Dick Costolo’s chirpy resignation doesn’t hide Twitter’s problems

By on June 15, 2015
dick_costolo

By Rachel Savage

The under-fire social media network is claiming the transition is all about stability. Go figure.

Dick Costolo may have quit as chief executive, but it’s as bright and beautiful as a dawn chorus at Twitter. No matter that the social network’s growth is stalling, this is all about a stable and smooth transition.

Of course, this is Silicon Valley smokescreen at its finest. It may be dressed up as entrepreneurial, happy-clappy straight talking, but tech giants’ corporate comms is as Orwellian as any FTSE or Fortune jargon.

Costolo, who joined Twitter in 2009 before becoming chief executive in 2010 when co-founder Evan Williams was ousted, is stepping down on July 1 2015. Twitter’s chairman – another co-founder Jack Dorsey, who was chief exec from to 2007 until he was also deposed in 2008 – will then take over as interim chief executive. The search for a permanent replacement has not yet begun, but a search committee has been formed.

Wall Street was pleased: Twitter’s shares, which have had a rocky ride since floating in November 2013, are currently up more than 5.5% to almost R456 in after-hours trading.

“As I tell all of you and everybody else who will listen, we’ve never had a stronger team here or a more clear and cohesive strategy,” Costolo wrote in an email titled ‘#LoveWhereYouWork’ and addressed to ‘Citizens!’ (aka staff).

“So while there is never a perfect time for transitions like this, the stability and performance of the organisation gives me confidence that this transition will be smooth.”

Costolo, a serial entrepreneur who had originally been bought in to try to stop the founders passing the parcel with the top job, said he had started talking to the board about succession planning at the end of last year. But behind closed doors he was increasingly unhappy about the relentless public criticism he was receiving over Twitter’s disappointing user and revenue growth, according to The New York Times. But the board apparently convinced him to stay on to set out a strategy and build up a management team that’s seemed more like a game of musical chairs over the last few years.

If accurate, it’s a reflection of the fact that Twitter’s problems go far deeper than who sits in the CEO chair. Its strategy is not working: first quarter revenues of R5.4-billion were up 74% from 2014, but missed its own forecasts as it struggles to attract advertisers; it has 302 million monthly active users, but growth is slowing; it’s still never turned a profit and its most recent quarterly loss of R1.9-billion quarterly was 23% bigger than last year.

It’s baffling the board would want Costolo to stay on to develop said strategy, which doesn’t appear to have changed much (save for the launch of the exciting, but as yet unproven, live video streaming app Periscope). The directors also had plenty of time to start a proper search for a successor, no matter Costolo’s claim they wanted it to be conducted in the open.

The answer to that particular problem may well lie with Dorsey, who has wanted to return as chief exec ever since he was ousted, according to The NYT. He’s still going to be chief exec of his payments company, Square; Twitter said in a regulatory filing that both a conflicts of interest policy and his pay for the interim role haven’t yet been sorted out. So much for having an independent chairman who can hire the outsider Twitter surely needs to shake the birds out of their tree.

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