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Sheryl Sandberg has held high-profile jobs at the World Bank, the Treasury Department and Google. Her latest challenge? Making Facebook as profitable as it is popular.

By Jessi Hempel, writer

PALO ALTO, Calif. (Fortune) -- This is only day 13 on the job for Sheryl Sandberg, so forgive her if she doesn't have everything figured out just yet. She pulls her legs up beneath her into a white Eames chair.

"This feels like Google when I started," she says of her new employer. It's a Wednesday afternoon in downtown Palo Alto and she has agreed to her first interview since she turned in her security badge at the Googleplex last month, packed six years of belongings into her car, and drove over to meet her colleagues at Facebook. As Facebook's chief operating officer, she is now number two to 23-year-old founder Mark Zuckerberg.

Sandberg, 38, is in charge of helping the Valley's most popular startup grow up. Over the past four years, Zuckerberg has built the social-networking site he started in his Harvard dorm room into a 550-person business that sprawls across seven buildings in downtown Palo Alto. A Microsoft investment has valued the company at $15 billion. The number of visitors to the site jumped 300% to 100 million in February, up from 24.8 million in February 2007.

More than one Valley luminary has held Zuckerberg's name up alongside that of Steve Jobs (proving that the only thing more plentiful than business plans there is hype). Engineers from Google (GOOG, Fortune 500) and Yahoo (YHOO, Fortune 500) are defecting to the company for a bit of that startup fairy dust. Facebook even recently hired Google's top chef.

But for all the success, the company has hit a critical point. Even though Facebook is seen as the embodiment of Web 2.0, it has the quintessential Web 1.0 problem: No one has figured out how to make real money off it. Facebook pulled in revenues of just $150 million in 2007. In short, Zuckerberg et. al have yet to hammer out a business model. Oh, that.

Facebook is betting that, if anyone can figure out how to turn social networking into cash, it's Sandberg. As vice president of global online sales and operations at Google, she built the operations to support Google's international strategy, and she ran its lucrative AdWords program. She managed the division that handled sales for nearly all of Google's online advertisers.

In growing a business unit from just a few employees to thousands, she learned a great deal about how to nurture companies as they develop. That will be important in her new roll at Facebook, where she's in charge of expanding operations, revenue and international reach. She's also responsible for sales, business development, public policy and communication. "It feels like a great thing that is starting to happen but really at the very, very beginning," she says.

No one is more jazzed that she's joining the company than Zuckerberg. Since their first meeting at a December Christmas party, he estimates they've spent more than 100 hours together, mostly over lengthy dinners at Sandberg's Atherton home.

"Sheryl has a lot of experience, probably the best and most relevant experience of anyone we could find, to help us scale our business," says Zuckerberg. But that's only part of the reason he's excited. In creating Facebook, Zuckerberg has social ambitions. He thinks helping people connect to other people on the Web will make the world a better place. As he puts it, "her values aligned very well with my own."

Sandberg has made a career out of helping exceptional individuals realize their aspirations. It started with her favorite college professor, Larry Summers, who taught her public economics at Harvard. Not that it was obvious at first.

"She sat in right field with a few friends with whom she always seemed to be having a terrific time," Summers remembers. "So I was a little surprised when she had the best midterm and then she also had the best final." Summers would become her mentor, serving first as her thesis adviser and then upon her graduation in 1991, hiring her to work with him at the World Bank.

This wasn't what Sandberg had originally intended. She figured she'd go to law school and ended up foregoing Harvard Law, which had accepted her. But Sandberg's career path has always taken unexpected turns.

"I want to do things that matter," she explains over a lunch at the University Café in Palo Alto. At the World Bank, Sandberg assisted Summers and also traveled to India for a project to curb the spread of leprosy. After getting her MBA in 1995 (yes, Harvard again) she spent a year at McKinsey before becoming Summer's chief of staff at the Treasury Department during the Clinton administration. There, she gained a reputation for her intellect, organizational abilities and her skills in managing personal relationships.

"She was one of the people who kept [the Treasury] together," said Lee Sachs, who served as Assistant Secretary of the Treasury for Financial Markets at the time. Summers concurs: "She never let an event go without a resolution. It made my job easier, and it also made me perform better."

As the Clinton administration drew to a close, Sandberg was courted by a number of investment banks but chose instead to go to Google, which was then a valley startup with fewer than 300 people. There she took charge of AdWords, which lets Web publishers place text ads on their Web sites and managed four employees. Early on, she thought about how to lay the foundation for a massive global business.

"I don't think there is a business in the world that was getting users at that pace," remembers Adam Freed, whom Sandberg hired to launch AdWords internationally. Sandberg created divisions and hired people to manage them when her staff was still tiny, Freed recalls: "We were a ten-person team and we were thinking, 'why are you going to hire that?' And she said, 'trust me, you need to think not about now, but where are we going to be in five steps and ten steps?' "

Google's David Fischer, who worked with her from the start and recently moved into the position she vacated at the company, calls this quality her ability to look around corners. "While the rest of us are planning three quarters ahead, she was thinking about how we jump ahead a number of years," he says

In keeping with her focus on social issues, Sandberg also drove Google's billion-dollar philanthropy endeavor, Google.org. She started the Google grants program to provide free search to nonprofits, and she helped develop plans for Google.org and was instrumental in hiring Larry Brilliant to run the company's philanthropic arm.

Sandberg will bring all of these experiences to bear in her new roll at Facebook. It's now up to her to add a dash of corporate structure without destroying the creative chaos that allows the company to innovate quickly. "One of the things I'm certainly focused on is tying things together," she says. "That's not just making a one-off decision, but seeing how it fits into a bigger picture."

First up, she'll tackle international growth. She's also focused on hiring. Facebook needs to find a couple more senior managers. The company is searching for a general counsel and a vice president in charge of policy and communications to round out the leadership team. And Sandberg will help her team come up with a process for identifying and recruiting talented people at every level of the organization.

Sandberg also hopes Facebook will figure out new advertising models for social networks. The company's launch last Fall of Beacon, a tool that lets users share their purchases with friends, was a spectacular failure. Beacon was highly anticipated by marketers, who hoped it would be to social networking what Google's AdWords tool was to search - a way to quickly and efficiently make money off the technology. But many users objected that Beacon revealed personal information, such as what videos they'd rented or gifts they'd bought, without asking.

Six months later, Zuckerberg admits the company messed up. "We made mistakes in communicating about it," he says. "We made mistakes in the user interface. We made mistakes in responding to it after it was out there. But the intent of what we were doing is still good."

Within 30 days, Zuckerberg apologized to users for launching a product that didn't adequately address their privacy concerns and adjusted Beacon to give users more control over what pops up on their profiles. He also now distinguishes Beacon from Facebook's ad strategy, which relaunched at the same time. Beacon, he explains, is part of the platform and just another way for users to use Facebook. The ad service is a different division of the company entirely.

Whatever you call it, though, the bottom line remains stark: Facebook has not yet found a way for using personal connections to advertise. Sandberg acknowledges that there won't be one silver-bullet technology that will make Facebook as profitable as it is popular.

"You can think about it more in terms of form, which is usually banners, pictures, things like that, or you can think about it how I think about it, which is, it's awareness building. If that's what we mean by brand advertising, I'm very hopeful that we play a significant role in pushing the envelope," she says. "How we get there, I don't think we know yet. In terms of what brand really is we could be enormously important in the market and that's a long-term goal I have."

But on day 13, that seems a very long way off. Sandberg's immediate challenge is to meet her employees, and she has spent the better part of the first two weeks checking in with them. Enthusiasm about her arrival emanates. Outside the glass-walled conference room, her head of human resources, a 2004 Stanford grad named Christopher Cox, ripsticks across the floor. (It's kind of like a skateboard, but cooler.) Earlier he stopped in to say how excited he was that Sandberg had arrived. "It was like Sheryl came and kicked everybody in the ass and said this is going to be hard," he said. "And then gave everybody a hug."

Egg On Their Face(book) - Facebook have been left red-faced after they disabled Lib Dem MP Steve Webb's account saying they believed he was "a fake".

Click here to read the full story. [adam boulton]

DAMASCUS (Reuters) - Syrian users of Facebook said on Friday the authorities had blocked access to the social network Web site as part of a crackdown on political activism on the Internet.

"Facebook helped further civil society in Syria and form civic groups outside government control. This is why it has been banned," women's rights advocate Dania al-Sharif told Reuters.

"They cut off communications between us and the outside world. We are used to this behavior from our government," said Mais al-Sharbaji, who set up a Facebook group for amateur Syrian photographers.

There was no comment form the government, which has intensified a campaign against bloggers, virtual opinion forums and independent media sites in recent months.

Syria has been under emergency rule since the Baath Party took power in a 1963 coup. No public criticism of the party and the powerful security apparatus is allowed. Scores of dissidents have been jailed over the past year.

Thousands in Syrian use Facebook to communicate with relatives and friends abroad. The social network also links groups with political and cultural interests. Syrians who have pages on the site include businessmen with links to the ruling class and pro-government commentators.

Ammar al-Qurabi, head of the National Association for Human Rights, said little independent political content published by Syrians on the Internet is now tolerated.

"We have asked officials and they said Facebook could become a conduit for Israeli penetration of our youth, but the real reason for blocking the forum because it provides for criticism of the authorities," Qurabi said.

"There is now an 'Internet political crimes' ward at one prison. Internet cafes have been required to limit their communications services," said Qurabi.

Activists who have published Internet articles are often summoned for interrogation and several have been arrested. Dozens of sites have been banned for what officials deem as subversive activity.

Even Microsoft Hotmail is regularly blocked. There is no access to scores of newspapers on the Web, such as the Lebanese daily an-Nahar and al-Quds al-Arabi, which is published in London by veteran Palestinian journalist Abdel-Bari Atwan.

The Internet started spreading in Syria only when President Bashar al-Assad succeeded his father, Hafez al-Assad, in 2000. Bashar held the title of head of the Syrian Computer Society before becoming president.

Microsoft (MSFT) has invested $240 million in Facebook at a valuation of $15 billion and gets the rights to sell third-party ads on the Facebook network. That’s about 2 percent stake. Not as crazy as the $900 million that MySpace (NWS) pried out of Google (GOOG), but still pretty steep. I thought the deal was for $500 million, so I am guessing there is another shoe to drop here. (Looks like Microsoft is going to be to Facebook what Yahoo was for Google… transition strategy!)

Today Facebook also launched an application for BlackBerry, and got RIM and T-Mobile USA on stage with Facebook co-founder Dustin Moskowitz to announce it today. Facebook already has an iPhone app that early adopters everywhere love to brag about. Moskowitz also announced the Facebook platform was expanding to all web-enabled phones, with apps appearing on mobile Facebook profiles and getting access to SMS to communicate with users.

Press call live blogging below the fold:

• The call was supposed to start at 2 pm, its already 2.04. Bad muzak playing!
• Mark Zuckerberg , if you want to play Steve Jobs, learn to be punctual like Steve.
• Maybe they are getting their stories right, and haven’t figured out how to put the obscene finger gesture to Google in polite/politically correct language.
• 2.10 pm, and still terrible music and no sign of anyone.
• 2.12 pm: It’s on. Vivek Verma and Kevin Johnson, president of the Platforms & Services Division at Microsoft, are on the call. Brandee Barker (spokesperson) and Owen Van Natta, vice president of operations and chief revenue officer at Facebook. are on the call.
• Mark is beyond all these PR things ;-) He got peeps it seems who are handling this!
• There is an error in the press release, and will be reissued.
• Owen is speaking. He is saying stuff which could be spoken by any executive on any conference call.
• Kevin - major win for Microsoft in advertising and strong signal from our biggest partner. Facebook is a strategic win for us. We are very pleased with the depth and the scope of this deal. Seems like Facebook is going to work on newer ads for social environment.
• Kevin says the equity stake is a strong statement of confidence in this partnership. Blah blah! 200 million users is in realm of possibility and combine that with monetization opportunity.
• Kevin - there are certain elements we won’t disclose about this deal. We have strong alignment around technology. Lot more we will do together.
• Owen says: lot of folks wanted to partner with us over advertising, and relationship has been great for us. We are now expanding our relationship beyond U.S. borders.
• Owen says: no restriction on 3rd party developers. I think they can tap into Microsoft ad center and other technologies.
• (Arrington asks) Any other investors in this round? Not announcing any other investors in this round for now. Just Microsoft.
• Kevin says - we are expanding our advertising relationship internationally and that is what we are announcing right now.
• In response to Josh Quittner’s question about who else were they talking to, Owen says not commenting on who were others they were talking to.
• Owen says lot of rumors about financing but this is the best set of terms we came up with this deal.
• Not talking about Facebook IPO.
• Is this deal just for banner ads? Will it be expanding to Internet Search deal and will it be separate deal? We are not announcing anything related to Web Search. This is only about advertising.
• Question Mine: Kevin Johnson (what we are seeing so far) we continue to see monetization which continues to improve. We will drive hire. Continues to improve… both parties are not disclosing the metrics. Part two - in terms of what we are using the capital for, our innovation and growth we are seeing today. Expanding our employee base. 700 employees in 2008 (wow). International growth and there is a lot of technical infrastructure we can build around the. Allow people to experience better Facebook. (I will expand on this point later)
• Building your own (FB) salesforce? Microsoft is an exclusive advertising platform partner. The two companies work together today and going forward - there are different needs advertisers have. Socialization of the Internet needs innovation.
• Does Microsoft have access to Facebook user data? User trust is core to what we focus on and we both are going to provide highly relevant advertising and focus on that. We don’t want to violate user trust… There are certain parts of the partnership we are not announcing. I think they are dodging a very relevant question.

Hitwise just sent me over some data that helps put the deal in perspective. According to the Internet monitoring firm, for the week ended 10/20/07:

• Facebook.com was the 9th most visited web site in the U.S., with .96 percent of all Internet visits.
• U.S traffic to Facebook.com has risen 102 percent year-over-year when compared with the week ended 10/21/06.
• Among a custom category of leading social networking web sites, Facebook.com received 15 percent of U.S. visits, putting it at No. 2 behind MySpace.com, which received 76 percent. Windows Live Spaces received 0.4 percent.
• Facebook.com received 9.9 percent of its U.S. traffic from search engines. Of that traffic, MSN Search and Live Search combined for .46 percent to Facebook.com. Google sent 6.82 percent of U.S. traffic while Yahoo! Search sent 1.34 percent of traffic.
• U.S. visits for Facebook.com among users ages 35 and over have increased 19 percent when compared with the week ended 10/21/06.

Microsoft Wants A Piece Of Facebook? - How much is a 5 percent stake in Facebook worth? $300 million? $500 million? $750 million? It all depends on how desperate the buyer is and how well Mark Zuckerberg can play a game of corporate poker. Rational thinking long ago flew out the window when it comes to anything Facebook.

[gigaOM]

Workers who spend time on sites such as Facebook could be costing firms over £130m a day, a study has calculated.

According to employment law firm Peninsula, 233 million hours are lost every month as a result of employees "wasting time" on social networking.

The study - based on a survey of 3,500 UK companies - concluded that businesses need to take firm action on the use of social networks at work.

Some firms have already banned employees from accessing Facebook.

Lunch-break option

Mike Huss, director of employment law at Peninsula called on all firms to block access to sites such as Facebook.

He asked: "Why should employers allow their workers to waste two hours a day on Facebook when they are being paid to do a job?"

He said that loss of productivity was proving a "major headache" for firms.

"The figures that we have calculated are minimums and it's a problem that I foresee will escalate," he said.

While some firms have embraced Facebook as a motivational tool, others have cracked down.

Last month, Kent County Council (KCC) banned workers from using Facebook in an effort to crack down on "time-wasting".

The TUC said last months that all-out bans were not the answer and that firms should draw up guidelines instead.

The organisation said employers were entitled to stop people using the sites during the working day but that staff should be able to use their time during lunch breaks to contact friends on sites such as Facebook, MySpace and Bebo.

Mr Huss is not convinced such an approach will work in the long-term.

"If a company can police the system, and only allow limited access during lunch breaks then that is fine. However I think it would be easier and less expensive to ban access altogether," he said.

Real friends?

Meanwhile, scientists have cast doubt on how big a part social networking sites such as Facebook and MySpace can play in people's offline social lives.

Dr Will Reader, a researcher at Sheffield Hallam University, has been conducting research into the new types of friendships being fostered online.

Presenting his findings at the BA (British Association) Festival of Science at York University, he said that the huge contact lists of some members of Facebook and MySpace belied their real social status.

"Although the number of friends people have on these sites can be massive, the number of close friends is approximately the same as in the face-to-face real world contact," he told delegates at the festival.