The New York Times — After replacing much of Twitter’s top management team last year, Dick Costolo told members of the company’s board that he wanted them to replace him as chief executive, too.
On Thursday, they did just that, announcing that Mr. Costolo will step down July 1 and appointing Jack Dorsey, Twitter’s co-founder and former chief, as interim chief executive while they look for a permanent successor.
Mr. Costolo, a wealthy former entrepreneur who has led Twitter for the last five years, had grown tired of second-guessing by Wall Street, with its focus on the social network’s sluggish user growth and its repeated failures to make its products more appealing. In January, he confided to friends at the Consumer Electronics Show in January that he did not need the aggravation anymore.
Instead of beginning an immediate search for a new chief executive, the board kept him on, encouraging him to build up his management team and lay out a strategy for it to follow.
“There is never, ever the right time to begin a transition like this,” Mr. Costolo told investors in a call to discuss the leadership transition. But “you want to do these things when the org is stable and the product is robust.”
Even as Mr. Costolo and his lieutenants promoted their early progress in reinvigorating the company’s products, criticism of his strategy grew. Last week, one of the company’s biggest shareholders and cheerleaders, Chris Sacca, publicly called for change.
Twitter shares rose more than 7 percent in after-hours trading immediately after the change in leadership was announced.
Now Twitter, which has 302 million active users, faces deep questions about the future of its messaging service, which is built around 140-character snippets of text in a world that is increasingly about photos and video.
“The situation at Twitter must be much worse than it appears, as replacing the C.E.O. is such a big step,” said Brian Blau, an analyst with Gartner. “Twitter’s problems are clearly not over, and while Jack Dorsey knows Twitter well, they really should bring in some outside perspective as most of their strategies so far are not working out so well.”
Mr. Dorsey said that Twitter’s board was not seeking a change in strategy or direction for the company as it searched for a new permanent leader. “We do have a great strategy, we do have a great direction, and we do have a great team behind it,” he said in an interview.
Since Twitter’s debut as a public company in 2013, Mr. Costolo has repeatedly failed to meet Wall Street’s high expectations.
His departure is likely to renew speculation that Twitter is an acquisition target for the handful of tech giants that could afford the company, which currently has a market valuation topping $24 billion. In recent weeks, Google has been rumored to be eyeing Twitter, but people with knowledge of the companies said that no deal was in the works.
The research firm eMarketer estimates that Twitter’s monthly user base will grow 14.1 percent this year, down from 30 percent growth two years ago. By 2019, its worldwide user growth rate will be 6 percent, according to the firm.
Twitter accounted for 3.6 percent of the $19.2 billion mobile Internet ad market in the United States last year, according to eMarketer, while Facebook held an 18.5 percent share and Google dominated with 36.9 percent.
Pressure on Mr. Costolo grew in recent weeks after Mr. Sacca, an early Twitter investor, went public with an 8,500-word analysis of what Twitter could be and how it could get there.
Shortly after the essay was published on Mr. Sacca’s blog, Mr. Costolo fielded some tough questions from Twitter stockholders at the company’s annual shareholder meeting.
Mr. Sacca’s manifesto calls for a much deeper rethinking of Twitter’s service and more experimentation at a company that has resisted change.
“Twitter can afford to build the wrong things,” Mr. Sacca wrote. “However, Twitter cannot afford to build the right things too slowly.”
After Mr. Sacca posted his letter, Robert Peck, an analyst at SunTrust Robinson Humphrey, said that if Twitter’s financial results disappointed investors again in July, as they had for the last two quarters, “we think it’s possible that the company may look to make some changes” in leadership.
Twitter said on Thursday that its second-quarter financial results were on track to meet its previous forecasts.
Twitter, founded in 2006, has never been known for its stable management, with a history of plots and counterplots among its founders and early executives.
Mr. Costolo became chief executive in October 2010 in a boardroom coup against Evan Williams, Twitter’s co-founder and then chief executive. Mr. Williams remains on the board and is one of the company’s biggest shareholders. He will be part of a search committee for a new chief executive.
Last year, much of Mr. Costolo’s executive team was fired or resigned as he sought to speed up the company’s pace of product improvements.
Article by Vindu Goel and Mike Isaac for The New York Times
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