The faces behind Facebook

BURLINGAME, CALIF. - Facebook is maturing from a teenager prone to mistakes to a sophisticated adult who knows how to get around the block.

Over the past year, the popular social networking site has hired a bevy of Internet veterans -- including former Google (nasdaq: GOOG) vice president Sheryl Sandberg -- to help it define a long-term business plan around advertising and grow revenues. Facebook is also trolling for more seasoned execs to lead its swelling ranks, which are expected to double to 1,000 by the end of 2008.

Facebook is currently scouting around for a new general counsel and a vice president of communications and public policy.

The move to beef up its executive team is a response to recent missteps from the Palo Alto, Calif.-based social network. Members and privacy groups have criticized the company and its 23-year-old founder and chief executive, Mark Zuckerberg, for implementing programs that make personal member data accessible to advertisers.

Zuckerberg has apologized for the company's Beacon ad program, which lets users track their Facebook friends' activities on other sites. "We've made a lot of mistakes building this feature, but we've made even more with how we've handled them," Zuckerberg wrote in a blog post on Facebook.

He has also confided to Facebook investor Roger McNamee, a partner at Elevation Partners, that the chief executive job is more difficult than he thought.

Nevertheless, Zuckerberg is determined to remain in the top job, but he knew the time had come to surround himself with experienced Internet executives. For that kind of talent, what better place to look than Google? Last year, Facebook poached the Internet giant's video site chief financial officer, Gideon Yu, to be its chief financial officer.

This year, Facebook lured away Sandberg, who managed Google's $16 billion online advertising business, to be its chief operating officer, and Ethan Beard, the Internet giant's social media director. Beard is now director of business development at Facebook.

In addition to executives, Facebook has snagged a number of top Google engineers, including Benjamin "Golden Boy" Ling. Industry watchers say Google has grown so big, so fast -- it now has 16,800 employees worldwide -- that it's getting harder for employees to make a mark there. As a result, many Googlers are "resting and vesting," -- hanging out at the company until their stock options to vest and then leaving for other jobs.

The Mountain View, Calif.-based company's stock options package -- once the envy of corporate America -- isn't as attractive anymore now that the stock is trading north of $500. Industry watchers say competition between Facebook and Google for engineers and newly launched business school stars likely will intensify.

Facebook's move to bolster its executive ranks is a common move for Internet start-ups as they get more successful and require more sophisticated business strategies. The company had estimated revenues of $150 million, primarily from advertising, in 2007, but it is reportedly burning through more cash than it is generating. Since Facebook launched four years ago, it has raised an astonishing $400 million--more than half, $240 million, came from Microsoft (nasdaq: MSFT) last year. The deal gave Facebook a valuation of $15 billion.

Whether Zuckerberg, who wants to take Facebook public next year or in 2010, can keep the CEO title remains to be seen. The founders of Google, Yahoo! (nasdaq: YHOO) and eBay (nasdaq: EBAY) all handed over their companies to seasoned executives who had been chief executives elsewhere.

"If they go public, is he the right guy?" asks Ross Levinsohn, who led News Corp.'s (nyse: NWS) $580 million acquisition of MySpace. Then again, "you don't want him disengaged," Levinsohn notes. "He has his finger on the pulse. For a 23-year-old, he's done a remarkable job. For a 43-year-old, he's done a great job. For as long as [Facebook] continues on this path, he's the right guy."

(Wendy Tanaka, Forbes.com)