AUSTIN, Texas--The biggest ballroom at the Austin Convention Center was packed full with an eager audience well over half an hour before Facebook founder Mark Zuckerberg, recently pegged by Forbes magazine as the world's youngest billionaire, was set to take the stage for his keynote at the South by Southwest Interactive Festival on Sunday. There were even two "spillover rooms" for a simulcast of the keynote, where the young CEO was going to be interviewed by BusinessWeek's Sarah Lacy.
In case you didn't know already, Zuckerberg is a pretty big deal in the tech sphere. Anyone hoping for big news from the company may have wound up disappointed: the only thing that nobody had really heard before was that the site will be launching its French version on Sunday night. But come on, this is Facebook--they're notoriously tight-lipped. Nevertheless, the audience was eager for dirt, and that impatience eventually turned into a bit of moderate heckling.
"Most of the stuff that's been written about Facebook since the platform launch has been corporate stuff," Lacy started off, addressing Zuckerberg in what was by far the highest-profile keynote at any SXSWi event. "The core of why you're doing so well is the site itself." She asked Zuckerberg what he'd rather people focus on instead of the company's valuation and the fact that he has yet to turn 24.
"A lot of the focus has been on things that we as a company have not been as focused on," Zuckerberg replied. "The thing that we are trying to do at Facebook is just help people communicate and connect." He talked about how Facebook usage in Colombia has gone up since the site became available in Spanish and became a focal point for activist organization against the country's guerilla army.
Did he ever think people would do that? "No," Zuckerberg said, dozens of camera bulbs flashing around him as though he were Justin Timberlake.
Talk of changing the world dominated the first half of the keynote. "I heard this story a few months ago that's absolutely unbelievable," Zuckerberg said, and talked about Facebook's presence in the Middle East. He'd heard that youths in Lebanon had been connecting with one another on Facebook and broadened their horizon beyond insular communities where religious fundamentalism permeated the culture. "They just had a broader understanding and more empathy for what was out there on the world and that really changed their outlook on things."
Lacy then asked if Facebook was proactively working on specific tactics that could, in one way or another, change the world.
"Um," Zuckerberg hesitated, and then said, "I think what we're doing as a mission is a very important thing..." Clearly, this was an answer on which Zuckerberg hadn't been quite as expertly coached. When he trailed off, Lacy went into a mildly humiliating story about the first time she interviewed Zuckerberg and was surprised to see how socially awkward he was, and related that he'd said, "That's really hard" when she asked him to say more than two words at a time. It was the first of several "embarrassing story about another time when I interviewed Mark" anecdotes that Lacy went into throughout the talk.
Of profits and philanthropy
A mildly stymied Zuckerberg then re-addressed the topic of philanthropy. "There are a lot of really big issues with the world that need to be solved," he said, "and what we're doing as a company is basically building an infrastructure on which some of those problems can be solved."
"Why does there need to be a big organization order to channel peoples' voices?" he said. "Communication should be efficient enough that these people should have a voice, and issues that are important to these people should be able to be heard" without a massive nonprofit or celebrity-filled initiative backing it. "There needs to be a solid base for people to communicate that needs to built not top-down by legislation or countries, but bottom-up" by people on the ground. He added that because Facebook's business is "around break-even," it doesn't have a whole lot of money to throw around in the manner of Google's Google.org.
Back on the topic of international expansion, Lacy let it slip that Facebook's French version would be launching on Sunday night, and asked why Zuckerberg was so confident that it would be able to catch on across the world. "The need that we're tapping into is a universal need," he asserted.
Then the conversation turned to what everyone in the financial sector has been scratching their heads about: how Facebook will be able to turn a profit worthy of its $15 billion valuation. "We want the way that we make money to be in line with how people use the site," he said, alluding to the Social Ads strategy that launched in November.
Lacy then brought up the speculation that Facebook's banner ad deal with Microsoft wouldn't be sustainable, to which Zuckerberg said, "I think (Microsoft's) very happy with the deal," he said. "Obviously, as a private company we're not sharing stats on that, but I can tell you that it's going really well."
Mistakes were made
When someone in the audience shouted out, "Beacon sucks!" Zuckerberg replied, "Thank you." Later, he elaborated: "When we announced that, we probably got a little ahead of ourselves and said we had more of it figured out than we actually did," Zuckerberg said of the "mistake" that Facebook had made with the way it launched Social Ads and Beacon.
"In our company, Beacon isn't part of the ad team, it's part of the platform team. And there's this trend where we think that these social networks and social services are going from being these large monolithic sites...to a collection of social services." He mentioned in-house projects like the News Feed and inboxes, and then started talking about developer activity.
"Our DNA as a company isn't set to develop a lot of these things," he said. An "increasing amount" of developer activity surrounding Facebook, he elaborated, will go on outside the site. "That's just going to be an increasingly important part of the ecosystem." Beacon was a "first step" with bringing third-party activity onto the site.
"I think we made a lot of mistakes both in terms of how we communicated it, and some interface things," Zuckerberg admitted. "We're still learning as a company."
Lacy noted that uproar over the launch of Facebook's News Feed had eclipsed the Beacon controversy, which was fueled largely by a vocal minority. But both, she said, concerned privacy, and asked whether the site will continue to face privacy concerns. "The thing that's really important is that we need to give people complete control over their information," Zuckerberg answered. He said that only 20 or 25 percent of Facebook users share their cell phone numbers, and that they have the option to only share it with their friends rather than their entire networks.
"All of the mistakes that we've made are because we didn't give people enough control," he said.
On to the next topic: Facebook developer applications, and the criticisms that they're unproductive and full of spam. "There are pretty big changes underway with the system now," Zuckerberg hinted. "We've basically said that we have some distribution channels, you can send requests to people, you can send notifications...we allow you to do everything that you want up to a point."
Now for some of the juicy stuff! Well, not really. Lacy asked about the recent gossip that Facebook plans to launch a music service. "I don't know," Zuckerberg said. "We talk to a lot of companies all the time about a lot of different things." He said that there are plenty of music applications on Facebook and that the company has not touched upon it internally. "There are lots of developers who fileld that niche, so we don't even need to."
"As a company, we're out and we're talking to people in the space but building relationships," he said, but said that Facebook has "nothing to talk about right now" about the "iTunes killer" rumors.
After not-so-subtly pegging her impending book in which she extensively interviewed Zuckerberg, Lacy then asked up-front, "You don't actually think you're worth $15 billion?"
"I just don't think that's what we're thinking about," Zuckerberg said. "We want to get as little dilution as possible and raise money on the most favorable terms." He said that with a high valuation, Facebook can do business and recruit top talent more efficiently.
"Definitely an interesting time for us"
Zuckerberg says that the company also "made some management changes" after the internal bickering surrounding whether the company should have taken the $1 billion acquisition offer that Yahoo served it in 2006. Facebook famously turned it down, hoping to grow to a greater valuation first. "There were a set of people at the company who joined when it was way smaller, for whom if they could sell the company for a billion dollars, that would achieve a lot of their goals...(but) most of the people who started the company are still around."
On the company's new chief operating officer, former Googler Sheryl Sandberg, Zuckerberg said, "We'd been looking for someone who could help us scale our operations...it's growing really quickly and so having someone who can help us scale is just going to be very important for the coming years."
And is it hard to be CEO as the company gets bigger and Zuckerberg is invariably less hands-on when it comes to the product development? "It's definitely an interesting time for us," he said.
Audience response to the keynote was mixed--but on the negative side of mixed.
Judging by activity on Twitter, a sizable number of the audience was slightly disappointed with Lacy's tendency to go into anecdotal stories about Zuckerberg rather than asking him more tough questions. She alluded to something being a "Lesley Stahl" moment, and Zuckerberg retorted, "You have to ask questions!" to which the audience erupted into applause.
Then, as Lacy was talking about Zuckerberg's tendency to detail the minutiae of his business plan in longhand notebooks, someone in the back of the room shouted out, "Talk about something interesting!"--more wild applause--and a flustered Lacy opened up the floor to a few audience questions. (Editors' note: Sarah Lacy spoke on video after the Q&A with Omar L. Gallaga of the Austin American-Statesman.)
One question the audience was what Facebook's biggest obstacle is. "I think a lot of it is around, it's basically around building these systems and giving people control while also giving people an easy product," he said. "In terms of the next year or so, that's going to be a huge thing that we're working on."
Another audience member asked whether Google is pissed off that Facebook keeps so much information internal rather than out on the Web and searchable. "I don't think that they get pissed. They're very nice guys," Zuckerberg said.
In closing, Lacy asked Zuckerberg if he had anything to say as a conclusion. "I didn't think this has been that painful!" Zuckerberg said in response to the audience heckling. "It's important to focus on the trends and the things that are going on in the world, and this is a good conference to do that at."
See more stories in CNET News.com's coverage of SXSWi (click here).