It’s been just a little under a day since Twitter CEO Dick Costolo unexpectedly announced his resignation, putting in place co-founder Jack Dorsey as the “interim CEO”. Dorsey will serve as the interim CEO while the company’s board searches for a permanent CEO. The official narrative, provided by Twitter and prominent investors such as Fred Wilson, is that Costolo has served his role in Twitter: he took a company from $0 in revenues to millions, and took it public. He has accomplished everything he wanted to in the company. His time there is done.
But that sounded a little too perfect for us. Twitter is, after all, a company known for aggressively hiding the truth from the press — or even its own employees. As New York Times columnist Nick Bilton wrote in his book Hatching Twitter, Twitter aggressively stage-manages every executive exit, painting every departure as mutually-agreed upon and for the best of the company. With that in mind, we asked around. And we found a few people who were willing to talk to us, as long as we do not attribute the information to them.
Our two word summary of everything we heard is going on at Twitter: it’s messy.
Costolo’s unexpected departure
Short of Twitter’s most prominent investors and the company’s C-suite, almost no one in the company knew — or got any hint — that Costolo was going to resign. Some felt betrayed that the everyone else, including the media, learned the news at the same time they did. But more importantly, they were sad. Costolo, who used to be a comedian, was universally loved within Twitter. He was incredibly funny, warm and personable.
When Costolo announced that he was resigning, those in the room gave him a standing ovation, while others began tweeting with the hashtag #ThankYouDickC.
“We all knew how much he tried for the company,” said one senior executive we talked to. But at the end of the day, Costolo did not satisfy Wall Street’s expectations, after numerous misses on revenue and user growth. As Twitter’s investors became more and more vocal about the dismal state of the company, many began calling for Costolo’s head to roll.
“The Dick I know will only resign when he knows that there’s really nothing more he can do for this place he loved so much,” the senior executive continued.
Dorsey, isn’t as well-liked within Twitter… perhaps for a good reason.
The fake CEO search
In 1997, when Steve Jobs returned to Apple, he was given the “interim CEO” title by the board. Years later, he dropped the “i” in front of the “iCEO” title. Several employees believe that this is going to be the case with Dorsey. Sure, he may be the “interim” CEO now — but not for long, they told us.
So why pretend to have a CEO search when the board is eventually going to make Dorsey the permanent CEO?
“It’s all part of an illusion, at least that’s what I think, to make sure that no one suspects a coup occurred,” one employee who has worked at Twitter for a number of years told us. “They already made up their mind… and they know that no one wants the job more than Jack.”
There’s also another reason why it’s important to have a broad CEO search: in case Dorsey screws up.
The responsibility of appointing a competent CEO ultimately falls onto the board. If Dorsey screws up as the CEO, investors are going to wonder why didn’t the board hire someone more competent from another company, or at the very least, not from within Twitter. If and when that happens, the board then say: look, we did try to look for other candidates, but we believe Dorsey is the best guy to lead Twitter. It’s not on us that he screwed up.
Is a distracted Dorsey any better than a focused Costolo?
The more we talked to former and current Twitter employees to get their take on Costolo’s resignation and Dorsey’s iCEO status, the more we heard this: if Dorsey can’t make any money at Square, what makes you think he’s going to make any as Twitter’s CEO?
One of the most important reasons why major investors wanted Costolo canned was because Twitter’s revenues weren’t increasing at a pace that satisfied Wall Street. Twitter’s stocks took beatings regularly. It was getting ugly. But does it mean Dorsey can fix that problem?
As The Verge noted, “the value of [Square] compared to its revenue has been steadily declining. That’s likely because it has become clear that Square’s current business model can’t generate a profit, no matter how large it scales.”
Even worse still, insiders pointed out a critical flaw of Dorsey’s: he seems to be always distracted with other projects.
When Dorsey was Twitter’s CEO, a position he was fired from in late 2008, he often prioritized personal projects over the state of the company. As Bilton wrote in Hatching Twitter, Dorsey would often dash from the office at 6 p.m. sharp, to go to his favorite extracurriculars: sometimes a drawing class, sometimes yoga, other times a dress-making course.
Now, Dorsey is the CEO of Square, in addition to being Twitter’s interim CEO. Square is a company that has taken on close to $600 million in funding from investors who are eagerly waiting for their return on investment. “It makes you wonder… is Jack going to prioritize his baby [Square], where he found a second chance after being booted out [of Twitter] humiliatingly, or is he going to prioritize the company that, well, betrayed him?” said a former Twitter employee. “The way I see it, Twitter is doomed under Jack.”
The chorus is getting louder: take Twitter private!
A well-placed source within Twitter confided in us that, in his opinion, the best thing Dorsey can do is to take Twitter private while trying to fix the company’s business model. He believes that Twitter’s business model — wanting to be like Facebook, but being unable to — is in need of serious fixing.
If you look at the numbers, it’s a belief not entirely unfounded.
Twitter’s monthly average users (MAUs) is growing, relative to the social media world, very slowly. New users are not signing up. Normal people — those who aren’t celebrities or journalists — aren’t using it. If Twitter becomes private again, the reasoning goes, Twitter can figure out other measures of success and monetize on those new measures beyond just raw user numbers. “Twitter should stop playing a game they know they’re going to fail in,” our source said.
In terms of raw user numbers, Twitter is way behind Facebook. Shareholders want Twitter to be Facebook. It can’t. It is something different, but no one wants to embrace Twitter’s difference. So the next logical thing to do is to take Twitter private, so it can figure out its future strategically without taking constant beatings from investors over every single misstep. Twitter’s management needs room to breathe. It’s suffocating.
As we said before, it’s messy.