Here is a company that, in less than a decade, gained 300 million users, is now world-renowned, worth more than $24 billion, and nevertheless just fired its CEO at its stockholders’ request. Richard “Dick” Costolo was head of the social network for five years, and will officially be temporarily replaced by Twitter co-founder Jack Dorsey, who thus will become the head of the company for a second time.
Twitter, however, portrays an image of absolute success, a company that creates a buzz every minute:
• Iranian and Arab revolutionaries have made it into a combat weapon;
• The entire world is talking about how Barack Obama is creating his own personal account;
• There isn’t a single sport or showbiz star that doesn’t have his or her millions of followers;
• And even French politician Nadine Morano cannot survive without her Twitter account, just to give you an idea!
Results Are Not in the Cards
Nevertheless, the stock exchange is worried and panic stricken; financial results are not in the cards. While Twitter recorded disappointing results in the first quarter of 2015, the stock price fell and lost 25 percent of its value in two days.
One of its main stockholders, venture capitalist Chris Sacca, no doubt dealt the final blow to Dick Costolo a few weeks back by publishing a very long analysis via his blog on all that, he says, is not going well at Twitter. The title, “What Twitter Can Be,” seemed like a death sentence.
Stockholders’ complaints are simple. Twitter losing even more money is not so much what bothers them— $578 million in losses in 2014 for a turnover of $1.4 billion; Amazon lost money for a longer period of time without the stock exchange getting worried.
What is worrying is that Twitter lost the race to Facebook. The comparison between the two social networks is indeed in favor of Mark Zuckerberg and his 1.4 billion users worldwide, four times that of Twitter. More importantly, the new user acquisition rate has been declining year after year, though Twitter is still advancing:
• +50 percent in 2012;
• +25 percent in 2013;
• +18 percent in 2014.
Critics emphasize that at this rate, Twitter will never catch up with Facebook and its 1 billion accounts.
But above all, with four times the number of users, Facebook generates 10 times the income! Facebook was able to transform itself into a “cash machine,” as they say in the Silicon Valley, by getting its users hooked — users who put their private lives, networks, and vital or entertaining information up on Facebook.
Twitter, the preferred network of the “elites,” does not have the same publicity potential. Dick Costolo’s successor will have to change that.
Silicon Valley’s “Financialization”
These figures say everything about Wall Street’s analysis grid and the “financialization” of these major technology and content companies that were established over the last decade. The strength and weakness of the Silicon Valley system is what gave birth to the giants that dominate the world today.
Being listed on the stock exchange, which has become essential for venture capitalists and other investment funds that have supported these companies since their perilous beginnings, to be able to guarantee a comfortable profit, obligates them to “deliver,” that is, to guarantee substantial margins.
It doesn’t really matter that Twitter’s positioning and function are not the same as Facebook’s, or even Snapchat’s, which also outdid Twitter in terms of number of users; the figures speak for themselves and are not in Dick Costolo’s favor. Mr. Costolo was thus pushed out, just as his predecessor, co-founder Evan Williams, was five years ago. The New York Stock Exchange welcomed the occurrence by giving +7 percent to Twitter’s stock …
Dick Costolo looked content, tweeting a “welcome back” message to Jack Dorsey, the co-founder who will replace him as the company’s head on July 1.
“Friendly” Handover of Power
Yet, this staging of a friendly handover of power is reminiscent of a scene that played out in 2010, which New York Times journalist Nick Bilton talks about in a book published in 2013 called “Hatching Twitter,” with the following sub-heading: “How a fledgling start-up became a multi-billion dollar business and accidentally changed the world.”
Nick Bilton begins his book with quite a surreal scene: Evan Williams chases a female employee out of his office, shouting “Get out, I’m going to throw up.” And he throws up in a wastepaper basket. This was his last act as CEO of Twitter; his name would stick to the company’s saga from the start, while a few others searched a smelly office for the brilliant idea that was going to make them rich and famous.
“Ev,” as his Twitter employees call him, was informed of his dismissal by the board of the company that he had founded. And he would be replaced by Dick Costolo, who was the chief operating officer at that time. Evan Williams had no more than a few minutes to announce to staff in an emergency meeting that he was leaving his post of his own initiative, and that he was pleased to hand off the baton to his friend, Dick …
Nick Bilton says that a blog post signed by Evan Williams was about to be put up online, confirming the following:
“‘I have decided to ask our COO, Dick Costolo, to become Twitter’s CEO,’” said the post, allegedly written by Ev. Of course, that wasn’t true.
Ev, seated on the floor of his office, with his hands wrapped around a garbage can, had absolutely no desire to say that.”
This scene, worthy of a television series, recalls that Silicon Valley had long lost its innocence, if it ever really existed.
Gold Diggers of the 21st Century
Evan Williams could have been more bitter that day, given that he had done exactly the same thing to Jack Dorsey two years back, the same Jack Dorsey who is making a comeback as the interim CEO today.
Both men were part of the first small group of young people with a passion for technology, drawn to California by the Silicon Valley dream, arriving as 21st century gold diggers, in search of the rare “nugget” that was going to make them rich.
By chance, Twitter was born on March 21, 2006, an accidental project in a start-up that was working on another half-baked concept. The initial idea was borne out of the statuses that Internet users could post on their accounts to describe their daily mood, their latest music, what they’re passionate about or what annoys them. Out of this desire to share these statuses, make them more visible, and share them, Twitter progressively became a platform of exchange, opinion, breaking news … unparalleled worldwide.
That was not the original plan, but as is often the case in Silicon Valley projects, the users are the ones that made it into what it has become, beyond and sometimes despite the founders themselves.
Twitter is still a terrific tool, even if an inside look at the business through the current management crisis is not necessarily pretty. We are once again immersed in the TV series world: Glory, power and money in the 21st century — everything’s there.
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