Twitter Chief Stepping Down as Growth Weakens

Maybe we're going to have to pay for Twitter pretty soon, since it appears no one's found a way to grow the company.

At WSJ, "Twitter CEO Dick Costolo Stepping Down":

Dick Costolo is stepping down as Twitter Inc.’s chief executive after five years, as Wall Street began losing faith in him and the social-media company’s future growth.

The move puts a spotlight back on co-founder and Chairman Jack Dorsey, who will serve as interim CEO while he remains chief executive of payments startup Square Inc. Mr. Dorsey was Twitter’s first CEO from May 2007 to October 2008.

Twitter said it would be looking both inside and outside the company for a new chief.

Notably, Mr. Dorsey isn’t part of the search committee, which will include board members Peter Currie, Peter Fenton and co-founder Evan Williams.

Mr. Dorsey declined to comment on whether he would accept the job if it were offered to him. “I’m not going to answer that question because it’s not what I’m focused on,” he said in an interview. He said he already spends his time at both Twitter and Square, which are located on the same block in San Francisco.

Mr. Costolo’s departure July 1 will leave Twitter without a permanent replacement while the company wrestles with mounting questions from investors as to whether it can overcome disappointing user growth, a series of executive changes and flip-flopping on product strategy.

Messrs. Dorsey and Costolo said that the transition is happening only because Mr. Costolo, 51 years old, wanted to move on. Mr. Costolo said he began discussions with the board at the end of last year and continued those talks through last week when he and the board came to an agreement.

“There’s never a perfect time to do these things,” Mr. Costolo said in an interview.

Under Mr. Costolo, Twitter evolved from a scrappy startup to a public company with a market value of some $25 billion. At the same time, the 140-character messaging service gained cultural prominence, becoming a powerful microphone for celebrities, activists and citizen journalists.

Mr. Costolo has been credited with helping the company formulate its business plan in its early days and rallying the troops after a contentious fight between co-founders Messrs. Dorsey and Williams.

But the former improv comedian’s strengths—his ability to make snap decisions—frustrated senior executives as the company faced the scrutiny of Wall Street after it went public in November 2013, according to current and former employees.

During Twitter’s first year as a public company, Mr. Costolo replaced or lost five direct reports, including his chief operating officer Ali Rowghani and chief financial officer Mike Gupta. He also replaced his product chief four times as the company struggled to release critical features to make the product easier to use.

Mr. Costolo has attempted to right the ship in recent months. He elevated veteran executive Kevin Weil to run consumer products, and since then Twitter has rolled out new features at a faster pace. Whereas its private chat feature was left untouched for years, it can now support group chats, users can share photos, and on Thursday, Twitter said it would be getting rid of the 140-character limitation on each message.

Mr. Costolo has sought to get investors to focus on the size of Twitter’s reach—an audience that sees Twitter content but doesn’t use the service—instead of the 302 million users who sign in once a month. That user base only grew 18% in the year through March 31, and remains about one-fifth the size of users who log into Facebook Inc.

Making matters worse for Mr. Costolo, Twitter reported its weakest quarterly revenue growth in April, sending its stock down nearly 20%, throwing into doubt Twitter’s one consistent bright spot. The disappointing earnings report suggested that the company’s advertising strategy might be faltering. Twitter’s revenue, which grew 74% from a year earlier to $435.9 million, fell short of its own projections as well as analysts’ forecasts.

Shares finished Thursday at $35.84 on the New York Stock Exchange, little changed, before rising 4% after hours following the announcement on Mr. Costolo. Since the company’s first day of trading, the shares are down about 20% through Thursday’s close.

“I don’t think Costolo by himself was an impediment to the growth of the business,” said Mark Mahaney, analyst at RBC Capital Markets. “There’s been more C-level turnover at this company than I have ever witnessed in the year-and-half after the IPO of any company.”

In its announcement Thursday, Twitter sought to give confidence to investors. The company reaffirmed its second-quarter outlook, expecting revenue of $470 million to $485 million and earnings before interest, taxes, depreciation and amortization of $97 million to $102 million.

Mr. Costolo’s resignation immediately raises the question about who will succeed him...

And go to Techmeme, "Dick Costolo to step down as Twitter CEO, will remain on board; Jack Dorsey to become interim CEO effective July 1."