CEO Mark Zuckerberg has just informed Facebook's staff that his long-restive cofounder, Dustin Moskovitz, is leaving the company. Adding to the blow: Moskovitz, left, is taking with him Justin Rosenstein, right, a top engineer who was one of the first employees Facebook poached from Google as it began its tumultuous rise in 2007. The two are starting a new company together. Rosenstein wrote a much-circulated email to friends explaining why he'd left Google, with the now-famous line, "Facebook really is That company.... I have drunk from the kool-aid, and it is delicious." Rosenstein's note is worth rereading — keeping in mind that, if he's leaving, Facebook must no longer be the company Rosenstein wrote so enthusiastically about:

Another Facebook employee has managed to figure out how to get out from under Facebook COO Sheryl Sandberg's thumb — and he didn't even have to leave Facebook to do it! Christopher Cox, Facebook's director of human resources, has gotten a new job as the company's director of product. In April, told Fortune about Sandberg's entry into the company: "It was like Sheryl came and kicked everybody in the ass and said this is going to be hard. And then gave everybody a hug." Afterwards, Cox told colleagues he "felt sick after saying that," but that he had to because Sandberg had told him to. Putting an HR guy in charge of product sounds implausible, but Cox, before running HR, was an early engineer at the company and helped launch the site's crucial News Feed feature. It's not a promotion, but it must be a relief.

Slide and RockYou, the two largest developers of Facebook apps, have long had a serious rivalry over the most frivolous Web software. But the two may be pulling apart. Slide, Max Levchin's SuperPoke machine, signaled yesterday that it's betting on online entertainment, partnering with Hollywood to bring mainstream content to its FunSpace apps. RockYou, meanwhile, seems to be turning into a gamemaker. "We want to be like the Electronic Arts of social networks, and build games for social networks," RockYou CEO Lance Tokuda, shown here, said today at the Startonomics conference in San Francisco, referring to the dominant maker of videogames.Build, or perhaps buy. In July, RockYou acquired Speed Racing, one of the top games on Facebook. But RockYou, in diverting its attention from its rivalry with Slide, will face well-funded competitors in startups Zynga and SGN. By the time all this becomes a serious business, isn't it just as likely Electronic Arts will be the Electronic Arts of social games?

Facebook's management is certainly innovative in figuring out how to pocket a little spending money from their profitless enterprise, but not necessarily so innovative in actually building a solid revenue model. But when you can't make money, you can at least save some by outsourcing work offshore to tax-havens with English-speaking populations. However, could COO Cheryl Sandberg have killed two birds with one stone? ScalaWag offers a modest proposal on how Facebook could generate some revenue in the Hibernian hills:

The great Facebook cashout now has a date: November 1. Former and current employees recently received an email from Facebook's stock administrator updating them on plans to let employees sell some of their shares, even though the company is still private. Details of the plan are expected in mid-October; one ex-employee characterized it as a "buyback." That suggests that the company itself is going to buy shares from employees, and then sell them to an outside buyer. The limits previously outlined by CEO Mark Zuckerberg in an email to employees — 20 percent of an employee's vested shares, or $900,000, whichever is less — remain unchanged. The plan has an advantage over letting employees make ad hoc sales to wealthy investors, in that Facebook gets to choose who it has a shareholder. One thing's not clear: How will Facebook force employees, especially ex-employees, to stick with the plan?Facebook's corporate charter has a relatively unusual provision for employee stock sales. The company has a right of first refusal over employees' shares, meaning that it has the right to match any price offered by a buyer; most companies have tighter restrictions. Employees have been told that sales outside the program will have "career-limiting effects"; promotions, raises, and new stock-option grants may be taken away from those who sell anyway. But Facebook has no such hold on ex-employees. And the offers in the market are tempting. Facebook's program will let shareholders sell at $8.90 a share, which represents a company valuation of $4 billion; some buyers are offering $11 a share. If too many transactions go through at the higher price, Facebook may have to revalue its shares, which will have untoward tax implications for the company and other employees. It's not clear what Facebook can do, short of rewriting its corporate bylaws. But the company program does have one thing going for it: It will be formal, organized, and predictable. For geeks who'd rather optimize code than their own financial returns, letting their managers handle their money may seem easier.

Grant Facebook COO Sheryl Sandberg this much credit — she's endlessly creative in her explanations. Take her reasoning for opening up an international headquarters in Dublin, Ireland: "The talent pool in Dublin is world-class and recruiting local talent will help us better understand the needs of local users and the regional dynamics that, in turn, can give us better insight into what features matter most.” What she really means: It's a cheap place to hire a lot of drones in customer support. And Ireland's tax rates are rock-bottom low. If Facebook ever makes money, it'll be set. Kudos to Sandberg for dressing up a cost-savings maneuver as a way to advance international understanding.

Ted Ullyot, the neoconservative lawyer who served as Alberto Gonzales's former chief of staff, is not Facebook's first general counsel, as had been reported. Facebook cleared the way for Ullyot by sending former top lawyer Rudy Gadre packing in July. Gadre left "to spend more time with his family." Gadre is spending more time with his family by working for a Seattle startup called Evri. Here's one theory: Facebook's politically minded COO, Sheryl Sandberg, may have had Ullyot lined up for the job, but waited to finalize the hire until the Justice Department released its report on Gonzales's firings of U.S. attorneys general for political reasons. Notably, Ullyot's name does not appear in the report. A tipster tells us his "high-level insider" friend at Facebook isn't happy about the swap anyway, given Ullyot's controversial political background. Naturally, he blames Sheryl Sandberg:

Congress has passed a bill compelling registered sex offenders to submit "email addresses, instant message addresses and other identifying Internet information" to law enforcement. The legislation is sponsored by John McCain, who is not uncoincidentally running for president. The bill, which has passed both houses of Congress and is expected to be signed into law by Bush, aims to protect children from sexual advances on social network sites. Facebook, MySpace, and others are meant to cross-check their user databases with the federal list, and, in the parlance of these types of laws, "delete online predators." But these bills are so broken from the start: what's to keep a past sex offender from just using multiple online identities? Oh, and then there's that whole sticky issue of protecting freedom of speech for those who've served their criminal sentences. Courts in Utah — yes, that Utah — have just ruled on that, providing bad news for those who supported the McCain bill.After a challenge to a similar state law in Utah last week, a federal judge restored a sex offender's right to anonymous speech online. Though the judge stated that this decision should not apply unilaterally to all registered sex offenders, her ruling is the first to question the conventional wisdom: that curbing online speech can curb sex crimes. Free speech advocates and social network analysts have long been claiming that this approach won't work. First, there's the problem of the expansive definition of "sex crime" — from violent assault to public nudity. On that basis, Flickr has at least one employee who, after bending over bare-assed for his colleagues, could be banned from the Internet. Add to that that state and Federal lawmakers still can't seem to grasp the qualitative difference between a sixteen year old flashing her boycrush and a fifty year old posing as the same sixteen year old. Toss with a little bit of election-year mania about being tough on crime, and you get a botched bill that may only drive sex offenders further from the public eye — the opposite of the safer, happier Internet McCain hoped to create. (Photo by soggydan)

One goal of the Facebook redesign was to kill pointless widgets that cluttered user-profiles. It's working. When Facebook launched its platform last year, AllFacebook's Nick O'Neil created your typical one-trick app: the Bush Countdown Clock. All it did was sit on a user's profile like a badge, and yet it attracted and maintained over 50,000 users. But with Facebook's redesign, O'Neill's widget and other simple badges like it were moved to a "boxes" tab on user profiles. After the redesign went permanent on September 11, traffic to the countdown clock dropped 60 percent almost overnight. Writes O'Neill: "Widgets have not survived the shift over and my guess is that within a matter of weeks we will see most top-performing widget applications practically disappear." In December 2007, VC Ross Levinsohn said 2008 would be all about "Facebook plus widgets." Maybe that sort of poor prediction explains why he and partner Jon Miller can't find their pot of gold?

Why did the citizen-spying National Security Agency pay Google $2 million? According to a contractobtained through the Freedom of Information Act and parsed by Blogoscoped, the NSA purchased "four Google search appliances, two-years replacement warranty on all of them, and 100 hours of consulting support." I know, kind of a letdown. But we sincerely hope that won't stop the conspiracy theorists from creating another paranoia-fueled video like the classic we've embedded below.

New Facebook lawyer Ted Ullyot will have his hands full. Before Mark Zuckerberg came along, every college had a facebook — a collection of pictures of the incoming freshman class, distributed in print. But now, there's only one Facebook. Aaron Greenspan, a Harvard student who came up with an online facebook called HouseSystem prior to the creation of Facebook, has long disputed Zuckerberg's claim to the idea — and he's been disputing the company's name, too. Records from the U.S. Patent and Trademark Office now show that Greenspan's suit to cancel Facebook's trademark has resumed, having survived two motions to dismiss. The most probable outcome here: Like Cameron and Tyler Winklevoss, the twins who claim they hired Zuckerberg to work on their college social network, ConnectU, Greenspan will get paid off with a piece of Facebook, too.

Click to viewAccused of permitting unwarranted spying on citizens, torture, helping to blow a CIA agent's cover and firing non-political appointees for political reasons, former U.S. Attorney General Alberto Gonzales left the White House shrouded in ignominy. Facebook just hired his former right-hand man, Ted Ullyot, as its general counsel. The privacy advocates who plagued Facebook during its Beacon controversy might not be pleased, but Washington insider and top Facebook flack Elliot Schrage is giddy. "He has an extraordinary combination of private legal practice and public sector experience. So many of the legal issues we face touch on both of those arenas," Schrage told the Los Angeles Times. "Ted's arrival really demonstrates we're a little more grown-up." Ullyot's impressive resume:

Click to viewBoomp3.com At the Washington DC premiere of The Secret Life Of Bees, a young male fan took a major step forward in his relationship with actress Dakota Fanning. After taking the photo, Billy Walsh asked Fanning if she would be okay with him changing his relationship status on his Facebook profile. Fanning said she wouldn’t mind, but didn’t understand why Walsh would seek her approval. Walsh took a deep breath and explained that Fanning and him have been internet dating for quite some time now and would like to their relationship to the next level. Walsh said, “I’m just started the seventh grade. It’s high time that I settle down with a good girl. A girl like you, Dakota. I can’t be spend all of my junior high years running wild with my bro dawgs looking for a cheap thrills at Stevie Gordon’s pool party. I need to settle down with somebody like you. So, would you mind if it says on Facebook, that ... we’re ... you know ... together?” Fanning was unsure of how to answer Walsh’s question and wanted to think about it overnight. A feeling of dejection swept over Walsh’s young face. He was about to say something when Fanning interrupted him and said, “It’s not a no, but why ruin a good thing by putting a label on it?” [Photo Credit: Splash Pics] *A Call To The Bullpen is a work of fiction. Although the pictures we use are most certainly real, Defamer does not purport that any of the incidents or quotations you see in this piece actually happened. Lighten up, people ... it's a joke.

During an Advertising Week panel on Monday, a moderator asked Facebook COO Sheryl Sandberg how the Wall Street meltdown will effect online spending. Sandberg delivered a carefully crafted response to an expected question touching upon her time at the Treasury during the Clinton years, the Mexican peso, the Asian crises of the 1990s, and contagion, a fancy new term the rest of us can break out at dinner parties. When she's so comfortable talking global economics, why did Sandberg ever leave Washington D.C.? Look how smoothly she endorses Treasury Secretary Hank Paulson. Most obvious of all: She's clearly enjoying herself. We don't get the same vibe from Sandberg when she's talking up Facebook.

The "I Hate The New Facebook" group is up to 1.4 million members. Facebook plans to make its redesign permanent next week anyway. That rebuff won't hamper Facebook's popularity, or discourage the creation of new groups motivated by the urge to whine. Starting a group on Facebook is the millennial generation's preferred act of protest, but not because the students who create them hope to change anything. They are popular because, since preschool, my fellow millennials and I — very special snowflakes, all of us — have been told that it's not if you win or lose, or even how you play the game. It's that you participate.We millennials know there are two things we can do about weighty problems like the Sudan, Iraq and HIV/AIDS: Start a Facebook group, or mock those who do. I'm not about to start a Facebook group. Forthwith, a list of Facebook groups that never achieved their creator's ambitions to become "one million strong" — though I'm sure coach will give them a plastic trophy at the end of the season anyway.

Elmo Keep is a legal name, but the Australian woman who uses it got booted from Facebook because of it anyway. Facebook's customer sevice drones didn't let her back on the site — and in fact wouldn't tell her why she was banned. Until she mailed them copies of her passport and driver's license, always a risky proposition — Facebook once accidentally published a user's driver's license under similar circumstances. This happens to lots of people with weird names like Ms. Keep's, because part of Facebook's pitch to advertisers is that on the site, users are "authentically themselves" and if they're not, as Facebook COO Sheryl Sandberg puts it in this clip: "We kick you off." The irony, of course, is that people with unusual names often decide to sign up with more common fake names. The Sydney Morning Herald came up with a list of real names that got users banned from the site:

NEW YORK — Facebook is making a huge push during Advertising Week, an industrywide series of events for media buyers and publishers taking place now. Mark Zuckerberg's marketing minions bought a full-page ad in the program; sponsored sessions on Tuesday, Wednesday and Thursday mornings; and put Facebook COO Sheryl Sandberg on a panel. They're throwing a party Thursday night; Bob Marley's kid, Ziggy Marley, will be the entertainment. "We're finally sponsoring something!" I overhead one Facebook employee gush to another on Monday. It's all a big effort to reintroduce Facebook to the New York ad agencies after Zuckerberg botched last year's first try.Judging by Sandberg's panel appearence Monday, Facebook particularly wants to push its new Engagement Ads — the ones which allow users to comment on advertiser's banners. Yesterday, I sat down with a top executive from one of the major interactive agencies and asked him what he made of Facebook's showy efforts. Engagement Ads? "Eh, those aren't what I want," he said. Then he suggested three things Facebook needs to do right now to win Madison Avenue's money faster than a week's worth of sessions, panels and Ziggy Marley parties ever could. Build a toll booth. Everyone knows banner ads don't do it for big-budget advertisers anymore— not even ones that allow users to comment on them and share with their friends, like Facebook's new ads. Instead of creating gimmicky features that users don't want, Facebook needs to come up with ways for advertisers to be seen as providing new functionality on Facebook itself. By way of analogy, my source told me to imagine American Express sponsoring a normally congested toll road for a day. Drivers approaching the toll booths would see them empty and maybe billboard that read: "No toll today. Drive on through and see what it's like to be an American Express cardholder." That's the kind of branded experiences Facebook needs to create for users and advertisers, my source told me. Not gimmicky ones like asking users to design Mazda's new cars or come up with new Ben and Jerry's flavors. Facebook should encourage users to feel like a site improvement was brought to them by a brand. Maybe Facebook's Video application should have been sponsored by Sony's CyberShot line, for example. The challenge: Facebook's site developers work separately from the group which comes up with ad products, a divide Facebook needs to erase. Facebook needs to stop imagining it will ever reach Google's size. One reason Facebook hasn't come up with these kinds of advertising arrangements already is that they require lots of creativity, planning and customization. They're one-offs, and Mark Zuckerberg can't simply program a computer to sell them over and over. It's a terrifying reality for Facebook because its investors put money into it expecting it would become the next Google, which is an automated moneymaking machine. (Only 3,000 out of its 18,000 employees are required to run its advertising operations.) The sooner Facebook management and its investors realize that the company will not be the next Google — which, let's face it, lucked into a ridiculously simple way of making money — the sooner it can take advantage of its massive, desirable user base. Zuckerberg and Sandberg need to hire Madison Avenue insiders. My source says Madison Avenue avoids spending money on MySpace because no one in New York knows its ad salespeople. Facebook needs to put Madison Avenue insiders in positions where they have Mark Zuckerberg's ear. For example: Zuckerberg could have used someone with advertising experience to challenge him with the baby-name test before the company went forward with its Beacon ads. The baby-name test? "You know," he said, "The one where you take the name and think of all the terrible things it rhymes with and then decide if you still like it."

CAMBRIDGE, MASS. — Fast Company videoblogger Robert Scoble, who has discovered in the Web a popularity which escaped him in high school, has been moderating a panel titled "Web 2.0/Web 3.0 Mashup" at MIT's EmTech conference for the past hour. There are people from Facebook, Six Apart, and Plaxo on stage with him. With no introduction, Scoble launched into a meandering conversation about data portability, online video, URIs, social TV guides, and the Olympics. An hour later, it still has no sign of going anywhere. Joseph Smarr of Plaxo talks very fast. Dave Morin of Facebook seems very tired. Sample quote: "The pace of change is not indexable from a central service." The audience appears to be stunned into stupor. Does it matter that nothing is being said? Perhaps not; perhaps the point is to show this audience of technology generalists how insubstantial the obsessions of the Valley's geek set are.

Here's a new problem for the people running popular online properties like YouTube and Facebook to complain about: Ad agencies love using those sites to market their clients, but advertisers are beginning to realize they don't have to spend a dime to do so.Even when they do, the platform companies aren't the ones who see the profits. Lonelygirl15's creators, for example, make most of their money selling product placements in their videos. YouTube doesn't get any cut of that revenue. A top exec for a major interactive agency told me yesterday: "I keep telling my guys I"m going to do a contest next year to see who can come up with a media plan that costs $0, outside of our fees, of course." It shouldn't be too hard. Marketers create free Facebook pages for all kinds of brands. It's just as free to upload a YouTube video. And if an agency uploads one as clever as the above American Express ad, and its sequel, below, the agency won't need to pay anybody to promote it.

Once again, the internet is causing humanity to be beaten up. A high school (on Long Island, strangely enough) organized its five-year reunion using dangerous internet site Facebook. But when Adam Lynn, a derivative trader (ha) from Hoboken (ha) arrived at the bar where it was being held, he was attacked by two of his fellow classmates! The dispute was traced back to "a hotly contested gym-class handball game during their junior year." When will the internet stop being so dangerous that the press has to issue ominous warnings whenever anything vaguely internet-related happens? It's not just this latest "PUNCH IN 'FACE BOOK,'" as the Post eloquently puts it. The media has been warning us of internet dangers forever!