News broke Thursday that the CEO of Twitter, Dick Costello had resigned. Dick has been on the firing line since Twitter went public back in November 2013. This may come as a surprise for many who may have viewed Twitter as one of the success story of Startups in the last 5 years.
Twitter was created in March 2006 by Jack Dorsey, Evan Williams, Biz Stone and Noah Glass and launched by July 2006. The microblogging site has since then been heralded as the leading platform for real time online information dissemination and consumption with over 300 million active users world wide.
Despite its relative success as a Social media leader, its CEO had to resign after intense pressure from some shareholders and investors who felt he wasn’t taking the company in the right direction. Here are some of the issues they had with Dick Costello and how you can learn from it.
More Investors means More Scrutiny
Twitter in November 2013 had an IPO that saw it valued at about $18 billion. With an IPO Twitter soon became public and all its financials fell under much scrutiny. Investors now wanted to see a lot more progress beyond being a popular social media tool. Investors who give you cash to run your Startup also have a long list of expectations.
They set you targets that you must have signed up to after you must have collected their money. If you do not make as much money (not profit) than you had expected, you shouldn’t be surprised when they call for your head. Dick Costello, whilst makingmony wasn’t making growing it fast enough. In fact, the jury was that they felt with him at the top, Twitter will make less money.
Be willing to PIVOT
Startups founders/CEO typically have this set in stone mindset of how they want their service to look like. Whilst that can be a strong advantage, it can be quite limiting in its ability to allow for user change in taste and preferences. For example, whilst Twitter was a great way of sending short messages, it had a huge disadvantage which apparently was its strength. It had just 140 characters and meant people who wanted to express themselves more could not.
That disenfranchised a lot of possible users who rather than waste their time on short messages prefer to rather use Facebook. The result of course was shorter attention life span. As a Startup CEO, be ready to take bold steps and PIVOT if the life of your business depends on it. Facebook is a success today because they Pivot a lot.
MAU > CASH
If you are a Startup that relies on the internet to drive revenue, then the most important data you must track is the growth Monthly Average User (MAU). You MAU basically is the number of new people who use your product. Think of it as a Club that just started business. The club makes more money when there are more people outside and waiting to get in than there are inside. The impression that creates even brings in more people as everyone believes it is the place to be.
For Twitter, its MAU was not growing as fast enough. Whatsapp for example, began operations three years after Twitter and now has over 500 million users and growing. In fact, they project that it could hit 1 billion in three years. Investors see this and believe the managers of Twitter are doing something wrong. As such, if they don’t fix it Twitter may just get out muscled with more people spending more time on Whatsapp and Facebook.
Twitter is a social business and not a social service and as a social business their main revenue source is advertising. For any business largely focused on advertising, the key drive is how much time users spend on the platform. For Twitter this number was going down with more eye balls spending more time on other social media platforms such as Instagram, Snapchat, Wechat, Facebook,BBM and Whatsapp. Startups must understand the fundamental economics of their business and makes sure their financial model is built upon it. Anything less will result in the same challenges Twitter is facing.
Disrupt the disruptor
Most Startups are known for creating a brand new industry to survive whilst some disrupt existing businesses to carve a niche for themselves. For example, Google created the Search Business whilst Uber is disrupting the Taxi Business. However, some Startups can end up disrupting existing business which also started out as a Startup. For example, Facebook disrupted Myspace.
Twitter has had to face competition from other social media Startups such as Whatsapp, Snapchat, Tumblr etc. which came much after it did. Whilst it did not particularly affect its status as the dominant social media player after Facebook it sure chipped away ‘eye balls’ from its platform. As mentioned above, advertisers will throw money at a platform with users that posses longer attention spans.
As a Startup, you must continue to be aware of the Startups around you and how what are doing or not doing can affect your MAU and user attention span.
Startup Founders/CEO must constantly realise that success becomes harder when you are at the top. Investors will want more and sometimes that could mean hurting your users a bit. Twitter CEO perhaps took long to realise this as he wasn’t willing to take some of the bold steps required to move increase revenue and MAU.