Twitter Inc CEO Dick Costolo on Thursday abruptly announced that he was stepping down, amid increasing scrutiny of the company’s slow user growth and inability to attract advertisers at the same rate as its competitors.
Costolo is to be replaced by cofounder Jack Dorsey on an interim basis.
According to a source familiar with the matter, it was Costolo’s decision to leave, and Costolo said he brought it up with the board last year as it began talking about succession planning.
Twitter has had a number of shake-ups in its management. Cofounders Dorsey and Evan Williams both served as CEOs before Costolo, who has overhauled much of his management team over the past year.
“Unfortunately this news isn’t surprising,” Nate Elliott of management consultant Forrester Research said. “The bottom line is that Twitter isn’t very good right now at serving either its users or its marketers.”
Costolo said on a conference call that Twitter would consider both internal and external candidates for its next CEO and that it has the “strongest management team [it has] ever had,” which influenced his decision to step down.
In an interview with Reuters, Dorsey said he was not thinking “at all” about remaining CEO permanently because the search has just begun, but did not rule out the job. He also said he did not anticipate any change in Twitter’s strategy or direction. Although he was ousted by management in 2008, Dorsey said that he is now surrounded by a strong executive team and had learned from his experience running Square Inc.
Dorsey said the CEO search has not begun.
Dorsey continues as CEO of Square. He served as Twitter’s president and CEO from May 2007 to October 2008.
Wall Street reacted positively to the news, as Twitter shares rose to US$37.17, up 3.6 percent, after the announcement, meaning investors thought Twitter was worth US$900 million more without Costolo than with him.
Costolo is to step down on July 1 and will continue to serve on the board, the company said in a regulatory filing.
Twitter chief financial officer Anthony Noto said Costolo did not receive a severance package because he voluntarily stepped down.
Costolo has agreed to cancel all of his remaining unvested equity in Twitter after July 1.
Twitter has long struggled to gain users at the rate of other social media companies, such as Facebook Inc, Instagram and Snapchat.
“Twitter has never been great at giving its users reasons to come back. While other social sites have introduced new features and functionality the past few years, Twitter has mostly stood still. The result has been excruciatingly slow user growth,” Elliott said.
Data firm eMarketer projects that Twitter’s monthly user base would grow 14.1 percent this year, compared with more than 30 percent two years ago.
Twitter owned 1.6 percent of the US$50.7 billion US digital advertising market last year, compared with 1 percent in 2013, eMarketer said.
That pales in comparison to Facebook, which increased its share from 7.6 percent in 2013 to 10.4 percent the following year.
Twitter’s stock has also lagged some of its peers since its closing price after its first day of trading. Since Nov. 7, 2013, it has dropped 20 percent, compared with a 72 percent increase for Facebook, 9 percent rise for Google and 27 percent for Yahoo.
Twitter reaffirmed its outlook for the second quarter, expecting revenue of between US$470 million and US$485 million, and adjusted earnings before interest, taxes, depreciation and amortization of between US$97 million and US$102 million.
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