In a surprise move earlier this month, Twitter (NYSE:TWTR) CEO Dick Costolo announced he was stepping down from his position at the head of the company. Following an underwhelming start as a publicly traded company, the social media service faces an incredibly important decision naming its new chief executive. At a critical crossroads and lacking meaningful catalysts for user growth, Twitter has investors hoping new leadership could help its stock rebound.
Though Costolo was not specific about his reasons for leaving, it is likely that the stock's underperformance had something to do with it:
While Twitter stock is well above its IPO price of $26, it is still below the $40-plus levels it reached by the end of the first day of trading. With the stock registering about a 70% gain on that first day in 2013, Wall Street clearly had huge expectations for the company. But under Costolo, Twitter has not lived up to all the hype.
Meanwhile, Twitter's board has passed the reins to Twitter co-founder and chairman Jack Dorsey. As an interim CEO, Dorsey splits his time between Twitter and Square, a payment company where he also serves as CEO.
So far, Dorsey has avoided stating whether or not he is in the running for a permanent CEO position at Twitter, though the board did say in a statement Monday morning that it "will only consider candidates for recommendation to the full Board who are in a position to make a full-time commitment to Twitter." Dorsey, therefore, would have to quit his job at Square before being considered.
Whoever gets the job has their work cut out for them.
Can user growth reaccelerate?
Wall Street's disappointment in Twitter is mostly related to its unimpressive user growth. Since the company went public in November 2013, monthly active users, or MAUs, have increased from 232 million to just 308 million. Anyone following popular social networks will recognize how slow this growth is. For comparison, consider Facebook, Instagram, WhatsApp, and Snapchat user growth during this same timeframe:
- Despite its already huge user base, Facebook added 252 million MAUs during this period.
- Instagram's MAUs doubled from 150 million to over 300 million.
- Snapchat's MAUs skyrocketed from 30 million to an estimated 200 million or more today.
- WhatsApp's MAUs also doubled from 350 million to 700 million.
Investors worry that Twitter has ostracized itself with a platform that is too hard for new users to get acquainted with, limiting its audience to just a fraction of who the other social networks can reach.
Twitter is addressing this issue with new ways to provide immediate value when a user signs up. In one example, the company has launched what it calls an "instant timeline." The purpose of the feature is to reduce the effort and time necessary to create a useful, personalized experience.
The ultimate choice of the new CEO during this critical time could have a huge impact shaping the company's strategy in an attempt to make its service more accessible to a broader audience. The CEO will need to find a delicate balance between remaining true to the experience that active Twitter followers have come to love and new features that reduce the barriers for faster adoption by those unfamiliar with the platform.
Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.