Leading any publicly traded company, let alone a high-profile social media darling like Twitter (NYSE:TWTR), is no easy chore. Now-former CEO Dick Costolo's every move was scrutinized, and Twitter's results, or lack thereof, were magnified due in large part to its earlier stock price performance. But the subsequent nosedive in shareholder value has left Costolo on the outside looking in. While high expectations can be blamed for some of Costolo's and Twitter's problems, he brought many of them on himself.
There is rarely just one or two reasons a CEO loses her or his position, but we asked a few Fool contributors to note some of the higher profile missteps that nudged Costolo to where he is today: heading for the exit.
Tim Brugger (New User Process): Twitter's relatively anemic monthly average user (MAU) growth has been the bane of Costolo's reign as CEO since shortly after it became a publicly traded company in Nov of 2013. In the early days, Twitter fanatics swept talk of MAU growth under the rug, after all its stock was trading through the roof and both investors and industry pundits "knew" that users would come: it was just a matter of time.
As it turns out, instead of new users, Twitter was most adept at attracting visitors. Late last year, and in subsequent conference calls, Costolo boasted about Twitter's 500 million plus visitors each month: not MAUs mind you, just visitors. There was no mention of just how long Twitter had nearly twice as many visitors monthly as actual users, but it's safe to say Costolo and team were aware of the "opportunity" the non-users presented for some time.
However, the bigger question is why? Why so many visitors that didn't translate to MAU growth? One reason, perhaps the biggest reason, was Costolo took too long to simplify the sign-up process. Sure, Twitter had attempted to make the new user sign-up process simpler in the past – multiple times -- but clearly it wasn't working which should have been abundantly clear a year ago, if not more. A CEO's job, among other things, is to knock down barriers to entry – in this case new user sign-ups – that remains a work in progress after all these years.
Adam Levy (Spinning the wheels with VP of Product): Among Dick Costolo's 3 Worst Moves as Twitter CEO were the three subsequent hires he made in an attempt to replace Jason Goldman as VP of Product.
First, Twitter brought on Satya Patel in March of 2011. He was previously a product manager at DoubleClick and then Google after the search giant acquired the company. Satya Patel's previous experience with ad products explains why his focus was more on revenue products than consumer products. And while he, with the help of President of Revenue Adam Bain, grew Twitter into a billion dollar business, the lack of consumer product improvements caused Twitter to miss out on user growth.
Twitter replaced Patel with Michael Sippey in 2012. Sippey was extremely hesitant to roll out any new features, and always erred on the side of caution -- especially when it came to Twitter's reverse chronological timeline. He focused on testing new features, but released relatively few.
The third time wasn't a charm when the company hired Daniel Graf away from Google in 2014. Graf had been the Director of Google Maps before becoming the VP of Product at Twitter. He didn't last much more than six months before receiving a demotion.
Costolo's latest replacement, Kevin Weil, has been with the company since 2009, and has shown a unique capability of pushing out significant product changes in his brief tenure. However, the previous missteps left Twitter spinning its wheels for the better part of five years.
Brian Stoffel (Cutting off third-party developers): Social-media sites usually benefit from a symbiotic relationship with a third-party ecosystem. App developers outside of the company make a social media site easier and stickier to use for free, in return for deriving some sort of profit from those who use the app.
Allowing this kind of free, tinkering, bottom-up design is key for one big reason: the downside risks for a company like Twitter or Facebook (NASDAQ:FB) are limited, but the upside potential is huge. As The New York Times wrote back in 2010, "Twitter made it easy for programmers outside the company to build 70,000 applications that made the microblogging service more usable ... Because of that, Twitter grew so fast that no me-too company could mount a serious challenge."
But there are obvious conflicts that eventually arise — namely, Twitter wanting to get the money that 3rd party developers are, and total control over the user experience. Back at the beginning of Costolo's tenure, the company effectively shut down its 3rd party ecosystem, and he took way too long to realize what a big mistake this was.
Since then, the company has struggled to provide the type of continuous innovation that keeps users coming back for more. The release of the company's Fabric development platform last year was an attempt to win back the developers it lost, and it will take time for the company to regain the trust of the community before it can restart the same level of bottom-up growth.
Adam Levy has no position in any stocks mentioned. Brian Stoffel owns shares of Facebook and Twitter. Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of 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.
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