Twitter CEO Costolo To Leave, Company Needs Reboot

Amid a steady drumbeat of direct criticism -- and general concern for Twitter’s future -- CEO Dick Costolo is stepping down.

As the social giant’s board begins a search for a permanent replacement, co-founder Jack Dorsey will assume the role of interim CEO. Costolo should officially exit by July 1.

“Welcome back, @jack!!” Costolo tweeted on Thursday afternoon, in reference to Dorsey.

Not at all surprised by the ouster, analysts on Thursday said Twitter and its next CEO need to effect fundamental changes in order to win back users and marketers.

“Twitter’s user experience looks almost exactly the same as it did nine years,” said Forrester analyst Nate Elliot. “The next CEO needs to innovate and do a much better job of serving both users and advertisers.”



According to Elliot, Forrester’s research shows that marketers are spending less on Twitter and believe they are getting a bigger bang for their buck on Facebook and other rivals. “It seems to have lost touch with marketers,” he said of Twitter.

Echoing Elliot’s comments, eMarketer analyst Debra Aho Williamson said advertisers have grown increasingly “wary” of Twitter, and especially because of its inability to keep users’ attention.

“Twitter needs to figure out how to keep people using the service, while [rival platforms] compete for their attention,” she said. “We all know the company has been struggling for a long time,” Williamson added. “Finding that new direction with new leadership is probably going to be a good thing.”

In late April, Costolo blamed disappointing first-quarter earnings on “lower-than-expected contribution from some of our newer direct-response [ad] products.” Worse yet, he said the company expected the problems to persist for the remainder of the fiscal year.

Revenue for the first quarter was $436 million -- while up 74% year-over-year -- was lower than analysts’ estimates of about $457 million.

Among other vocal critics, early Twitter investor Chris Sacco recently published a long prescription for all that ails the company.

According to Sacco, Twitter has been its own worst enemy. “My biggest concern is the abundance of public doubt and misunderstanding when it comes to Twitter’s vision and the near future for the service,” he wrote. “It’s hard to blame Wall Street or the press … Twitter has failed to tell its own story.”

“If the company has a bold vision for the future, it doesn’t come across in their communication with us on the outside,” according to Sacco. Along with a weak vision presented to Wall Street, “new product launches are soft and rarely get the attention from investors or users that Twitter’s peers drum up.”

Sacco’s takedown corresponded with an appearance on CNBC, in which he suggested that Twitter sell to Google.

Short of selling out, Sacco said that Twitter needs to reinvigorate new user growth; figure out why nearly 1 billion users have tried Twitter, then given up on the service; and actually make its direct response ads work for Madison Avenue.

Twitter’s Board has formed a CEO search committee, which will be helmed by its lead independent director Peter Currie and includes Peter Fenton and Evan Williams. The committee said it plans to retain an independent executive search firm to assist in the process.

Among other top attributes, “we’re looking for someone who uses and loves the product,” Dorsey said in a conference call with analysts, on Thursday.

Investors immediately showed their excitement for the executive change, on Thursday. At last count, Twitter’s stock was up about 8% in after-hours trading.           

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