Twit­ter chief ex­ec­u­tive Cos­tolo out as growth pres­sure keeps build­ing


Twit­ter chief ex­ec­u­tive Dick Cos­tolo is sur­ren­der­ing his post, hand­ing the reins back to co-founder Jack Dorsey as the popular ser­vice strug­gles to boost its ranks of users.

Cos­tolo will step down on July 1, and Dorsey will take back the Twit­ter chief job in an in­terim ca­pac­ity, the com­pany an­nounced Thurs­day.

Dorsey pre­vi­ously held the job for about a year and a half, leav­ing the post in 2008. Cos­tolo came on board in 2010.

“The fu­ture be­longs to Twit­ter thanks in large part to Dick Cos­tolo’s ded­i­ca­tion and vi­sion,” Dorsey said.

Dorsey said he will stay at the Twit­ter helm while the board finds some­one to re­place Cos­tolo longterm.

Cos­tolo will re­main on the Twit­ter board of di­rec­tors, and Dorsey will con­tinue to be chief of mo­bile­cen­tered fi­nan­cial trans­ac­tions com­pany Square that he co-founded in 2009.

The shake- up comes amid ru­mors that Cos­tolo was un­der tremen­dous pres­sure from in­vestors to prove his worth by ramp­ing ranks of Twit­ter users and rev­enues brought in by the glob­ally popular one-to-many mes­sag­ing ser­vice.

“Un­for­tu­nately this news isn’t sur­pris­ing,” For­rester an­a­lyst Nate El­liott said.

“The bot­tom line is that Twit­ter isn’t very good right now at serv­ing ei­ther its users or its mar­keters.”

Cos­tolo guided the San Fran­cisco-based firm through its ini­tial public of­fer­ing, but growth has been dis­ap­point­ing and the com­pany has yet to show a profit.

Twit­ter shares jumped more than 3 per­cent to US$37.16 in af­ter-mar­ket trad­ing that fol­lowed re­lease of word Cos­tolo is out as chief.

Hold­ing Course

Dorsey said dur­ing a con­fer­ence call that he will split his time be­tween Twit­ter and Square, re­ly­ing on man­age­ment teams he knows and trusts.

He ex­pressed faith in the strat­egy Cos­tolo has in place at Twit­ter and prod­ucts in the com­pany’s pipe­line.

“I don’t fore­see any changes in strat­egy or di­rec­tion,” Dorsey said.

“The op­por­tu­nity is ab­so­lutely mas­sive. The in­ten­tion is to cer­tainly bring it to ev­ery­one around the world.”

The plan to do that in­cludes mak­ing Twit­ter easy and re­ward­ing for users, ac­cord­ing to Dorsey.

“If we build a prod­uct peo­ple love and value, ad­ver­tis­ers and users will fol­low,” Dorsey said.

Cos­tolo said he be­gan dis­cussing de­par­ture with the board late last year and opted to step down now be­cause re­main­ing dur­ing a search for a suc­ces­sor would have been too dis­tract­ing to the com­pany.

Cri­te­ria had yet to be es­tab­lished re­gard­ing what Twit­ter is look­ing for in a new chief.

“We are look­ing for some­one who re­ally uses and loves the prod­uct in ev­ery sin­gle way,” Dorsey said.

Slow­ing Growth

Re­plac­ing Cos­tolo might not be the so­lu­tion Twit­ter needs, ac­cord­ing to Sil­i­con Val­ley an­a­lyst Rob En­derle of En­derle Group.

Twit­ter’s trou­ble isn’t a lack of skill and hard work by those in the com­pany; it is that the short-form, real-time na­ture of the ser­vice does not lend it­self to ad­ver­tis­ing cru­cial to rev­enue in an age when peo­ple want free on­line ser­vices, the an­a­lyst rea­soned.

“You could liken it to be­ing in an off-road race and your prob­lem is your car doesn’t work off-road,” En­derle said.

“It’s not about the driver or the team; the whole thing is about the car.”

It could help if Twit­ter’s next chief is out­stand­ingly cre­ative when it comes to find­ing ways of mak­ing money with ads while not taint­ing the ex­pe­ri­ence users cher­ish.

“This one is go­ing to be tough,” En­derle said of find­ing a leader with the skills Twit­ter needs at the helm.

In­dus­try tracker eMar­keter es­ti­mated that the num­ber of peo­ple us­ing Twit­ter monthly will grow 14.1 per­cent this year, com­pared to a growth rate of 30 per­cent two years ago.

By 2019, Twit­ter user growth will slow to about 6 per­cent world­wide, eMar­keter fore­cast.

The com­pany said the num­ber of ac­tive monthly users rose above 300 mil­lion, but that fig­ure grew at a pace too slug­gish for many in­vestors, and be­low ri­vals in so­cial net­work­ing.

Twit­ter’s share of the US$145 bil­lion spent on dig­i­tal ad­ver­tis­ing around the world this year is slightly less than 1 per­cent, up from just shy of a half-per­cent last year, eMar­keter re­ported.

In com­par­i­son, Face­book in­creased its share of the world­wide dig­i­tal ad mar­ket to 7.9 per­cent this year from 5.8 per­cent in 2013, ac­cord­ing to the in­dus­try tracker, which said Google led the mar­ket with a 31.4 per­cent stake.

In its lat­est earn­ings re­port, in April, Twit­ter said it had a net loss in the quar­ter of US$162.4 mil­lion.

Be­cause Cos­tolo is resigning, there is no sev­er­ance pack­age in­volved, ac­cord­ing to Twit­ter.

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