Dear Elliot Schrage:

BoomTown wins.

As Sheryl knows from experience, don’t mess with the Swish. Or Texas. Or Zohan.

Just don’t mess.

For everyone else, here is the entire memo that Facebook sent out this week from CEO and founder Mark Zuckerberg to its 800-person staff about the departure of CFO Gideon Yu and the financial status of the Silicon Valley social-networking start-up, which some had been questioning.

According to the memo, there is a company Q&A tomorrow about it all too! What should I wear?

UPDATE:In a version of the memo I first posted, there was a repeated paragraph, with slight differences. This might have been a software error–several versions I got of this entire memo had different punctuation in various places.

In any case, I eliminated the extra repeated graph and I changed one part below of “we are” to “Facebook is” in brackets.

COMPANY CONFIDENTIAL–DO NOT FORWARD

Hey Everyone–

Today ends the first quarter of 2009, so I wanted to send out an update on our growth and financial progress, as well as a couple of changes we are making.

Our user growth has been extraordinary over the past year and has continued to be strong throughout Q1. We are getting very close to reaching our 200 millionth active user. This is pretty remarkable considering we just reached 100 million actives a little more than seven months ago. We have become the top site for sharing information on the web, and this gives us a good strategic position to help people share even more.

I am also pleased that our financial progress has been very strong as well. While we came into this year wondering how the recession might affect us, our financial performance in the first quarter surpassed our expectations. As other businesses around us are slowing down and cutting back, we continue to grow around the world. Our advertising products are becoming more attractive for advertisers and we have seen strong growth in both our domestic and international direct sales and online sales channels.

Even in the current economic environment, we are confident that this success will continue. Based on our first quarter results, we now believe we are on track to see our revenue grow by at least 70% this year. We just completed our fifth straight quarter of EBITDA profitability. And most importantly, we expect to achieve free cash flow profitability next year. That’s an important measure of financial success and sustainability because it means we’d be able to fund all of our operations and server purchases from the cash we generate while increasing our cash reserves in the bank. Hitting these numbers will require continued hard work, discipline and execution by everyone here at Facebook, but we are on the path to achieve these goals.

As we ramp up to take on these challenges, I want to let you know that Gideon Yu will be leaving the company. Gideon has played an important role in helping us achieve our financial success, building a strong finance team and establishing the core financial operations of our company. I will always be grateful to Gideon for his contributions to Facebook and what we are trying to accomplish. As those of you who know him know, Gideon’s family is his highest priority and it’s certainly not the usual cliché to say that he plans to take some time off to be with his wife and son. Gideon and I have often discussed that the next stage of his career will likely be as an investor, and I fully support him in this regard.

We have retained Spencer Stuart to search for a new CFO and we will be looking for someone with public company experience who can help take us to the next stage in our growth.

In the interim, the finance team will report to Cipora Herman in her capacity as Treasurer and Ted Ullyot as mteam lead. In addition, [Facebook is] fortunate that Peter Currie, the former CFO for Netscape, has agreed to serve as the advisor to Facebook until a new CFO comes on board.

As always, please feel free to reach out to me or to others on mteam if you have any questions about our finance plans or organization. I’ll discuss this more at the Q&A on Friday and I will be happy to take questions then too.

Congratulations to everyone on a great start to the year and on all the momentum you have all helped build for the rest of 2009.

Mark

Facebook CFO Gideon Yu (pictured here) is leaving Facebook, as the company announced internally today that it was replacing him and searching for a new CFO on the path to an eventual IPO.

The Wall Street Journal also reported the news, noting that the huge social-networking start-up was looking for a CFO with “public company experience.”

But several sources within the company said the departure was more due to an increasingly strained relationship between Yu and Facebook founder and CEO Mark Zuckerberg over strategic disagreements about a wide range of issues, from increasing advertising revenue to fund-raising discussions with investors.

“At Facebook, you’re either with Mark or you’re not,” said one source at the 800-person company, located in Palo Alto, Calif., and founded five years ago. “And, if you’re not, you leave.”

As a sign of that, Yu was out of the company HQ immediately today after a meeting, said several sources.

Facebook confirmed the move in a statement, focusing instead on its hope for an IPO sometime in the future:

“Facebook confirms that CFO Gideon Yu will be leaving the company. Gideon has played an important role in helping us achieve our financial success, building a strong finance team and establishing the core financial operations of our company. We are grateful to Gideon for his contributions to Facebook and what we are trying to accomplish. Despite the poor economic climate, we are pleased that our financial performance is strong and we are well positioned for the next stage of our growth. We have retained Spencer Stuart to lead our search for a new CFO and will be looking for someone with public company experience.”

In addition, trying to stanch the rumors of its financial weakness and need to raise more funds, Facebook said in its internal memo to staff that it was on the path toward a public offering soon, with revenue growth up 70 percent in 2009 and EBITDA profitability this year, and that it would be cash-flow positive in 2010.

The memo also painted Yu’s departure as another step toward its much anticipated IPO, although it is clearly an ouster of much more complex internal reasons about how Facebook is run.

Facebook has had a lot of those in its short history.

From come-and-then-gone Google tech exec Ben Ling to former COO Owen Van Natta to the pair who started Facebook with Zuckerberg, the fast-growing start-up has seen more executive turnover and turmoil than most big companies.

In fact, Yu–who was an exec at both Yahoo (YHOO) and YouTube and integral to its sale to Google–replaced former CFO Mike Sheridan in 2007, in another case of a key exec being replaced.

Some inside and outside the company were quick to blame COO Sheryl Sandberg for Yu’s departure–probably due to the fact that the pair’s relationship was initially tense when the well-known Google exec arrived a year ago. That has been much less so of late, sources said.

And while Facebook can be a highly political place, with an unusual level of passive-aggressive infighting among execs, it is also a place where Zuckerberg and his wishes firmly hold sway.

And those wishes included the fact that Zuckerberg has long and publicly maintained that Facebook’s growth was paramount over a focus on monetization of the service.

Yu is known internally to be more conservative fiscally, pushing on Zuckerberg to ramp ad revenue more quickly and to consider a range of options outside of IPO, including selling the company.

Many current and former execs had hoped the company would IPO, a process that has been dragged out due to the weaker economy. But–barring that–many had also hoped it would sell to a larger company like Google (GOOG) or Microsoft (MSFT).

In fact, Microsoft has expressed interest in buying Facebook many times, and it was Yu and Van Natta who were key to getting the software giant to outbid Google to invest in the company at an astounding $15 billion valuation.

After raising more than $500 million previously, Yu has more recently been busy working with top execs on the best way to raise more funds for Facebook, in order to allow it grow faster and give it a deeper financial cushion.

High user growth has blown past Facebook’s internal projections, which is both an audience blessing and a cost curse.

But that fund raising has been at a much lower valuation and in a very weak economic climate, adding to stress internally at Facebook, many said.

Yu has held a number of meetings with investors, many of whom have told me they have asked him consistently about the monetization issues at Facebook and exactly when Zuckerberg would turn on the ad spigot at the service.

Yu has also has been involved in some recent debt financing of equipment, which is not as unusual for a fast-growing company as some recent reports have portrayed it, although that might also have been a source of tensions.

How to answer prospective new investors has probably been at the heart of his problems with Zuckerberg, who has been known to run hot and cold on top managers, especially with those who disagree with him too much.

That was clearly the case with Yu.

But, said many execs at the company, Zuckerberg’s conviction that growth is key over all other concerns–about which the company today is taking the edge off by noting sunnier financial results in the internal document–has been the correct one.

Currently, Facebook is veering in on 200 million users, which represents an astounding accomplishment.

But how it is going to take those numbers and make Facebook into a revenue-rich company on par with its increasing power on the Web is the question it will face until, of course, it does.

Besides the current drama over Yu today, Facebook has also recently been embroiled in unhappiness about its recent redesign and separately, about onerous changes to its Terms of Service.

Facebook has since backtracked on both issues, likely adding to the level of pressure on Zuckerberg and top execs.

And that is not even mentioning the curse of the Winklevii–it seems the fun never stops at Facebook HQ!

On an actually more amusing note, I once nicknamed Yu “Death Cat.”

As I wrote in mid-2007:

“Like that cat named Oscar who can detect death, Yu seems to have an amazing ability to get a sweet job at the hot Web company of the moment at just the right time. Case in point: He left Yahoo as its treasurer and went to YouTube as its CFO just a month before it sold to Google for $1.6 billion, a deal in which Yu apparently played a key role. Then, on his way to a spot as a junior partner at also-hot VC firm Sequoia Capital, he grabbed the Facebook CFO job in July. I say we watch where Yu goes and follow stealthily behind so as not to be detected.”

It’s more than likely Yu will pop up again soon in Silicon Valley in another prominent CFO job or as a venture investor. Although, after today’s events, this digital cat has definitely lost one life.

BoomTown might have been remiss in my post yesterday on top candidates for the Yahoo CEO job, after the news Monday that Jerry Yang is stepping down, by leaving out several key possibilities.

Yesterday’s roster included News Corp.’s Peter Chernin, Google’s Tim Armstrong, Kevin Johnson of Juniper Networks (JNPR) and also two Yahoo board members, among others. (The main internal candidate, Yahoo President Sue Decker, seems unlikely to get the nod.)

So here is an addendum to my initial list–all of whom are Yahoo (YHOO) outsiders.

Tom Freston:

Chernin is not the only media mogul whose name is being bandied about–the other prominent one is former Viacom head Tom Freston.

Freston apparently got shafted by the–let’s be polite here–disturbingly volatile founder of Viacom (VIA), Sumner Redstone, for not buying MySpace. In fact, News Corp. (NWS), which also owns this Web site, did. But Freston remains a well-respected and creative exec and has been dabbling in the Internet space since leaving Viacom.

Also, Oprah and Arianna love Freston–which is all I need to know.

Jeff Jordan:

Jeff Jordan, the former top eBay (EBAY) exec who is now the CEO of OpenTable, was also on the short list for COO at Facebook, a job that went to former Google exec Sheryl Sandberg.

While the restaurant reservations Web start-up has been headed for a public offering, that event has obviously been pushed out indefinitely by the econalypse, which might be just the impetus to convince Jordan that bussing tables all day is too dull.

Some speculate that Yahoo could buy OpenTable and get Jordan in the process.

Richard Rosenblatt:

Another interesting idea is Richard Rosenblatt of Demand Media, a company that Yahoo was sniffing around not too long ago.

The network of social-networking sites and apps maker is an innovative play in the space and might give Yahoo some much needed Web 2.0 DNA. Demand could still be bought by Yahoo, in order to put Rosenblatt into place.

(Rosenblatt, for those who do not remember, ran the company that owned MySpace, and he was key to selling it to News Corp.)

Also, Lance Armstrong likes Rosenblatt.

Shelby Bonnie:

A reader actually made the excellent suggestion of former CNET head Shelby Bonnie, who is now investing in start-ups. Bonnie is another steady exec–despite leaving CNET, now owned by CBS (CBS), under an options backdating controversy–and is well-liked in the Internet industry.

Yahoo would be a much bigger job than he has ever held, although he certainly has both tech and advertising experience online.

David Rosenblatt:

Lastly, especially if Yahoo is interested in an exec who has turnaround talent, there is probably no better a choice than DoubleClick CEO David Rosenblatt. An experienced online advertising exec, he is also sharply outspoken and knows how to get companies in line and fast.

He is also impossibly rich after Google (GOOG) bought DoubleClick out from under–wait for it–Yahoo recently. While he is still running the show for Google, after having decided to stay, Yahoo might present an interesting challenge for the very savvy Rosenblatt.

Please see this disclosure related to me and Google.

Today, a panoply of prominent tech and Internet leaders is taking a very public stand against a controversial initiative before California voters, which would eliminate the current legal right of same-sex couples to marry.

Forming a group and taking out a full-page ad in the San Jose Mercury News tomorrow, the execs hope to convince voters to reject Proposition 8, which is titled “Eliminates Right of Same-Sex Couples to Marry.”

Silicon Valley has had a long history of supporting gay rights. And recently, Google (GOOG) Co-Founder Sergey Brin has made a strong statement opposing Proposition 8, while Apple (AAPL) gave $100,000 to help defeat it.

The honorary co-chairs of “Silicon Valley Leaders Say NO on Proposition 8″ include: Brin; Bill Campbell, Chairman, Intuit; David Filo, Founder, Yahoo; Chuck Geschke, Founder and Chairman, Adobe Systems; John Morgridge, Former CEO and Chairman, Cisco Systems; Pierre Omidyar, Founder and Chairman, eBay; Sheryl Sandberg, COO, Facebook; Eric Schmidt, CEO, Google; and Jerry Yang, Founder, Yahoo.

In a statement in a press release set to go out this morning, Yang said: “Silicon Valley has always been an example for the rest of the country of how diversity and openness help to drive innovation and value creation. This divisive measure is the antithesis of those values that make Silicon Valley so unique.”

An ad the group–which also includes star venture capitalist Mike Moritz of Sequoia Capital, as well as Palm Founders Donna Dubinsky and Jeff Hawkins, and many others–is putting out tomorrow in the Mercury News reads:

Silicon Valley Leaders Urge You to Stand for Equality.
Vote No on Proposition 8.

As Silicon Valley leaders, we are committed to equality and fairness. We are opposed to Proposition 8 because it would change our state constitution to take away rights from one group of people. It would set our state, and our country, back in the fight for fundamental fairness and equal rights.

Please join us by reaching out to friends and neighbors and asking them to stand for fairness: Vote No on Proposition 8 on November 4th.”

(The ad and a longer list of tech leaders opposing Proposition 8 is below.)

If passed by a majority of voters, the California Constitution would be amended to include a new section stating “only marriage between a man and a woman is valid or recognized in California.”

Earlier this year, the California Supreme Court held that same-sex couples have a constitutional right to marry under the state’s constitution.

Former California State Controller and former exec at eBay Steve Westly noted that his own interracial marriage was once illegal, which is one of the reasons he was opposing Propostition 8.

“It really is the civil rights issue of the day … people stood up and fought for people like me and now it is time to stand up for others,” said Westly, who was an early supporter of gay marriage and is said to be eyeing a run for governor of the state. “While this is a polarizing issue, it is mind-boggling to me not to support the right of any two adults who love each other to marry.”

One thing is certain–the issue is indeed polarizing. Currently, the vote on Proposition 8 is very close, and a huge amount of money–more than $60 million–has been spent by both sides in the battle, which is considered one of the most contentious and high-profile in the nation.

Here is the ad (click on the image to make it larger):

LEADERS (partial list):
Deborah Barber, Principal, Jackson Hole Group
John Battelle, Chairman and CEO, Federated Media
Larry Birenbaum, Former Senior Vice President, Cisco Systems
Lorna Borenstein, President, Move
Larry Brilliant, Executive Director, Google.org
Owen Byrd, President, Byrd Development
John Chisholm, Chairman and CEO, CustomerSat
Barry Cinnamon, CEO, Akeena Solar
Tod Cohen, Director of Government Affairs, eBay
LaDoris Cordell, Administrator, Stanford University
Sue Decker, President, Yahoo!
Jack Dorsey, Chairman, Twitter
David Drummond, SVP, Corporate Development & Chief Legal Officer, Google
Donna Dubinsky, CEO, Numenta
Alan Eustace, SVP, Engineering and Research, Google
Naomi Fine, President & CEO, Pro-Tec Data
Rachel Glaser COO/CFO, Reunion.com
Carl Guardino, President and CEO, Silicon Valley Leadership Group
Andre Haddad, CEO, Shopping.com
Jeff Hawkins, co-Founder Palm, Handspring, and Numenta
David Karnstedt, Investor
Scott Kaspick, Managing Director, Kaspick & Co.
Steve Kirsch, Serial Entrepreneur
John Koza, CEO, Third Millennium
Ross LaJeunesse, Head of State Policy Western US, Google
Gary Lauder, Managing Partner, Lauder Partners Venture Capital
Laura Lauder, General Partner, Lauder Partners Venture Capital
Len Lehman, Investor
John Luongo, Former CEO, Vantive Corporation
Roger McNamee, Managing Director & co-Founder, Elevation Partners
Ken McNeely, President, AT&T California
Michael Moritz, Partner, Sequoia Capital
Susan Packard Orr, CEO, Telosa Software
Randy Pond, Executive Vice President, Cisco Systems
Amy Rao, Founder & CEO, Integrated Archive Systems
Jana Rich, Managing Director, Russell Reynolds
Miriam Rivera, Former Vice President and Deputy General Counsel, Google
Dan Rosensweig, Investor
Dan Rubin, Partner, Alloy Ventures
Hilary Schneider, Executive Vice President US Region, Yahoo
Len Shustek, Chairman, Computer History Museum
Jeff Skoll, Former President, eBay Inc.
Stephanie Tilenius, SVP, eBay North America
Joy Weiss, President and CEO, Dust Networks
Steve Westly, former California State Controller & former SVP eBay
Evan Williams, CEO, Twitter

[UPDATED on 11/05/08] In the interest of full disclosure, I am obviously not a supporter of Proposition 8. And, after I wrote this piece and hours before it passed last night, I got married in California under its recent same-sex marriage law, which the initiative has now overturned. It is still legally unclear what that will mean for people like me who married before Proposition 8 was passed, as it is not retroactive; as of now, the marriages remain valid. In any case, please see this disclosure related to me here.