Twitter’s CEO Dick Costolo Resigns

June 11, 2015 0 Comments

Um, good?

And Twitter Shares during the Announcement?

You can also read the letters of both Dick and Jack here regarding the resignation and the task of finding a suitable replacement. None of that really concerns me, so I won’t share it. The only part that is of concern is the fact that the CEO of Twitter just decided to resign and there aren’t going to be any meaningful changes in Strategy. If this is true, then why resign at all?

It was only half a year ago when S&P credit rating agency downgraded the stock from investment grade to junk. Twitter hasn’t made a profit in god knows how long and the company is barely generating enough cash flow to keep the lights on.

However, that’s not their largest problem. After all, the company is still young. Their biggest challenge lies in a clear vision on how to obtain long-term sustainable growth and generate a consistent, active user base. This is especially critical if the company plans on competing with long-term rival, Instagram, which doesn’t even have its own IPO yet.

All of the issues relating to the stock can be summed up by Chris Sacca, one of the largest shareholders of Twitter and a Venture Capitalist, on his blog Lowercase Capital:

Twitter’s biggest challenges today are its slow-growing user base, its high number of inactive users, and a product flow that makes direct response and commerce transactions challenging. All of this is compounded by Twitter’s unsuccessful attempts to convince investors and the public that it has a clear vision and product roadmap that will accelerate growth. The stock price reflects the resulting misunderstanding and doubt.

In the absence of any better metric, investors and the public have focused on Monthly Active Users (MAU). While MAU can be one helpful guide, it certainly misses the entire picture of the state of the business. Logged in users are always nice to have, but Twitter’s logged out visitors will continue to be increasingly valuable. Between search and referrer intent, geographic and time context, TellApart data, cookie data, data gathered from developer tools, and inferences from engaged participation in the stream, there is no ceiling on the potential to make money from this logged out audience.

Twitter has already shown it knows how to build a healthy business at scale and continues to grow faster than any public company of its size. In addition, with every proposal in this post, obvious opportunities for additional monetization emerge. Everything I discussed can be thoughtfully and effectively promoted. Plus, by creating a save button, Twitter can build a home for a significant direct response and commerce business.

He also adds:

Since 2009, when I decided to start buying all the Twitter stock I could find, and through all the years I convinced huge institutions to invest in the company with me, I have focused on one measure of the health of Twitter’s business:

“How big is the audience they can show ads to?”

Nail that, and everything else works itself out. So, to make sure no one is ever surprised by the answer to that question again, Twitter simply needs to:

  1. Make Tweets effortless to enjoy,
  2. Make it easier for all to participate, and
  3. Make each of us on Twitter feel heard and valuable.

Done right, and done soon, hundreds of millions of new users will join and stay active on the service, hundreds of millions of inactive users will return to the service, and hundreds millions more will use Twitter from the outside. Countless users, new and old, will find Twitter indispensable, use Twitter more, see great ads, buy lots of stuff, and make the company much more money along the way.

There is some truth to this. Tweeting has been much more enjoyable for everyone ever since they allowed viewers to see the full tweet of people you have quoted using the ‘Quote Tweet” feature. Also, making users feel heard and valuable is a step in the right direction. Right now, Twitter is simply the home for celebs and pseudo-celebrities who contain importance in their own individual right.

I don’t really feel advertising is something the company can improve on in the long-term, as advertising is a huge problem with other social media companies such as Facebook. However, I still feel that there is room for improvement, especially generating a loyal MAU base. Right now, money aren’t the largest concerns; however, if the investors are confident in the long-term prospects of generating sustainable long-term growth, I’m all for seeing people pile onto the stock again. Until then, I would stay as far away as I can.

2,675 total views, 4 views today