier to quickly see the big
picture and make the right call.
Experience helps.
,
But don t forget that one-in-a-million
exception. Like the computer science
student at Harvard who dropped out
in his second year when he found
something more exciting.
In 2004, he noticed that a lot of
people found it cool to build a web
,
page. But it wasn t easy and posting
pictures was even harder. So, he figured
that people would find it fun to post
things on a web page as easily as one
writes an -mail.
Unfortunately, pictures take up a lot
,
of computer space and users wouldn t
pay for it. Worse still, there_ was a
company called MySpace which did
something like this and was already
entrenched with 75 million users.
So he took a different approach: He
made his site special by restricting it to
university students like himself. That
was easy since university students get
e-mait addresses ending in .edu when

The remarkable
Mr Zuckerberg
QuickQuote

Money is better than poverty,

if only for financial reasons.
Woody Alien,
comedian

they start classes..Best of all, only

students get it.
lt worked, and his exclusive user
base quickly spread to one million at US
universities . lt
. was his first big "think out
of the box" innovation. He was on a roll
and five years later, peers described him
as someone who can see things that
others can't.
lt sounds almost spooky - like the
eight-year-old boy in the movie The
Sixth Sense who talked to dead people
that no one else could see. Remember
him?

The Zuke
,
If you haven t guessed, the university
dropout I am talking about is Mark
Zuckerberg, 31, who founded Facebook
in his Harvard dormitory room at age 19.
11

"

He later dropped the requirement that

Facebook membrs need to have an
.edu e-mail address, and when he did,
the whole world signed up.
Active users grew to one billion in
late 2012, after which Facebook stopped
counting since it felt that metric was no
longer of primary interest. Facebook
went public in 2012, with a value of $100
billion. Now - three years later - it is
worth $250 billion.
Before going public, Zuke broke an
unwritten rule of initial public offerings
(IPOs). He put Facebook into a deal so
bold and unexpected that it placed the
IPO in jeopardy. Would anyone buy into
this wheeling and dealing company?
What he did was buy lnstagram for
$1 billion, which was a company with no
profits and almost no revenue. Analysts
said he grossly overpaid, and the news
media ridiculed him.
As usuat Zuke had a plan: He knew
the IPO would allow him to pay part
of the $1 billion with Facebook's newly
issued share.s. He could keep buying
companies this way too. He would
simply issue more money (more shares)
to pay for whatever he wanted to l,ly.
Today, lnstagram has beg,me
bigger, although less famo':ls :than

Source: The Sunday Times Singapore Press Holdings Limited. Permission required for reproduction.

Twitter. lt has more pictur:es, more users

and the $1 billion price tag now looks
,
like a bargain. lt cemented Zuke s
reputation as the guy with vision.

Oculus and WhatsApp

He made two more big buys, which
looked crazy at the time but are working
well. One is Oculus Rift, for which
Facebook paid US $2 billion, much of
it in Facebook stock.
The other is WhatsApp, which cost
US$19 billion, and Zuke again paid for
it using Facebook shares. Even tech's
biggest spender, Google boss Larry
Page, was dumbstruck, and said he
wouldn't have paid so much. But
WhatsApp has grown from 350 million
to 600 million users, and is successful.
Oculus Rift is about virtual reality
and is mostly hardware. Mr Z calls it
"the next platform': in the same way that
the Internet was the last platform
Do other shareholders want to take

these risks? Who cares? Not Zuke. He can

do his own thing because he owns 16
per cent of Facebook (worth $39 billion)
and more importantly, holds the voting
rights to 57 per cent of the stock. His is
the only vote that matters.
This scheme is called "super-voting
shares" and is permitted in the US,
although not in Singapore or most of
other countries. The structure is unusual
but not unheard of. Founders Sergey
Brin and Larry Page control Google in
the same way.
,
Don t say he didn't warn you. When
Facebook went public in May 2012,
stockholders:
told
Zuckerberg
"Facebook will never care as much
about clients and shareholders as it
does about its service and users".

An adjunct professor at SMU, Or Haverkamp contributes

this column weekly to help our readers understand
money matters better.