Dan Rose Profile picture
21 Nov, 13 tweets, 3 min read
A few days after I joined as head of biz dev at Facebook in 2006, MySpace announced a partnership w/Google worth $1B. I sent an internal email suggesting we pursue a similar deal and Zuck gave me a hunting license. Here's how I signed the biggest deal of my career with Microsoft:
Microsoft had been left at the alter with MySpace. They bid more than Google for the right to run banner ads, but MySpace was owned by NewsCorp and Rupert liked Google better. Ballmer was reportedly very upset about losing, so my first call was to some folks I knew at Microsoft.
MySpace had 10x more users than Facebook at the time, but we were #2 and growing. I told Microsoft we could be their “rebound date,” but they had to move fast because Google was also pursuing us (which was true). I didn’t mention we were wary of Google’s competitive ambitions.
Microsoft did move fast. They were starting to believe ads could be an existential threat to their software business, and they understood that scale mattered in building an ads platform. There weren't many deals left that could give them scale in web-standard banner ads.
We had been selling banner ads in our left column, yielding low CPMs + low quality ads. Our COO Owen Van Natta told me to get 30 cent CPM guarantee for that space, substantially more than what Google gave MySpace. Owen was the best negotiator I ever met, great at pushing limits.
Days earlier Microsoft had lost the MySpace deal to Google. This time they hit our bid on the spot, and Ballmer told his team to get the deal done before another one slipped away. A week later we had a signed contract worth hundreds of millions of dollars.
A few weeks later I was briefing Zuck on the deal. I proudly explained how much money we were making already from Microsoft on our guaranteed CPM. Zuck stopped me and asked "how's it working for Microsoft so far?" I knew in that moment I would work with this guy for a long time.
Microsoft contributed most of Facebook’s revenue over the next couple of years. They were able to break even on our guaranteed CPM, which they viewed as a win since their primary goal was getting scale. At the same time, Google lost a ton of money on a MySpace deal that unraveled
Why did we outsource our early ads biz? We knew banner ads weren't strategic for us. This deal gave us learnings and guaranteed revenue which we invested in R&D to develop social feed ads. We were transparent with Microsoft about our strategy and they were happy with the trade.
A year after we signed that initial deal, we expanded the scope internationally and Microsoft led our Series C at $15B valuation (which eventually worked out great for them). We were close partners for many years, in part because we found mutual alignment in our fear of Google.
Partnerships are hard. When I was doing BD at Amazon, we signed multiple deals that ended in lawsuits. At Facebook we thrashed developers over the years as we pivoted our platform strategy, which gave everyone a lot of heartburn. But good partnerships can be transformative.
Good partnerships maximize value for both sides with minimal waste. If you are bargaining over an orange, one resolution is to slice it in half. But if you dig deeper into motivations of each side, you might find one party cares about the meat while the other cares about the rind
Despite risk of failure, good partnerships are worth pursuing. Always look for optimal solutions, keep digging until you find them. Push your limits on leverage, but leave value on the table. And after you sign a deal, always ask yourself "how's it working for the other side?"

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More from @drose_999

8 Nov
I got my first real job in '99 on the biz dev team at Amazon. Like most first jobs, it was a combination of hustle and luck. I had no idea Amazon (or later Facebook) would become what it is today, but I knew I wanted to work there. Here's how it happened:
In high school I thought I wanted a career in business, but my dad was a doctor, my mom a therapist, aunts/uncles physicians & lawyers. I had no role model in biz except my grandfather who owned a fleet of taxi cabs in NY. And my grandmother who always told me "work for yourself"
Harvard had no business major so I thought I would try economics. But after taking Econ 101 freshman year, I decided it wasn't for me (too theoretical and math heavy). Instead I studied Sociology and went down a path of learning about human behavior.
Read 15 tweets
17 Oct
In 2004 I had an offer to join the new Kindle team at Amzn and I jumped at the oppty. I was on our retail team at the time -> Kindle was new/sexy. But a week before I was scheduled to start my new job, I was told to stay put and I learned an important lesson. Here’s the story:
2 years earlier I had been given P&L responsibility for Amzn’s cell phone store. We sold phones + plans (like Car Warehouse and Best Buy). This was Amzn’s highest margin biz, but it was tiny and not growing and I was told it could get shut down. I had 6 mos to turn it around.
The industry model at that time was give phones for free w/ service plan attach. I reinvested the service plan margin to make phones less than free, and rev growth exploded. GM % plummeted, but profit $ went way up. My little biz was our fastest growing segment at Amzn!
Read 10 tweets
3 Oct
In 2008 Facebook’s user growth hit a wall at 80M and we were having serious debates about whether any social network could ever reach 100M users. 2 years later we had doubled our user base and not long after that we reached 1B users. Here’s how we did it:
I joined FB in summer ‘06 when we had 7M users and were adding 5k/day. Over the next 18 months, Zuck shipped News Feed, Open Registration, Platform and community-led translation. By end of ‘07 we had 70M users and it seemed like we couldn’t be stopped.
Towards end of ‘07 I helped raise our Series C at $15B valuation. We had <400 employees and only $250M revenue, but we had explosive user growth and powerful network effects. Our entire valuation was based on how fast people were signing up for FB all over the world.
Read 13 tweets
19 Sep
May 18, 2012 - there was a crisp blue sky at FB’s campus as we rang the opening bell. Emotions ran high as we took a brief moment to celebrate our hard work. The stock traded up for the first few hours. Then it traded down for the next 12 months...
Facebook’s IPO coincided with a paradigm shift in technology. The majority of our usage and revenue transitioned from desktop to mobile practically overnight. Facebook’s journey to a mobile-first company started with a strategic error and ended with a pivot. Here’s the story:
Mobile initially presented us with a number of challenges, and our instinct was to innovate our way around them. The heart of our strategy was HTML5, which turned out to be a flawed approach. We spent 2 years sprinting down the wrong path before reversing course. Why?
Read 16 tweets
12 Sep
Amazon launched in July 1995, and every Xmas was a near death experience for the first 7 years. I joined in ‘99 and got to experience this first hand. Starting in late Nov, all corporate employees were shipped to fulfillment centers to pack boxes for 6 weeks. Here’s what I saw:
Despite efforts to plan ahead, the company literally couldn’t keep up with holiday demand. 40% of all annual orders would come through in 6 weeks from Thxgiving through New Years. Ops teams would start planning in Jan, but by Sept they were always massively behind.
As “earth’s most customer centric company,” failing to deliver presents for Xmas would have been like Santa missing his deadline. But when demand exceeds even your most aggressive forecasts, it’s a physical world problem that requires physical world solutions - ie human bodies.
Read 11 tweets
4 Sep
I dropped out of b-school to join Amazon July ‘99. By Dec Amzn’s stock had doubled, Jeff was Time Man of the Year. Then March ‘00 internet bubble popped -> my stock options were underwater and Amzn faced bankruptcy. Yet dropping out was the best decision I ever made. Here’s why:
I needed a pattern interrupt. My life had been conformist up to that point - straight A’s, awards, Harvard, b-school. But business is messy, life is messy. I knew deep down I needed to mess stuff up, get outside the box. I’ve tried to maintain that mentality ever since then.
Shortly after I started my internship at Amzn, I asked CFO Joy Covey if she thought I should drop out of b-school to stay on full time. She said I would learn more on the job than in school (she had dropped out of high school). She was right, you can’t learn biz in a classroom.
Read 8 tweets

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