The biggest move Twitter made in the past few years was pushing out its CEO last week. That’s the problem.
“Twitter today looks pretty much exactly like it did when it first launched,” said Nate Elliott, principal analyst at Forrester Research. “And that simply isn’t good enough. The reality is a limited number of people that will be interested in any one piece of social functionality.”
Why the Exit?
Last week, the social media giant announced that Dick Costolo was leaving the CEO post July 1 after nearly five years. The news confirmed speculation that has been bubbling for weeks in the wake of the company's lackluster financial returns. Twitter announced disappointing earnings for the first quarter in April, missing revenue expectations and causing its stock price to plummet. Twitter stock has been trading recently below its first-day closing price of $40.37 on Nov. 7, 2013.
“My assumption is something else is going on internally at the management level that he’s not the right fit,” said Brian Blau, Gartner Research’s lead Twitter analyst. “Maybe he realized himself he was good at what he did when he came in but is not suited for the next step.”
Blau referred to Twitter a “great brand with a well-known global presence that’s impacted a lot of people and businesses.”
But, he added, the “brand does not match the business performance. The brand’s accelerating. The business is not. It’s a real big mismatch.”
Some are not convinced the Costolo exit is a good thing for San Francisco-based Twitter -- even if he suffered a major public-relations blip this year. In February, someone leaked a Costolo internal memo in which he said he was "frankly ashamed of how poorly we've dealt with (trolling and abuse) during my tenure as CEO."
"We suck at dealing with abuse and trolls on the platform and we've sucked at it for years," Costolo wrote in an internal memo obtained by The Verge. "It's no secret and the rest of the world talks about it every day. We lose core user after core user by not addressing simple trolling issues that they face every day."
“Even though it did not come entirely as a surprise, Costolo’s exit is a big loss for Twitter,” Raul Castanon-Martinez, senior analyst for enterprise mobility and cloud at 451 Research, told CMSWire. “Despite unrelenting pressure from Wall Street, Costolo was steadily making progress toward monetizing Twitter, and his strategy was beginning to yield results.”
Castanon-Martinez told CMSWire Costolo has laid the foundation for Twitter to continue growing its mobile advertising revenues. In the last 1.5 years, Twitter has steadily improved its revenues from mobile advertising.
“Even though overshadowed by Facebook’s overwhelming success, Twitter has become a key player in the mobile advertising business,” he said. “The emphasis that Wall Street places on user growth is misguided as a business goal because mobile advertising is shifting away from volume-based monetization.”
User engagement -- and not just user size -- should be Twitter’s measuring stick, he added.
“This is Twitter’s key strength, and a competitive advantage even above Facebook,” Castanon-Martinez said. “Enterprises can leverage this capability for user engagement to their benefit, and learn from what top brands, including celebrities, TV shows and movies, are doing. Twitter can learn from Facebook, too -- monetize its capability for user engagement with initiatives similar to Facebook’s “saved replies,” which allow companies to engage directly with consumers, to address questions, support issues or other customer services-related problems in real time.
Can I Help You?
Customer service, though, is where Twitter suffers, according to R Ray Wang, principal analyst and founder of Constellation Research.
A frequent tweeter, Wang called a recent personal effort to work with Twitter a “massive fail.” They need to fix their “god awful” customer service, he added.
“We’ve been trying to merger @constellationrg with @constellationr,” Wang said, “and I’ve been trying to gain verified status for years -- all without a live human response.”
Wang added that Twitter’s basically a hard network for folks to grasp.
“With 300 million subscribers and 1 billion who signed up and quit, those are bad ratios,” Wang said. “However, Twitter’s a great platform for live events and breaking news. This is really the strength. Twitter should evolve into an events calendar and news-driven site.”
A change at the top may be a good thing, but Twitter still needs to innovate no matter who’s calling shots, according to Forrester’s Elliott.
Change will be good “if the new leader renews the spirit of innovation,” Elliott said. “For this change to be successful it has to lead to a change in the product as well. They need to find something that appeals to the majority of Americans who aren’t interested in posting 140-character updates.”
Vanessa Thompson, research director at the IDC who examines enterprise social networks and collaborative technologies, said Twitter has an opportunity in workplace application messaging.
“Extending the 140-character limit in direct messaging could mean competing with products like Cotap, Lua and Slack that are quickly establishing presence in the enterprise,” she said. “To be successful in here, Twitter will need to deliver content (Dropbox, Box, etc.) and commerce integrations with major providers as well regulatory compliance in the markets it chooses to go after.”
Twitter must also enable the developer community to build solutions around specific problem sets.
“This starts with having access to the data,” Thompson said. “Earlier restrictions alienated some of the developer community who have moved away from Twitter as a development channel.”