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POV: What do Twitter’s CEO troubles mean for brands?

Mindshare Point of View:

Introduction

Last week it was announced that Dick Costolo, the Chief Executive Officer of Twitter, was stepping down from his role with almost immediate effect. The board named Jack Dorsey (one of the co-founders of Twitter) as the interim CEO, and announced that it was planning to launch an immediate search for a successor to Costolo. The outgoing CEO has been under an immense amount of scrutiny for the past year as growth of the platform has not performed as expected, and while revenues have shown promise, growth in the users and time spent on Twitter has stuttered. Ultimately, squeezing existing users for advertising revenue has demonstrated that the sales team at Twitter is exceptional, but the product (and marketing of the product) has not advanced at the same speed. Having a decent ARPU (average revenue per user) is great, but if your user base growth is stalling, that’s going to create an artificial ‘roof’ on potential future earnings - this has been further compounded by Facebook’s stellar growth of both ARPU as well as user base growth too. Unfortunately, Costolo positioned Twitter as a competitor to Facebook too often, and while this is a grand vision, having shareholders now means that that vision must be realised, or at least demonstrably worked towards.

Details and implications

Investors are hoping that a change in leadership (or a return to Dorsey’s leadership) will bring about critical changes to the Twitter business. With Dorsey announced as the interim CEO, there have been a raft of rumours circulating that he is, in fact, destined to be the permanent CEO. The alternative is either a step up from the existing leadership team (which was mostly put in place by Costolo), or someone recruited from outside of the business. Regardless of who is chosen, Twitter needs to focus on the long term growth of the company, and communicate this vision clearly with investors (as Facebook, Google, and Amazon currently do - Amazon being a prime example). Simply chasing short-term results for investors (further increases in ARPU, and an increasing volume of formats) will most likely not solve Twitter’s underlying issues.

This long-term vision will most likely need to solve the Twitter user experience rather than introduce new ad products. The Twitter experience has barely evolved from its first days beyond a redesign a few years ago (which made the platform look more like Facebook), and a handful of new features either introduced or bought in (Vine, Explore). In order to grow the user base (and in turn grow the attractiveness of the platform with advertisers), Twitter must be put an enhanced customer experience above ARPU.

There are two opposing outcomes of this situation on the advertising platform; the first is that a new, revenue-focused CEO joins the company and focuses on driving ARPU, in which case we’re likely to see an influx of new advertising formats and a much stronger sales pitch from Twitter. The second outcome would be that a new CEO joins and focuses their time on developing the product, returning to the core values of the company, and increasing the volume of people using the platform, and the time that they spend with the platform. For brands, the latter is much more attractive in the long term, however the former would likely deliver an increase in reach (and potentially a drop in investment required).

Summary

Bringing in an external CEO (Costolo) at a time when the product was still developing now looks to have set the company back by a considerably amount of time. The return of co-founder Dorsey could see a return to the original vision, and a reinvestment in customer experience and product development. However, with buyout rumours rising up from Wall Street about continued interest from major companies including Google, the next six months is shaping up to be very interesting. From the perspective of brands using Twitter as an advertising platform, this may mean more users, more advertising formats, and more opportunities to engage with their audience. It may also mean less… only time will tell.