SAN FRANCISCO — When Facebook filed for what is expected to be one of the biggest ever initial public stock offerings, the company identified just two executives it could not do without: founder Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg.
Sandberg isn't as famous as her 27-year-old boss, but she's the one who turned the social networking service into one of the world's most richly valued businesses.
Now Sandberg's business acumen and political skills will be put to the test as she becomes the front person who guides Facebook from privately held firm to the publicly traded markets where companies live or die on revenue and profit.
For all of the breathless coverage of its IPO expected in May and fevered demand for its pre-IPO shares, Facebook has yet to prove it's ready for the big time. Soon after the opening bell rings, investors will start barking for better results.
Facebook's financials released for the first time in February showed just how far the eight-year-old company has to go to live up to its considerable hype.
Facebook isn't even in whistling distance of its archrival in the battle for eyeballs and ad dollars on the Internet. And while Facebook made $1 billion in profit last year, Google makes nearly 10 times that, yet Google's market value is only about double the anticipated $100 billion Facebook will be worth after its IPO.
Sandberg will have to stoke Facebook's online advertising business to meet the wildly inflated expectations of investors without alienating the site's 845 million users or breaching their privacy with overly intrusive ads. And she will have to defend the company to investors who have already loudly complained that Zuckerberg has too much control over the company with more than one-fourth of the shares and agreements with other investors to give him voting power over almost 60% of total shares.
"It's a tall order to become a blue-chip company in a business that changes as fast as Facebook's does," said David Kirkpatrick, author of "The Facebook Effect." "I am not saying Facebook won't achieve it, but if it's going to achieve it, Sheryl has to stay for a long time."
To skeptics, Sandberg's fans point to her record. She took Google's ad team from four people to 4,000 before Zuckerberg wooed her away, and the Harvard grad's resume includes a stint at the White House, a spot on President Obama's advisory council on jobs and seats on the boards of Disney and Starbucks. But it's what she has achieved in Silicon Valley that has raised her profile.
Sandberg, 42, scored her first big Silicon Valley success at Google. She helped create the search ads business that has turned Google into a media empire.
Since defecting from Google four years ago, she built Facebook's online advertising business from the ground up, attracting some of the world's largest brands and raking in more than $3 billion in sales last year. She still faces the considerable challenge of getting brands to spend more money on the site.
"Wall Street is extremely comfortable with Sheryl," said Anupam Palit, head of research at GreenCrest Capital. "There is an enormous trust factor there because of what she has accomplished."
In March 2008 when Sandberg arrived as Zuckerberg's No. 2, Facebook's user growth had stalled, executives were fighting and, after the disastrous launch of the ill-fated ad service Beacon that unwittingly divulged people's purchases without their permission, the company had plenty of privacy headaches and few business prospects.
Sandberg began to recruit top talent. There was some grumbling at first. The new executives were dubbed FOSS, or Friends of Sheryl Sandberg. The tech gossip blog Valleywag Photoshopped a picture of Sandberg wielding a rifle as several high-profile executives departed, saying: "You're either with Sheryl, or you're against Sheryl. And if you're against Sheryl, you're not long for Facebook."
The sniping stopped when her team started delivering results: a new type of ad that could slip into conversations between Facebook users. Sandberg hopscotched the globe persuading Wal-Mart Stores Inc. and other major brands of the value in friending Facebook and setting aside more of their ad budgets for social media. Facebook soon took the lead in the U.S. online display advertising market.
Sony Corp. of America Chief Executive Michael Lynton said he was skeptical at first that Facebook could help promote his studio's movies. When he had dinner with Sandberg, she asked him why he didn't advertise more on Facebook. He told her he needed better tools to measure the effectiveness of the ads.
"Unlike any other executive, instead of just nodding her head, she and Facebook acted incredibly quickly by going off and forming a joint venture with Nielsen to devise a way to measure how effective our advertising would be on Facebook," Lynton said.
Sandberg also brought some corporate discipline to the freewheeling start-up, putting in place business processes and a more traditional hierarchy. Since Sandberg joined the company, Facebook has quickly grown from 66 million users to 845 million and from 130 employees to more than 3,000.
Sandberg had her share of missteps. Google fumed as hundreds of employees at the search giant — even Sandberg's favorite chef — followed her to Facebook, privately griping that Sandberg did not play fair. The animosity intensified last May when Facebook was exposed for quietly hiring public relations firm Burson-Marsteller to plant unfavorable stories about Google's privacy practices. Facebook's own privacy problems did not abate under Sandberg. In November, Facebook had to settle complaints with the U.S. Federal Trade Commission that it failed to protect users' privacy or disclose how their data would be used.
"So far Sheryl Sandberg has skillfully steered Facebook away from crashing upon the digital privacy shoals, which would wreck the company's lucrative post-IPO future," said privacy advocate Jeffrey Chester, executive director of the Center for Digital Democracy. "She has worked her magic on policymakers, big advertisers and Mark Zuckerberg. But Sandberg ultimately shares Zuckerberg's vision of a global marketing powerhouse that controls everyone's data. It's only a matter of time before even a corporate magician like Sandberg will have to face the digital music."
No Internet company collects more personal information than Facebook, but privacy concerns have yet to cool users' or investors' fervor. Shares of the privately held company sizzled on secondary exchanges. Facebook rewarded Sandberg by making her its top-paid executive. Her billion-dollar-plus stake in the company will make her one of America's richest self-made women after the IPO.
"None of this comes to her through any magical circumstances," said Adam Freed, chief operating officer of Etsy.com, who has known Sandberg since they were in the same dorm freshman year at Harvard and worked for her at Google. "She is one of the smartest and hardest-working people I have ever met in my life."
Sandberg grew up in the middle-class suburbs of Miami. Her father is an ophthalmologist; her mother gave up teaching college French to raise Sheryl and her two younger siblings. Her parents rallied support for Soviet Jews trying to escape anti-Semitism, imprinting early on the importance of giving back.
In high school, Sandberg was one of the top students in her class and a self-described "serious geek." At Harvard, she assembled a group to encourage more women to major in economics and government while still finding time to throw on leg warmers and run the Harvard aerobics program. In her junior year, she impressed Lawrence Summers while taking his public sector economics course. He was the advisor on her thesis on the economics of spousal abuse. She ran so much data that she crashed the university computers, and then persuaded the staff with pizza to bring them quickly back on line.
After graduation, Summers hired her at the World Bank, where she focused on poverty issues, visiting leper colonies in India and helping aid efforts in Africa by encouraging Summers to meet with U2's Bono. She returned to Harvard for an MBA, then went on to the consulting firm McKinsey & Co. before joining Summers again, this time at the U.S. Treasury Department in the Clinton administration. When he became Treasury secretary, she became his chief of staff. She was 29.
Sandberg thought she would devote her career to government and nonprofits. But in 2001, after the Democrats lost the presidential election, she said, she felt the pull of Silicon Valley for its power to foment social change. Google's then-chief executive, Eric Schmidt, called her every week, and she accepted a job running the 3-year-old company's business unit. Over the next six years, she built Google's global online sales from scratch.
With little room to advance at Google, Sandberg was looking for her next big job when she met Zuckerberg by chance at a holiday party. He was in search of a strong, experienced hand to run Facebook's business and was impressed with her sharp intellect and business sense, friends say. She shared his vision for Facebook, and says she turned down top jobs at other companies to become his second-in-command. The move drew comparisons to Microsoft in 1998, when then-CEO Bill Gates named Steve Ballmer president and handed off some operational responsibilities so Gates could focus on the company's technical vision.
"Facebook represents one of the most exciting opportunities there could be, if not the most exciting opportunity," Sandberg told the Los Angeles Times when she joined Facebook.
Over the last four years, she and Zuckerberg have forged an unusually close and trusting partnership, according to people who work with them. They sit at desks across from each other. She's his first meeting on Monday mornings and his last on Friday afternoons. She invites him to her home to spend time with her husband, Internet entrepreneur Dave Goldberg, and their two kids, with whom Zuckerberg has grown close. Two years ago at the Allen & Co. conference in Sun Valley, Sandberg's young son and his baby sitter walked by Zuckerberg and a media executive, waved and said, "Hi, Mark." The executive exclaimed: "Even preschoolers know who you are?"
Sandberg has told friends she has cried in front of Zuckerberg. Zuckerberg mounted the head of a bison he'd hunted himself on her conference room wall as a prank to make her laugh.
"No friend nurtures her friendships and keeps faith with her friends the way Sheryl does," said Larry Brilliant, whom Sandberg hired to run Google.org, the Internet search giant's philanthropic arm. "That really is her genius, beyond her ability to create ad products and to increase profits."
In the macho geek culture of Silicon Valley, Sandberg is said to be that rare powerful executive with a soft touch. She uses her success as a megaphone to urge women not to hold themselves back in the workplace and instead keep their feet on the gas pedal in their careers. Just days before Facebook filed for its IPO in February, Sandberg was in Davos, Switzerland, as a co-chair of the World Economic Forum speaking to women.
Her confessions — she feels guilty every time her son asks her to put away her BlackBerry, she pumped breast milk during conference calls at Google and she passed up a great job opportunity while at Google because she wanted to have a second child — resonate with women. She has also tried to make a difference for women who work at Facebook, pushing for a four-month paid leave policy for parents and designated "expectant mother" parking spaces near the office entrance.
Friends speculate Sandberg might run for California governor, even president. She's still active in politics — she recently threw a fundraiser for President Obama that Lady Gaga attended — and her ties to Washington have helped Facebook press its agenda there as it wrestles with growing regulatory scrutiny.
For the foreseeable future, Sandberg is staying put. In December, she said she would not stand for reelection to the Starbucks board to dedicate herself to Facebook.
Zuckerberg sees his second-in-command in personal terms that Jerry Maguire would understand.
"Without her," Zuckerberg told Bloomberg Businessweek last year, "we would just be incomplete."