Now that Dick Costolo is out as CEO of Twitter (TWTR), the company is on the lookout for a new CEO. But people thinking of prepping their resume should first consider the problems facing the social networking company.
Twitter's current state is not the result of a recent shift in markets. Costolo was effective in building up respectable quarterly revenue, but the red ink continues to flow and worries are about the future. Not only is profitability still some distance away, but the rate of growth in user numbers has flattened. A new CEO will need to come up with answers, and quickly, if Twitter isn't to become another Yahoo (YHOO) -- a company where, no matter how often new CEOs are brought in, the fundamentals seems to stay the same.
Make the ads effective
Twitter disappointed Wall Street with its report on first quarter earnings and revenue. A big problem is that advertisers aren't convinced yet that they see sufficient return on their marketing investment to justify more spending on the service, said the Wall Street Journal. Marketers want proof that an ad on Twitter can drive the results they need -- whether it's having someone visit a website or go to a local store to place an order.
Improve content relevance
The vast majority of people using Twitter read posts by others. Unfortunately, according to some analyses, much of what flashes by is a waste, as the Washington Post has reported. Sorting through all the material to find what might be of interest can be a time-consuming challenge unless you have a feed open all the time, a time investment many aren't willing to make. Because it's in real time and voluminous, looking later at your leisure is difficult at best.
The deal that companies like Twitter make with Wall Street when they go public (and even with venture capital firms before an IPO) is that they will become profitable -- one day. Some estimates say that the soonest it would happen for Twitter is the fourth quarter of 2017, according to the Wall Street Journal. That would mean a decade of red ink. Somehow the gap between revenue and expenses has to be quickly closed, or an explanation of why some additional time is necessary had better be incredibly convincing.
Face the management problem
One of the observations is that there may be an underlying issue with management fundamentals, as Management Today points out. The New York Times reported that Costolo wanted out last year, but that the board convinced him to stay on, build a management team, and create a winning strategy. But when the CEO is unhappy and wants to leave, a board should start a succession process, which it didn't. Bringing Dorsey back, even as an interim chief executive, perpetuates the same views and philosophies that have brought the company to where it now is. A new CEO will need to make some significant changes, and that means getting the powers that be to really go along, and not just hope that more of the same will do the trick.
Face market reality
It may be that Twitter will never have the inherent mass appeal of Facebook, as Vox notes. The design of the service is wrapped around power users and doesn't seem to appeal to the average person the way a number of other social networks do. In addition, the company has angered many third-party developers who were an aid to its original growth. Whatever the new CEO will do, he or she will have to remove the corporate rose-colored glasses and look reality square in the eye.