How Zuckerberg’s Old TA Helped Facebook Master Mobile Ads

ANDREW BOSWORTH WAS six months from his Facebook sabbatical when Mark Zuckerberg took him for a walk.

This was the early summer of 2012, just after Facebook’s $104 billion IPO. At the time, Bosworth oversaw engineering for Facebook profiles, privacy tools, and the recently launched Timeline. Bosworth is an engineer by training. He studied computer science at Harvard, and during his senior year, he helped teach a class in artificial intelligence. Mark Zuckerberg, then a Harvard sophomore, was one of his students. That same semester, Zuckerberg created Facebook, and two years later, when the social network needed some AI help, he thought of the guy everyone knows as “Boz.” Over the years, Bosworth helped build Facebook’s News Feed, its messaging system, and some of its core infrastructure, as well as profiles and Timeline. And by the summer of 2012, he needed a break.

For years, he and his wife had planned a lengthy getaway from life in Silicon Valley. “My wife had been with me for as long as I’d been at Facebook, since before she was my wife. She had put up with a lot, especially in the early times,” Bosworth remembers. “Years in advance, I told everyone: ‘We’re taking six months off.’ We were going to travel. It was fully booked.” Then Zuckerberg took him for a walk and asked if he could find a way to make money from mobile ads.

 

Bosworth wasn’t that interested. He didn’t just need a break. He knew almost nothing about the ad business, whether the ads showed up on smartphones or anywhere else. But as Bosworth explains it, in his typically offhanded way, Zuckerberg is rather persuasive. “He was like: ‘There are at least four billion-dollar opportunities on mobile in the next six months. You can unlock one or two. And then you can go on your vacation.’ That’s an insane thing to say. But I was like: ‘Why not?'” Bosworth remembers. “He says a thing that you think must be crazy. But you end up leaving the conversation thinking it’s possible.”

Facebook doesn't treat ads as a separate thing. It treats them as just one more piece of information people want to see.

In the wake of Facebook’s IPO, this was the company’s most pressing question: Could it continue to make big money as consumers shifted their Internet lives onto mobile devices? Facebookers were rapidly moving from desktops to phones, yet most of the company’s revenue still came from the desktop. The company was profitable, but Wall Street worried the profits would wane. Among all the big internet players—from Google to Twitter—no one had really cracked mobile advertising. Three years later, many still haven’t. If it wasn’t an “insane” thing for Zuckerberg to say, it was at least a stretch. But as it turns out, he was also right.

Certainly, Bosworth didn’t unlock mobile ads on his own. But in tandem with the larger team that builds ad services at Facebook—and the sales and marketing staff under Chief Operating Officer Sheryl Sandberg that helps push these services into the hands of advertisers—he did unlock them in a big way. That summer, he and his team slipped a new kind of ad into the mobile incarnation of News Feed, showing people “sponsored pages” that Facebook targeted to their particular interests. Previously, the company only showed sponsored pages in your News Feed if your friends had “Liked” them.

Sponsored pages are just Facebook profiles that businesses pay Facebook to promote. Brands had already built many of these pages, and they were already formatted for mobile. The trick lay in targeting the ads to particular people according to their Facebook activity and the data stored in their profiles. Irrelevant ads just piss people off. But also: the better the match, the more likely people will click. And advertisers pay for clicks. In the third quarter of that year, they paid in droves.

'There are at least four billion-dollar opportunities on mobile in the next six months. You can unlock one or two. And then you can go on your vacation.'

It was the beginning of a rapid transformation at the company. Wall Street no longer worries about Facebook making money on mobile. In the second quarter of this year, company revenue rose to $4.04 billion, and 76 percent of that came from mobile ads. Facebook is an advertising machine rivaled only by Google, which generated more than $17.7 billion in revenue during the second quarter and did so mostly with ads. There are still doubts, however, over Google’s ability to make big money from phones and tablets (the company doesn’t release mobile-specific figures). Facebook has cracked that conundrum. At least for now.

Scott Symonds, a managing director at AKQA Media, a firm that handles Facebook and other online ads campaigns for brands such as Audi, Nike, Gap, and Visa, still believes that Google Adwords is the more powerful online ad system. But he now ranks Facebook close behind. “They’ve had phenomenal success,” he says of Facebook. “They have solved some of the biggest problems in digital advertising, one of them being mobile.”

Facebook tackled the mobile problem in typical fashion. In many respects, it was one more sweeping “hack.” It’s not just that Zuckerberg tapped an engineer with little to no ad experience. It all happened at speed—and it didn’t slow down. That December, his task completed, Bosworth and his wife packed for that trip around the world. But two days before his departure, Zuckerberg called and asked if he would run engineering for all of the company’s advertising products. And he said yes. That meant giving up the sabbatical—at least in part. He cut his trip short after two months and then took some added time off at the end of the year. “I called it Zeno’s Sabbatical,” he says. “I just kept taking it by halves.”

In many ways, the story is unique to Facebook. Not every company is built to put a someone like Bosworth in charge of ad products. And with 1.5 billion people spending so much time on the company’s social network—and sharing so much of their tastes and interests—it’s a platform ideally suited to advertising. “We know who you are as a person…We know what pages you’ve ‘Liked.’ We know what ads you have hidden in the past or said that you didn’t want to see more of. We can combine all that to ensure that the ads you do see are relevant,” says John Hegeman, a Facebook engineering director who works under Bosworth, overseeing the online auction that drives the company’s ad systems.

John Hegeman  CARLOS CHAVARRÍA FOR WIRED

At a time when new iPhone tools are squashing ads inside the phone’s web browser and raising all sorts of questions about the longterm viability of online advertising—the monetary engine that drives so much of Internet—others might learn from the Facebook approach. Some may find it heretical, but the overarching lesson is that Facebook doesn’t treat ads as a separate thing. It treats them as just one more piece of information people might want to see. One of the guys who built News Feed ads is one of the guys who built News Feed. The teams that oversee ads partner closely with the teams that oversee other content. The News Feed ad team, led by ex-eBayer Fidji Simo, also manages the so-called “organic” stuff. “Our organization mirrors what we’re doing in the product,” says Hegeman.

Certainly, this doesn’t always work as planned. Some critics chafe at the mix of the “organic” and the sponsored (despite the labels attached to Facebook ads). “Users aren’t necessarily happy about that kind of thing,” says Ron Berman, a professor of marketing at the Wharton School of Business. But in the end, Facebook believes, this philosophy leads to a better experience for all. It’s also less vulnerable to ad blocking, and if it works according to Facebook’s rather lofty ideal, users won’t want to block that many ads anyway.

“This was not just about the shift from the desktop to mobile. It’s actually about the shift to native. It’s about the ads not being in the right-hand column, but being a part of News Feed and having voice and actors and Likes and comments in the same way that you see this with other content in News Feed,” Bosworth says. “The shift to mobile was the forcing function.”

A Natural Fit

When Zuckerberg asked Bosworth for more mobile ad revenue, News Feed might have seemed a bad place to start. It’s a very personal space with a limited amount of real estate. But it’s pretty much what people use on mobile Facebook. For Bosworth, ads and News Feed were a “natural fit.” In fact, ads had appeared in News Feed when Bosworth, together with Chris Cox, now Facebook’s chief product officer, first built and launched the service on desktops back in 2006. These were the days of Facebook “flyer” ads, based on the flyers you see posted across college campuses.

“We thought of News Feed as a marketplace for attention. The ubiquity of content means you need better tools to sort through that content,” says Bosworth, 33, now slick-bald, tattooed on both arms (“VERITAS”; custom-designed state of California), and built like a bouncer. “Ads were a natural fit when you’re doing that kind of a marketplace. There is going to be a lot of content competing for a place. Some of it is going to be organic, and some of it is going to be paid. The question is: How do you create a unified economy for it?”

As Bosworth tells it, with the rest of the business growing so well, the company saw News Feed ads as a “distraction” and dropped them. But the philosophy didn’t change. Six years later, when he joined the ads group, Bosworth spent weeks just learning the ins and out of the business. And at the end of it all, he went straight back to News Feed—this time on mobile phones and tablets.

Many complained about ads in News Feed. But Bosworth chuckles at the thought, given that ads were there in the beginning—and that he believes ads can provide real value as people scroll through their feeds. “The mission of my organization,” he says, “is to make meaningful connections between people and businesses.”

A Different Way to Sell

Not everyone is comforted by such high-minded words. Jeff Hammerbacher, another early Facebook employee who was at Harvard with Zuckerberg and Bosworth, once lamented that the “best minds of my generation are thinking about how to make people click ads.” Then he said: “That sucks.” Others complain that, in striving to target ads, Facebook collects and stores an inordinate amount of personal information about its 1.5 billion users. But however you see the Bosworth philosophy, it’s the philosophy that drives Facebook, and on many levels, it works. The proof is in the numbers: 1.5 billion monthly users and more than $4 billion in quarterly revenue.

This success is a product of many things, including consumer inertia. “People might complain about their privacy being invaded with cookies and other tracking mechanisms, but they don’t always takes steps to avoid that, even though there are tools all around them for doing so,” says Wharton’s Berman. “The status-quo effect is extremely strong.” But it’s also a product of Facebook’s definite approach.

Like Google, Facebook uses a rapid-fire automated online auction in order to place particular ads in particular places. Advertisers “bid” for places by way of an online advertising dashboard. But compared with the eBay-like “generalized second price” auction that Google uses with its search ads system, Facebook’s auction is less about advertisers trying to outsmart their competitors and more about how well advertisers have targeted their ads. The thinking is that, in the end, this will serve all parties well (for more on Facebook’s ad auction, see here).

'It was just like, if we ever wanted to make more money, you would just pull the lever and put more ads in the pixels.'

ANDREW BOSWORTH

“Advertisers will do best by focusing on the aspects that create value for everyone—which is making high-quality creative and selecting an audience for which the ads will be more effective,” Hegeman says. What’s more, News Feed’s organic content plays into the auction. It’s not just that ads are compared to ads. Ads are compared to everything else. “Everything has to compete against each other, to make sure that only the most relevant pieces of content—whether those be organic stories or ads—get surfaced and shown,” Hegeman says.

According to Berman, the breed of auction used by Facebook, known as Vickrey-Clarke-Groves, does indeed increase truthfulness and efficiency among advertisers—if properly implemented. What it doesn’t do, he says, is maximize revenue for the Facebook. But Facebook believes that in the long term, it will.

A Simple Thing

To understand why this approach is more than just idealism, consider how, in one of his more candid moments, Bosworth describes advertising at Facebook in the days before its IPO. “One of the things coming into 2012 was how easy it was for us to make money,” he says. “It was just like, if we ever wanted to make more money, we would just pull the lever and put more ads in the pixels.”

Like Google, Facebook could exploit this phenomenon in the extreme. But there’s a flip side. If you flood the market, you not only alienate users, you reduce the effectiveness of the ads. As time goes on, advertisers advertise less. If they advertise less, it’s harder to match ads with particular users. Then advertisers advertise still less. And so on.

The key to Facebook’s ad business, Bosworth says, is driving demand. In Facebook’s world, demand means the number of advertisements that advertisers make available for placement. The best way to drive that demand is to give advertisers good results.

Margaret Stewart.  CARLOS CHAVARRÍA FOR WIRED

But there are also other ways. In hacking together a mobile ad system in the wake of the Facebook IPO, for instance, Bosworth, Simo, and the team’s designers, led by ex-Googler Margaret Stewart, who also arrived with no experience in advertising, worked to significantly streamline the way advertisers buy advertising space. At the time, the dashboard was awash in ad-world jargon, and there were a ridiculous number of ad formats to choose from (more than 25). The big trick in the first quarter of 2013, Bosworth says, was just to pare things down.

“We used to have a bunch of different formats for e-commerce, but one of them was clearly performing the best, so we eliminated the other ones. Why would I let someone buy something that I know wouldn’t perform as well as the other ones?” he says.

“That also allows us to spend more engineering resources optimizing that one format. It was a more-wood-behind-fewer-arrows-type-of-effort, and that really made a huge difference in driving demand. If you look at the advertising growth in 2013, it’s really phenomenal, and I think it’s largely on the basis of this.” Sometimes, a hack is a simple thing.

The Next Hack

The next hack lies in changing the way ads are paid for. Today, advertisers pay for clicks and “impressions” (the appearance of an ad in front of a user). But like so many others in the ad business, Facebook wants to measure advertising success more accurately. That can drive demand ever more.

“No one is actually making money on clicks and impressions. What I want to talk about is lift, actually driving sales,” Bosworth says. “Whether it’s for a service or a product, whether it’s off the shelf or e-commerce, we really want to be measuring end-to-end sales.” In other words, he wants to show advertisers when an ad directly results in a sale—even if the sale happens inside a brick-and-mortar store.

To do this, Facebook is working with companies who gather data about in-store purchases, including an outfit called Datalogix. These companies collect email addresses and phone numbers from buyers; using these unique identifiers—the email addresses and phone numbers people share with Facebook—Bosworth and team can match ads with purchases. They can do this not only with Facebook ads but with ads posted on other sites, thanks to Atlas, an ad-serving system Facebook purchased from Microsoft that lets businesses serve all sorts of ads across all sorts of sites.

Andrew Bosworth, Margaret Stewart, and John Hegeman.  CARLOS CHAVARRÍA FOR WIRED

Though Facebook has made some progress in measuring offline impact, Bosworth admits this sort of thing is a long way from reality. “The truth is that this isn’t quite happening yet. Closing the loop on purchases and sales is quite hard, and mobile is making it harder,” he says, since it can be harder to identify people on their phones. But the company is further along than most.

At the same time, Bosworth and team are working to expand the scope the ads themselves and, yes, share its ad expertise with other online operations—all in an effort to keep people on Facebook and drive more revenue. As time goes on, the rise of video on Facebook—and indeed, on mobile Facebook—-represents a particularly large opportunity. Video means (valuable) video ads.

If the best minds of the generation are thinking about how to make people click ads, their thoughts are proving rather fruitful.

Many video producers have complained that the company hasn’t done enough to keep pirated videos off the site and that it isn’t giving them a proper cut of the accompanying ad revenues. But Facebook says it’s working on a solution. This, Bosworth says, mirrors the rise of “Instant Articles” on Facebook, where The New York Times and others big name media outfits publish stories straight to the social network and take a revenue cut.

Through something called the “Audience Network,” the company is also giving other internet services the option of plugging the Facebook ad system into their own smartphone apps, much as the Facebook-owned Instagram did recently from inside the company. Even outside the company, Bosworth says, Facebook can drive “native ads,” ads that integrate with the app at hand. In others word, it can reproduce the News Feed effect.

Of course, the biggest beneficiary of all this is Facebook itself. If a generation’s best minds are thinking about how to make people click ads, their thoughts are proving fruitful—at least in monetary terms. And of course, this money drives everything else that Facebook does, not to mention outside video makers, publishers, and partner internet services.

People like Bosworth and Hegeman and Stewart don’t see why this would suck. Bosworth was reluctant to take the job—both times it was offered. But now, he has worked with ads longer than he has worked with anything else at Facebook. It’s a hack like any other. “It’s easy to be cynical about the role advertising plays in our society,” Bosworth says. “I understand and respect the cynicism. But my response is that we haven’t done it well enough yet.”

AUTHOR: CADE METZ. CADE METZ        BUSINESS  DATE OF PUBLICATION: 09.21.15.

09.21.15 TIME OF PUBLICATION: 7:00 AM.