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How Facebook Built a $10 Billion Business in Three Years

The Sheryl Sandberg of 2007 was an unlikely business partner for the Mark Zuckerberg of the same model year. Zuckerberg a 23-year-old coder with a growing—but not leading—social media service making roughly $100 million annually. Sandberg a proven, late thirty-something star of government (chief of staff for Clinton-era U.S. Secretary of Treasury Larry Summers) and business (VP of the largest part of Google’s advertising business) who oversaw roughly $10 billion in annual revenue.

The only thing they had in common was attending Harvard, although Sandberg was awarded the John H. Williams Prize as top graduating economics student while Zuckerberg quit in his sophomore year.

Never underestimate the power of dinner and a mission.

Over a number of one-on-one meals at Sandberg’s house in late 2007 and early 2008, the mission to make the world more open and connected, which Zuckerberg had so unrelentingly been pursuing, won her over to becoming chief operating officer of Facebook. Perhaps the only thing better than the “rocket ship” working on organizing the world’s information and making it universally accessible, which then CEO of Google Eric Schmidt had convinced Sandberg to join in 2001, was the rocket ship working on organizing the world’s people and making them universally accessible, which Zuckerberg was encouraging her to join. That, and the fact that there was no room for a COO in the traffic jam of leadership at the top of Google made up of Schmidt and cofounders Larry Page and Sergey Brin.

To celebrate, Zuckerberg gave Sandberg the hardest job in Silicon Valley.

Win–Lose: A Brief History of Advertising

Although the most basic forms of oral and written advertising date back as far as many centuries b.c.e. and range as far and wide as China, India, Rome, Greece and Egypt, the Industrial Revolution is chiefly responsible for the rise of advertising as a giant industry.

Before large-scale, centralized manufacturing (e.g., Procter & Gamble, Gillette, Levis), national retailing (e.g., Wanamaker’s, Macy’s, Sears Roebuck) and advanced transportation systems for distribution became prevalent in the mid- to late-1800s, you understood and bought goods from your local shopkeeper whom you knew personally and who concocted, procured and explained these goods for you.

With the vanishing of the shopkeeper, however, the function of making you aware of, getting you to prefer and finally transacting a good or service had to scale up just as manufacturing and distribution had. Welcome to the golden age of advertising, and with it the age of mass media—first the newspaper, then radio, then television and eventually the Internet.

And if you feel that advertising has been to varying degrees intrusive, you would be right. It’s right there in the Latin root of the word advertere, to “turn toward.”

It makes you turn extra pages in magazines and newspapers, makes you wait for your radio traffic report, gives you a chance to go to the bathroom during the Super Bowl and keeps you from reading the front page of ESPN’s website.

Getting you “turning toward” a product or service is so vital—and in some cases even effective—that over $600 billion a year are spent globally on various forms of advertising.

However, hanging—like a musty blanket—over the entire advertising business is the sense that it has never shaken the win–lose nature of the interaction between people and businesses, especially when it comes to digital advertising:

When advertisers win, people lose: If a media provider can do a great job of getting you to turn toward advertising—especially true for the Internet’s so-called home page takeovers that obscure the content for which you came to sites like Yahoo, ESPN and CNN—people have at best a sense of disruption and at worst a deep resentment. Yes, they are getting content for free, but as they increasingly vote with their wallets to support ad-free services like Netflix, it becomes clear that free won’t always be a winning price.

When people win, advertisers lose: When a service is most useful to people—take Google search as a prime example—advertisers feel constrained in their ability to communicate via the small, text-only ads served up with people’s search results. Advertisers—and the hundreds of thousands of people that work at the agencies tasked with making their advertising clients successful—hate not being able to express themselves visually. The only thing they dislike more is not being able to create interest in their product where there was none before—nearly 90% of advertising is spent on so-called demand generation—and if people don’t type “red crayon” into Google search, “red crayon” companies are out of luck when it comes to digital’s biggest advertising tool to date.

Mostly, everybody loses: There are many, many corners of the digital advertising world where both advertisers and people lose because experiences are polluted with ads that are ineffective for the advertiser and disruptive to people. Billions of these impressions are served every day in the gutters of the digital world.

Mission Impossible?

But that was merely the beginning.

Sandberg wasn’t just shackled by advertising’s 150-year win–lose history. At Facebook, she was tasked with building a large advertising business in a product culture that was obsessively people-first. Zuckerberg, chief product officer Chris Cox and their teams keenly understood that Facebook’s success bringing people to the service and keeping them engaged came from pushing Facebook’s minimalist design to the background to allow the people and things that mattered to them to come to the foreground. It was Facebook’s prime directive to keep it that way.

There was only one thing worse for the company than interfering with user experience, and to make for a perfect storm, Sandberg would have to navigate it as well: peoples’ concerns about privacy juxtaposed with the opportunity of Facebook’s advertising to leverage the billions of daily pieces of information that real people—well over 90% of Facebook accounts are believed to be authentic—share with friends about their lives.

Sandberg, however, was undaunted. She is a serious operator with the finely tuned impatience to avoid every great company’s worst fate: poor execution. In that, she reminded me—in the best ways—of the patron saint of all great Silicon Valley operators, former Intel CEO Andy Grove. Sandberg stepped into the moment and throughout the first half of 2008 worked across all parts of the company—Cox in particular would become a close friend and confidant—and reached consensus on advertising as the central business model of Facebook’s future.

However, the early days of Facebook’s efforts showed clearly just how complicated the situation would be.

Before she could even concentrate on advancing the advertising products built by Facebook specifically for Facebook, she had to extract the company from an agreement struck with Microsoft the year before her arrival to show banner ads from Microsoft’s ad network on Facebook. The theory had been that Facebook brought additional inventory to Microsoft’s network while Microsoft could handle portions of ad sales for a fledgling Facebook, but it had become clear that serving the Microsoft ads was inconsistent with the nature of Facebook and took inventory Facebook wanted to use for ads targeted and delivered by its own systems. Extracting themselves from the obligation—a feat handled deftly by Sandberg’s vice president of corporate development Dan Rose—was a tenuous bit of work, as the deal had been part of Microsoft’s $240 million investment in Facebook in 2007, which had valued the company at $15 billion.

Managing just its own advertising products brought focus and reasonable revenue growth for Facebook in 2009 and 2010 from the handful of ads stacked vertically on the right-hand side of nearly every page of their browser-based experience. They were targeted to users based on basic Facebook information such as age, location and stated interests and priced to charge advertisers only when users clicked on the ads. That success, however, quickly brought the seedy underbelly of Internet advertising to Facebook: so-called affiliates who opportunistically roam the Internet frontier like mercenaries in search of opportunities to drive clicks to their clients in make-a-fast-buck enterprises, especially in the second tier of the dieting and dating industries. Facebook soon filled with ads featuring “muffin top” waistlines and women in questionable attire.

By the end of 2010—three years into Sandberg’s efforts—Facebook’s business was profitable but stuck between a rock and a hard place.

The rock of Facebook users who disliked low-quality ads, and the hard place of higher-quality advertisers, like national and global brands and the local businesses that people cared about, not moving their advertising to Facebook. Who wants to live in a neighborhood with the broken fences and dried-up lawns of dieting and dating? Besides, Facebook’s existing ads were widely thought too small and unproven for outcomes beyond mid-tier online e-commerce.

Imagine a meeting with the head of a movie studio looking to show beautiful trailer videos complaining about Facebook’s postage stamp–sized picture ads, and you get an idea of what Sandberg’s days looked like.

To make matters worse, the cognoscenti in the industry had begun to whisper and wonder what Sandberg would do if the mobile wave—which had begun in earnest with the arrival of the iPhone in 2007—became a tsunami. As Facebook’s own advertising product leader at the time, Greg Badros, would point out, there is no room for ads on the “right-hand side” of a phone. That’s where your hand is.

And pressure from the outside was mounting. Private investments in January of 2011 valued Facebook at $50 billion, putting more pressure on the business to grow the way perennial Internet advertising role model Google had at a similar stage in its life cycle. In 2004, Google’s 6th full year of operation, they had generated nearly $3.2 billion. In its 6th full year of operation, Facebook lagged by nearly half, having generated less than $2 billion.

Sandberg was, quite literally, chasing her past.

In the Meantime: A Giant Medium in the Making

While Sandberg was wrestling with the business, things on the user side were all sunshine. From 2008 through 2010, Facebook had grown its global user base nearly 10 times to over 600 million monthly active users while retaining nearly two-thirds of that number as daily users, an almost unheard-of level of user engagement. It wasn’t just that Facebook had long left MySpace in the dust. According to comScore, the end of 2010 marked Facebook’s ascent to the top spot in the United States for total time spent by Internet users, eclipsing the various offerings of former leaders Yahoo and Google.

Chiefly responsible for this degree of success with people was the central and most used feature of Facebook: the News Feed.

Launched toward the end of 2006 by Cox and his team, the News Feed was your personalized daily newspaper, featuring the people and things that mattered to you. Courtesy of its famous algorithm, which reduced the average of 1,500 daily pieces of information generated by your network of connections down to the 150 that it estimated mattered most and would be shown to you, News Feed was a seemingly endless river of everything from the sublime and profound to the banal. It never ran out, and, whether by value or compulsion, you could never be away from it for very long.

Facebook’s News Feed may have started as a mere feature, but by the end of 2010 it was well on its way to becoming one of the greatest media ever as it increasingly became the lens through which we observe our world. That is to say, our friends and the things we chose to connect to had become our editors. It was Facebook’s greatest triumph relative to its mission of making the world more open and connected.

As of the end of 2015, News Feed was delivering over 200 million of its stories to people around the world every minute. And in the year that people’s time using mobile overall eclipsed that of all time spent watching television, Facebook and Instagram together were the mobile attention champions, accounting for one in every five minutes spent on mobile, the vast majority of which involved looking at the respective feeds.

At first blush, it would appear that News Feed was the obvious answer to Sandberg’s advertising challenge: larger ads that confer to advertisers the same ability to express themselves as News Feed does to people who liberally shared pictures (and in later years video) placed in the middle of the most important consumer stream of information in all of digital—if not in all of media of any kind. But, since the end of early advertising experiments in News Feed in 2007, no ads had appeared in that hallowed ground. The ad business was a raft in the ocean of News Feed. Water, water everywhere, but not a drop to drink.

Some product purists within the company entirely rejected the notion of ads in News Feed. Zuckerberg, Sandberg and Cox, however, knew that the answer was more nuanced. That they had to aim for a future—independent of how long it would take to achieve—where ads in News Feed were seen as equally valuable to content from friends or things people were connected to. That could happen only if the best possible ad had been chosen for the best possible person, a problem with two sides: understanding people to an unprecedented extent and having enough advertising to choose from for each person to make the best connection.

And so the intersection of ads and News Feed would become the most important existential question Facebook had ever faced. Did they have enough information, enough advertisers and advertising and enough experience to deliver the right content to the right person?

Would they risk their single most important asset? Could they survive in the long term if they didn’t?

On the Threshold

The year 2011 would be a time of soul-searching for Zuckerberg, Sandberg and the teams working on the consumer and advertising products. Were they peanut butter and chocolate, or oil and water? Better together, or destined to be apart?

How could they possibly think about the huge risk of combining people’s chosen content from friends and things they had connected to—known as “organic” content—and ads—“paid” content—in one very important column? How would you feel if the announcement of your best friend’s firstborn was followed by an ad for teeth whitener?

It had been done successfully at the scale Facebook was contemplating only once. By Google, the juggernaut of digital advertising—and largest company by revenue in the entire global advertising business—who combined paid and organic items in a single search result page. That page was served in response to a search by the user, making combined organic and paid results dedicated to the expressed intent seem vaguely like the Yellow Pages of old, an experience people were familiar with and valued to a degree. Facebook, however, was aiming for something bigger and more complicated as it would have to show ads without the expressed intent Google’s search provided. It would have to essentially divine the best possible ad.

Two difficult things would need to come together for Facebook to make that possible.

People and businesses would need to feel that they were on an equal footing when it came to content in the News Feed. A consistent appearance—albeit with ads identified as “Sponsored”—that would give businesses the opportunity to share photos and links just as people could and the same opportunity to pass by an ad with the same ease of flicking your thumb over a dull political post from your oversharing friend.

And people needed to feel that an ad had been selected for them as carefully as possible, both to deliver a good user experience and to improve efficacy for the advertiser, the only way Facebook’s business could thrive in the long term.

The ads would have to be nearly as useful, interesting or entertaining as something from a friend or chosen connection.

In exchange for accessing an unparalleled degree of information people had shared about themselves, Facebook and the advertiser would have to do the best possible job of adding some kind of value.

The information assets at Facebook’s disposal to achieve that were formidable. Not only did they have billions of daily signals on Facebook—mostly in the form of what people “liked” and posted on Facebook—but they had also become increasingly effective at augmenting this data with useful data from elsewhere. Chief among them the ability for businesses of all sizes to match their existing customers—through e-mails or phone numbers—to people on Facebook so that those businesses could more intelligently address their communication to existing customers, customers with certain profiles and behaviors or noncustomers. This was further extended by understanding other websites people visited and data from third-party data providers who could bring understanding of information like household-level motor vehicle records to aid in understanding car ownership and buying intention, grocery store shopping information, household income and family composition. All of these were made available to advertisers at an aggregated level that prevented the identification and targeting of any single person but provided the additional insight necessary to communicate more thoughtfully with people. And once advertisers found success with a particular target of consumers, they could simply ask Facebook to use its incredible depth of understanding to automatically find more people like the original group. Called “look-alike targeting,” the technology uses every piece of data Facebook has on people to mathematically judge their similarity to the original cohort, going far beyond the basics of demographics a human advertiser would use and becoming one of the single most powerful tools in Facebook’s arsenal for both advertisers and people.

You only have to look to the Super Bowl to understand the power of being more thoughtful: at any one time in the United States, only about 7 million people are in the market for a new pickup truck, but due to the broadcast nature of television, all 115 million viewers of the game have to endure the inevitable Ford F150 commercial. There is a famous quote about advertising by department store magnate John Wanamaker who said, “Half of my advertising is wasted. I just don’t know which half.” The truth, it turns out, is that the situation in advertising is most likely worse. In our Super Bowl truck example, more like 90% of the advertisers’ investment—which totals a whopping $4.5 million for 30 seconds—is wasted. Facebook’s premise to both people and advertisers was that it could invert this inefficiency for both parties. On Facebook, the truck advertiser would be able to have similar reach directly into that group of 7 million intenders as the Super Bowl but would likely waste no more than 10% of their advertising.

In the end, the answer to these two challenges, and whether ads in Facebook’s News Feed could work, lay deep below the surface of the Facebook experience that you and I see and happens billions of times every day.

Each of these moments is the decision to show one ad to one person. And each of those decisions is made by a sophisticated algorithm that auctions the opportunity to communicate with that person to the most qualified ad and advertiser in Facebook’s system as assessed by a combination of predicting the likely outcome of the ad being shown to that person based on the advertiser’s and the person’s history on Facebook, with the price each advertiser has bid to secure the attention of that person.

Imagine putting a slice of your attention up on an easel at an auction house and the fast-talking auctioneer selling it to the highest bidder from among a group of well dressed, prequalified advertisers including your local dentist and restaurant, your favorite online retailer and an athletic clothing manufacturer and automaker competing with your incumbent favorites.

It’s like that. Billions of times a day. For every ad on Facebook.

This is not a new concept. It’s how Google auctions its search result slots for words that users have typed into the search engine to advertisers bidding on those words. Just type “new car” into Google to see the advertiser food-fight in your paid search results.

What Facebook is doing, however, is more extensive. They are finding and auctioning a match between people and advertisers across much more than just keywords. That is partly to make the most of the data they have and differentiate from Google, but, more importantly, it is what’s required to make the ads-in-News-Feed experience work.

Aside from finding a good match between advertiser and people, selecting each ad as an auction has other nice benefits. These include the leveling of the playing field between giant advertisers and smaller local advertisers. Each advertiser can get access to just the part of Facebook’s user base most relevant to them, and each bids what the attention of those people is worth to them. Your local small business has the same opportunity to communicate with you as a national or global business spending literally thousands of times more money in aggregate.

Additionally, since prior performance indicators about each advertiser play a modifier role in the auction—higher performing advertisers as judged by inputs like historical user engagement and low negative response rates essentially get a discount in the auction, while lower performing ones are charged a premium—the auction is able to effectively price less effective advertisers out. Once ads for these advertisers become too expensive for their taste, they either work harder to improve their advertising or leave the auction, either way eliminating opportunities to sour people’s experience.

Reward the thoughtful. Punish the thoughtless.

So, with just barely enough information and confidence, Zuckerberg and Sandberg made the most important decision in Facebook’s existence.

They started to experiment with early versions of ads in the web-based Facebook News Feed in December 2011, opened more widely throughout the spring of 2012 and allowed the first ads in the mobile News Feed of the wildly popular Facebook iOS and Android mobile apps in July of 2012.

As these advertising dials were turned up, Facebook closely monitored the sentiment in its user surveys—they do as many as 50,000 a day—around the perceived quality of the Facebook News Feed. Lo and behold, the introduction of advertising had only a negligible effect.

Slowly but surely, they were conquering the impossible: a win–win solution for advertising.

A Win–Win⁵ Solution

Looking at Facebook’s advertising business a mere three years later, it’s not just on the way to being a win–win, but likely a five-way victory:

It’s good for people and advertisers: By working hard aesthetically and technically to match the best ad to the best person, Facebook has made some of the most significant strides in the advertising industry ever. All the while, it has held itself accountable both to advertisers for the performance of its ads as well as to the sentiment of its users about those ads in their News Feed. Although difficult to summarize across advertiser industries and objectives, when used thoughtfully with creative executions that match the interests of its target audiences, Facebook advertising in News Feed—and especially on mobile and using video—routinely performs above the digital display marketing norms for reach, ad recall, brand awareness and return on investment maintained by industry observer Nielsen,¹ has lower cost-per-thousand impressions (CPM) and cost-per-click (CPC) than Twitter,² is considered by 95.8% of advertisers to produce the best return on investment (ROI) of all social media platforms³ and is cited widely by businesses with direct marketing objectives (conversion) for beating Google via look-alike targeting.

It’s good for creating awareness and transaction: The process of communicating and engaging with people important to your business is often reduced to the conceptual model of a funnel with consumers going through various states of increasing attention to your business (awareness to consideration to preference to transaction to loyalty). Most advertising media have a tendency to have a particular strength at different points of this funnel. Television is more often used at the “top” of the funnel (e.g., the glamour shot of that new car or the fact that you can save 15% on car insurance), while direct mail or search is used almost exclusively at the bottom (e.g., 25% off sweaters at Target this weekend, buy this TV at amazon.com now). Facebook, however, has increasingly become a solution throughout the funnel to accommodate many advertisers with different objectives (e.g., Burberry would like you to prefer their brand of clothing, while hotels.com would much rather you make a reservation tonight), as well as providing a nearly complete solution for advertisers that prefer to operate throughout the funnel (e.g., Southwest Airlines, Mercedes).

It’s good for large-scale and specific targeting: Until Facebook, most advertisers had to make a Sophie’s Choice between reaching people at large scale (e.g., Coke, Walmart) in media like television or web portals like Yahoo or with refined targeting (e.g., Michael Kors, Etsy) in much lower-reach media like magazines or lifestyle-specific websites. With Facebook, advertisers no longer have to choose as they enjoy access to extremely sophisticated targeting across a giant audience of 1 billion people a day. In the United States, for example, Facebook sees a Super Bowl worth of people. Every day. On mobile alone.

It’s good for large advertisers and small: The democratizing effect of the ad auction—and the opening of Facebook’s advertising engine to outside providers who help advertisers take advantage of Facebook’s tools and build additional capabilities on top of those tools (via a so-called Application Programmer Interface, or API)—creates opportunities for advertisers of all sizes, causing the ranks of monthly active Facebook advertisers to grow to 4 million as of September 2016. A very long tail that has a powerful diversifying effect on Facebook revenue, inoculating it against potential weakness in any individual advertiser objective, sector or region. More advertisers also means more advertising to choose from for each person. And the constant growth of Facebook users around the world means more options for each advertiser. All of which creates a system of growing both advertisers and people that only gets better the bigger it gets, which has caused even the largest and highest-quality advertisers in the world—finally convinced of Facebook’s quality and efficacy—to come aboard. So long diets and dating!

It’s good for traditional digital and mobile: Remember those whispers in the industry about how Zuckerberg and Sandberg would deal with the mobile tsunami? Those are gone, replaced with the awed respect of Facebook having created the most envied mobile advertising solution in the industry. An endless feed of organic and paid content, perfect for phones and controlled by people’s thumbs. It’s so good that it’s been proven to successfully augment the granddaddy of all advertising—television—for even the world’s biggest advertisers.

It’s Not All Clear Sailing Ahead

As successful as Facebook’s moves in advertising have been, they had still only netted them a number two position behind Google by 2016. Challenges still lie ahead, the hardest of which is a direct outcome of their success.

If Facebook sells out its ad inventory, doesn’t grow users faster than advertiser interest, does not show more content per person and isn’t willing to increase its “ad load”—the ratio of organic content to paid content a user sees, which has historically hovered at roughly 10:1—the economics of supply and demand in its auctions will cause prices to rise for all advertisers, slowly making advertising on Facebook less attractive.

There are a number of potential ways to address this challenge, starting with making each individual ad on Facebook more effective—and thus worth more. That’s the reason for the new ad types that Facebook has already introduced, including video and 360-degree video, multiunit horizontally scrolling Carousels and longer-form interactive Canvas ads—derived from Facebook’s Instant Articles technology—which you can open directly in the News Feed and which have proven very engaging in the early going. All introduced for advertisers only after the same content was made available and successful for people to share.

Two forms of improving ad inventory are next on the strategic to-do list for Facebook. The first is to make existing inventory work harder. While inventory in key regions like North America and much of Europe is selling out at increasingly higher rates, opportunities to sell even more of their inventory at even higher value still exist elsewhere. Facebook’s average revenue per user in North America is triple that of Europe and nearly 10 times that of the rest of the world. Much of that is due naturally to the lower value of the advertising industry in markets with less developed economies and therefore consumers with less—often substantially less—disposable income. Facebook is specifically building advertising products appropriate to regions with slower mobile infrastructures and even purposely slowing down the network on their own campus in Menlo Park every Tuesday to engender empathy among employees with consumers in precisely these markets.

The second is to add inventory, already underway in the form of ads appearing on Facebook’s 2012 acquisition, Instagram, as well an ever expanding collection of web and mobile properties owned by others, called the Audience Network, where Facebook’s ad technology is matching users and serving ads and sharing the resulting revenue. At more than 600 million monthly users as of December 2016, Instagram has grown to be larger than Twitter in terms of users and much larger than Twitter in terms of people’s time spent, which correlates directly to amount of content—and therefore also ads—consumed. Using the same cautious playbook and underlying technology Facebook employed for ads in the News Feed of its namesake property, they are already having tremendous success growing advertising revenue in the similar medium of the Instagram feed.

Beyond that lies the challenge—and opportunity—of opening up a vein of revenue untapped by Facebook to date that would aim directly at the heart of Google: Facebook’s version of search and search advertising. Search advertising in 2015 is a $80 billion global business—with Google taking a $45 billion lion’s share—and is estimated by eMarketer to grow to $130 billion globally by 2019. Google’s product and business are among the best ever devised, which explains why Sandberg and Zuckerberg are taking their time to determine whether Facebook could offer a better solution and, if so, how to prioritize the development effort relative to the products they are already building. Although it would require a complex interplay of trillions of pieces of information on the open Internet and trillions of pieces of information available only inside Facebook and a dash of as yet undeveloped artificial intelligence to structure people’s free-form posts and comments on Facebook into something as easily searched as the open Internet’s pages and links, a better product than Google’s search is plausible. But expect Sandberg and Zuckerberg and some of the most advanced technical teams within Facebook to show patience, making an advanced Facebook search function with related advertising opportunities unlikely before 2018 at the earliest. Its arrival would launch a revenue food fight of unprecedented proportions between Google and Facebook.

But What a Grand Ship It Is

Challenges aside, the momentum of Facebook’s advertising offerings is undeniable. As of the third quarter of 2015, they had 1 billion daily users. Annual ad revenue since the decision to put ads in Facebook’s News Feed had quadrupled, with an outsized 80% of that revenue coming from ads in mobile news feeds as of the 4th quarter of 2015, a business they had grown from $0 to more than $10 billion annually in less than three years.

While there are already 4 million active advertisers as of September 2016 (a mere six months after having announced 3 million advertisers), the total number of businesses that have a presence on Facebook via its Pages product exceeded 60 million globally as of July 2016, all of them potential future paying customers with an increasing array of offerings from advertising on Facebook, Instagram and the Audience Network to future customer engagement and e-commerce tools on Messenger and WhatsApp.

The good news is slated to continue with industry observer eMarketer estimating that 2016 marked the year spending on digital advertising in the U.S. surpassed spending on television and that by 2019 mobile advertising spending will double its share of the total global advertising pie to nearly $200 billion annually, with Facebook Inc.—meaning Facebook and Instagram—taking nearly $40 billion of that and projected to be the leader in nonsearch advertising. Facebook has clearly skated to where the puck was going.

Sandberg has taken the hardest job in Silicon Valley, built on what she learned at Google—selling to advertisers of all sizes a product that integrates paid ads with organic content—and, together with Zuckerberg and the Facebook product teams, fashioned an even more powerful ad product able to serve more needs of more advertisers over the long term.

While Google will likely continue as the bigger of the two over a five-year horizon, Facebook has the trajectory and opportunities to outpace them beyond that.

Turns out Sandberg and Zuckerberg had been right during all those dinner conversations back in 2008: the only thing more powerful—for both people and advertisers—than organizing the world’s information is organizing the world’s people.