I recently had the opportunity to sit down with Erik Johnson, VP-APAC at Facebook, at the Interactive Advertising Bureau Breakfast Briefing Series. The wide-ranging interview covered a number of topics, from the culture and conversations to metrics and measurement. I had a great time talking with Erik, and am pleased to present the transcription for part two of the interview below, which was initially published on the IAB Singapore website. You can find part one of the interview here.

Ken Mandel:

Let’s look at global advertising and here’s another question that comes to mind, which is – and let’s look at the figures - global advertising seems to be about $600 billion. TV is about $193bil. Print, 138. Direct mail, 155. Online, 68. Is that an unfair share, and what’s up with that?

Erik Johnson:

I think, well, I have two comments on this one as well: I think first of all, if you just look at time spent on media, you’re absolutely right it’s unfair. I think people spend on average almost 20% of their time on different digital assets, and there’s no way that the digital is 20% of the 600, so in general there’s a disconnect there and I think part of that is time and education and it will get better.

There’s another part of that which relates directly to Facebook, the social web in general. And a lot of people talk about social being, or they call it social networking or social media, or they say that Facebook’s advertising comes out of a digital budget.

What we find increasingly is that, social is a platform. It’s a platform where Facebook operates like anybody else. And it spans all kinds of different mediums, so there’s some date you saw earlier today the number that we generally talk about is seven hours per user per month, and that’s the global average and obviously it’s higher in some markets, some lesser than others. But I’m pretty sure that of those seven hours, some of those time was spent watching TV, or communicating via email, or on your mobile phone or reading the newspaper, doing something else. But maybe you’re doing it in a social way.

And you see that especially among those younger generation where you’ll find people actually watching good old-fashion TV, the kind where you change the channel and not the call of a specific show, and they’re on Facebook or they’re on some other social media site communicating with their friends. And the point of that is, I think that, if you look at money that’s moving into social, it’s not only disproportionately small for digital, it’s even worse when you think about how likely that it is when someone is watching TV and the ad comes on and they’re on Facebook.

There’s a great way to tie together the content that’s on television with something that’s going on Facebook, and run the ads there. That’s the world that we live in. And social, I use TV as an example, it’s true for lots of things and true it works too. And so, I don’t think that’s going to happen right away, I think the real opportunity with the social web is that it infuses marketing across the board, whether it’s TV, print, or digital.  And that we are coming up with your strategies around how you want to use social. You should make sure that you play in all those different areas.

K:

I read an interesting story this morning - it was in the United States where 6 people were fired from their job because they “liked” a page on Facebook. It turned out to be their boss’ political opponent. Their boss was running for some sort of office and they were legally fired. I mean, I know it’s not your issue and it’s not a Facebook issue, but it does kind of show that you’re breaking new ground, constantly. And that’s just one example of probably hundreds. Is that a huge distraction, to you and your team and Facebook in general? Because you guys are breaking new ground and suddenly you’re in the press with really that doesn’t have a lot to do with you, but has everything to do with you.

E:

No it doesn’t. These stories aren’t new. There’s been stuff like this in the media for years now. I think the first thing you have to take a look at is how many of those stories do you read and how many of these things go on. You have to set a little bit of severity on the issue and that doesn’t mean that it doesn’t matter; it matters deeply to Facebook because of the mission that we’re on.

My point is though that I’m not sure that it’s actually widespread, that it could get worse, so again, we don’t want to be arrogant and say this isn’t a problem. I just think on the face of it, it is not a huge issue at the moment. The way we think about it overall is that it is a distraction of course, because people sometimes fixate on this and this missed what it is that Facebook is trying to do.

At the end of the day, our goal, if we connect to everybody to everybody else, who they want to be connected with, there’s always going to be someone who says the wrong thing or does the wrong thing. And that’s always been true. I think what’s different is that people, because we’ve been doing it for thousands and thousands of years, we know how to conduct ourselves in public form.

So for example, if I take my 7 year old daughter, she does stuff at home; we will never allow her to do it in a restaurant. We’re training her from a young age that there’s a public form and a private form. And that’s true, we’re sitting down, having dinner with friends we may have one conversation and when a stranger comes up, we change our conversation a little bit. That’s just the way it is. And the people are still feeling their way around Facebook to understand what parts of it is public, what parts is private. At the end of the day, it’s up to you, how you want to use Facebook.

Some people take very, very close control over which their friends are, so there only their true, true, deep personal friends. And they use it in one way. Some people use it more broadly and they create groups within to have more private conversations and say that everyone I know is on Facebook, whether we’re friends or not. And in our world, you’re more in the public sphere, and in the first example you’re more in the private sphere. That’s an individual choice that people have to make.

I think the one thing that we do categorically think that is bad, we‘ve come out and said this publicly, that people hint at regulation around it is that people say you need to turn over information on your Facebook.   Our view is that your personal identity on the Internet and you choose how you want to use that identity, but it’s your identity. If you choose to go public with something, you can. As soon as someone asks for information, that’s crossing the line, that’s not acceptable.

I’m not familiar with this specific example that you just raised, in some cases there are laws about things you can and can’t say, and it’s the laws of the land and if it’s violated, that has nothing to do with Facebook. If it’s personal choice and an employer chooses to take some action and that’s probably in violation with some law of yours and that’s not something we will ever condone.

I think one of the most important things is your Facebook identity, if you’re a user, an individual or brand, it’s your to own and yours to manage and we continuously seek to clarify that, like some of the redesigns that we did around Timeline which we just for that, make it easier to see. Here’s everything I’ve ever said and everything I’ve ever done, and I can go curate it. I can go take stuff off; it’s my life and the way I want to present it. And that’s true for a brand as well.

So I think with that in mind, we believe that those tools will give people the opportunity to be their real self, to engage with others the way they want to engage, and people need to understand, depending on who you invite to your dinner party on Facebook, you got to be careful with what you say.

K:

In that case, you’re talking a little about this social graph and the interest graph and potentially how there needs to be a bridge between these two graphs one day. Let’s talk a little bit about Pinterest, since it’s the shiny new penny in the room. What are your thoughts on Pinterest? What is it become? Is that going to be the bridge between the interest and social graph, or is it just Twitter with pictures?

E:

I don’t know. What I would like is to give you the Facebook point of view and you can decide for yourself how that’s alongside something like Pinterest.

At the end of the day, I think our belief is that the social graph and interest graph, they should be one.  And things just grow up a certain way because the way people engage on the site, and the sites hit scale. Is there really any reason why Twitter isn’t more about following your friends? I don’t know, it is just the way it is. It’s evolved the way it is. You can maybe have some argument that the 140-character thing lends itself better in certain scenario, because I think there’s some element to that, but at the end of the day I think it’s just how the service has evolved.

That’s always the problem, we can always step back and we say things which we talk about a lot, like why is digital ads been so small. We’ll start off with a bunch of really crappy ads and then, you know, we’re still dealing with the legacy of that. Should it be absolutely not be the day that we do not support where we are, the same thing, you know why is there social graph and interest graph? There really shouldn’t be. We live in a world where there is a social web, where people communicate with each other across the Internet using mobile devices, and computers and browsers, and there’s no reason why those two things should not be the same.

Now, at the end of the day, there’s always going to be offerings that appeal more to one individual than other, so Pinterest may grow to be a really, really successful company. They make it really focus on interest graph and come together. I don’t know where they’re headed; I think they’re great, what do I want to say.  They play an important role in the Facebook ecosystem, so that people can use Pinterest then they publicize that on Facebook and so we view them, not as a competitor, but really as just another source of content that makes the Facebook platform interesting for users. With that in mind, we hope that they do really well. I think that it would be good for us, in terms of where they go. We’ll have to wait and see.

K:

Let’s open it up and take a question from the floor:

Audience Member:

What metrics does Facebook focus on, whether it’s user engagement, sign ups… what are the specific metrics Facebook looks at to ascertain, particularly on platforms like Mobile, whether or not, having these new ad platforms on the service is having an impact on users?

E:

It’s a great question and it’s kind of a challenge that we’ve always had.

I think, from the beginning Mark Zuckerberg and our board are very clear on the priorities for the company and in this order : which is more users and then working with brands.

So Zuckerberg has been really, really, I would say very hardcore around following that mission. Your question is, it may be true to know if how it is working and if you’re on the right path, so I say two things: the first is, and this is for speaking at an event like this, what is interesting is that if you look at the advertising on Facebook, it’s pretty different than advertising on any other publisher network and the Internet. And that’s because, the belief of the company is that, we don’t want to just put ads, we probably can throw a big banner ad at the back of the page, we had one years ago and probably sell that pretty well, given the reach that we had.  But that would not be true to the experience - I think that actually turns some users off.

And so the idea is to say how do we go do social advertising that actually gets people to engage friends and brands in a conversation and that’s different, no one’s ever done it before and there’s some risk of that will turn people off as well, but that’s always been the approach.

So starting there, the approach is real companies do advertising differently and we’re going to hope it works.  I’m a believer, but it doesn’t matter, we need 900 million people to be believers otherwise it’s the wrong thing.

In terms of the way we actually measure it, the very, very important matrix in the company are around user growth and user engagement, so we want to see continued growth in users and then there’s two sub-metrics underneath that, one is we look for number of friend requests, so people who are engaged in saying, well I’m well in this service, it’s great, I get some utility out of it, and I’m enjoying it, they’re more likely to go add friends. That’s the sign that someone is happy with the product. And we have a couple of times in our history, we seen that dip when we launched some changes either to the UI or to the advertising. So that’s good, it happens really, really quickly. We make a change and we know in one or two days that something’s not going exactly the way you want it to, so that helps a lot.

The second thing we look at, as we call it “L 6 out of 7”, which is how many people are logging in at least 6 out of 7 days, because our belief is somebody is using Facebook the way it’s meant to be used, you can’t just spend 5 hours on it one day and then not come back for two days. This is your real time, your point on the social web and if you are truly engaging in it, even if you are adding lots of friends, even if you’re not coming back that regularly, we’re worried that we haven’t made this service engaging enough. And again, similar thing there, if we do something that we think turn users off, we see that number drop very quickly, because 6 and 7 is such a high benchmark. People will not just come one day or two days, so we actually have pretty good tools to see in real time how stuff is working and how engaging and how the advertising community is absorbing this. This is a different problem and that’s one where we don’t have a great way of measuring it.

And so I think in order to be successful, we not only have to keep the users happy, we have to make sure the advertisers understand these ads are different, that they are powerful and they are good experience for brands as well. I think that’s the area where we still have some work to do and welcome all of your help as well as we get on that journey together. It’s not just for Facebook, this is really about the social web, I think social advertising will find itself on all kinds of other places on the Internet, at some point in the future and this something that we’ll all have to figure out together.

K:

What about user growth vs. monetization, especially monetization of Facebook. There’s huge user growth, but it always seems that the monetization of numbers lag behind the user growth.

E:

At the end of the day, Facebook is a business and everyone in this room works for a business, so making money is important, but the one thing and there’s some pick up on this in the press as well, that’s going on during the road show, was about Mark Zuckerberg’s ideals and his vision for the company, and it really is a mission-led company, and the mission of the company is to make the world more open and connected.

So Facebook, when we think about our priorities, not just anywhere in the world, but also in Asia, number one is add more users, number two is work with brands and companies to help them make their business more social, whether it’s on the actual business offering themselves, or just on the marketing, like really helping infuse that element of social into everything that they do.

And the third thing is monetize it in a least intrusive way possible. That’s actually priority number three. And it’s important because that implies some lag, everywhere in the world. That’s just the way we run our business.

Because I think we do believe that if you accomplish number one and number two, you will make money. The important thing is that you have to do number two as well. You can’t just add users, and I think that gets to your point which is the second one around how you get companies to think about their marketing in a more social way.

K:

Thank you. That’s a great answer. I think we’re going to wrap it up and I want a big hand for Erik for taking out some time. And thank you all for coming, we appreciate your support and look forward to having you at the next executive breakfast.  Cheers.