Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley

by Antonio García Martínez

When Facebook reported its second-quarter results in June 2013, two facts triggered a market rally in FB shares. First, the number of active users on mobile had increased by more than 50 percent from the previous year. Second, and more important, revenues from mobile had roughly doubled from the previous year. This indicated that Facebook was not only successfully making the much-presaged leap to mobile (whereby all online activity was thought to be moving to devices); it was also managing to monetize there, meaning the leap wouldn’t damage revenues. What was really going on? Facebook was slowly opening up its mobile News Feed to ads, putting on the auction block what was a formerly untouched piece of Facebook property. As 2013 ground on, Facebook turned its monetization knob gradually, opening more and more inventory for Ads, and bringing in steadily more revenue, beating expectations at every earnings call, and guiding the stock price ever higher. Ad inventory is like real estate, and what Facebook was doing was akin to the westward expansion of the United States following the Louisiana Purchase, a onetime land-rush bonanza that featured hardy pioneers racing into the sunset, under the nominal control of an organizing government. Multiple insiders at the time leaked to me the concern around the strategy: pimping out News Feed had to end at some point, and then what would Facebook do? There were even internal projections guesstimating when the moment would arrive, when th...