Dick Costolo, CEO of Twitter (pictured on left), announced on Thursday that he would be stepping down as head of the social media company, effective July 1. Jack Dorsey (pictured on right), the company’s chairman and co-founder, has been named interim CEO while the board of directors begins looking for a permanent replacement.
Costolo said he would continue to serve on Twitter’s board of directors, while Dorsey will continue to serve as CEO of Square Inc., the payments and financial services company he co-founded after Twitter.
Although the company grew rapidly into one of the most popular sites on the Internet, user growth has flat-lined recently. In April, the company reported a net loss of $162 million for the first quarter, despite a 74 percent climb in revenue. The news caused shares to plunge, and the company was forced to lower its estimates for the rest of the year.
No Coherent Strategy
During a conference call with investors following the announcement, Costolo said that he was leaving the company of his own accord. He said that he had first broached the idea of stepping down with the board a year ago. Costolo added that he thought staying on as CEO while the board searched for his replacement would be a “distraction” for the company.
It is unlikely that many of Twitter’s investors will be sorry to see him go. The company’s woes have led several investors to call for a change at the top. In April, Twitter investor Chris Sacca wrote a blog post outlining several problems facing the company, including the fact that for as many users as Twitter has, nearly one billion people have tried the service only to abandon it. However, investors are also concerned about Twitter’s ability — or inability — to attract online advertising.
Some said the company had also failed to communicate a coherent strategy for the future to its investors, leading to reduced confidence in its management team, Costolo included. Others complained that the company lacked focus or a clear plan to grow the company. As a result, Twitter’s stock jumped on news of Costolo’s imminent departure.
Not Growing Fast Enough
But it still remains unclear how much of an effect Costolo’s resignation will have on the company. In addition to remaining on the board, interim-CEO Dorsey said that the company had no plans to re-evaluate its current strategy, which in the eyes of many investors simply means no strategy at all.
Twitter’s user base is still climbing, with the number of monthly active users increasing by 18 percent year-over-year. But with only about 300 million users, that rate of growth makes it impossible for the company to ever catch up to Facebook, which enjoys both faster growth rates and a billion more users, and, therefore, is more attractive to advertisers.
And Facebook is not the only social media service threatening to steal advertisers. Instagram surpassed Twitter in number of users last year, while Snapchat is growing rapidly and could soon eclipse Twitter as well.
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