SAN FRANCISCO – Embattled Twitter CEO Dick Costolo is stepping down, with company co-founder Jack Dorsey – who is also CEO of payments company Square – stepping in as interim-CEO effective July 1. Costolo will remain on the board.
Some investors had called for Costolo to resign after an earnings bomb in the first quarter, as the company was predicting future sales well below its initial projections as well as Wall Street’s. Shares are down 20% since the company went public in 2013, a hint at perhaps growing public indifference to the service.
The company announced the formation of a search committee that includes co-founder Evan Williams, who had served as chairman and CEO.
“There is no one better than Jack Dorsey to lead Twitter during this transition,” Costolo said in a statement. “He has a profound understanding of the product and Twitter’s mission in the world as well as a great relationship with Twitter’s leadership team.”
Dorsey said: “The future belongs to Twitter thanks in large part to Dick Costolo’s dedication and vision.”
Some analysts feel that Twitter’s future is in fact linked to Costolo’s departure. The outgoing CEO has also been criticized for a dizzying array of changing to the company’s strategy and other wishy-washy leadership tactics, including five high-profile replacements since the company’s high profile IPO.
“We see this as significant news, showing TWTR is open to important change,” S&P Capital IQ analyst Scott Kessler said in a research note. “We also note TWTR reiterated its Q2 guidance, which we see as a positive after the mixed results and outlook provided in April.”
Twitter co-founders Jack Dorsey, Christopher Isaac ‘Biz’ Stone, Evan Williams and Twitter CEO Richard ‘Dick’ Costolo pose for a photo on the trading floor of the New York Stock Exchange after the company went public in 2013. (Photo: Emmanuel Dunand, AFP/Getty Images)
After the nine-year-old 140-character social media service went from unknown to all the rage almost overnight, Twitter has been struggling of late. It reported 302 million users in first quarter, about the same as Instagram, which is owned by Facebook. Twitter is considered not as intuitive to use by newcomers.
Twitter’s monthly user base will grow just 14.1% this year, slowing from more than 30% two years ago, and by 2019, its user growth rate will be just 6% worldwide, according to eMarketer.
The research firm also reports that Twitter accounted for 0.87% of the $ 145 billion digital advertising worldwide in 2014, up from 0.49% in 2013. By comparison, Facebook increased its share of the worldwide digital ad market from 5.81% in 2013 to 7.93% in 2014, according to eMarketer. Google remained the market leader with 31.42% share in 2014.
Dorsey is also a controversial figure, and his other startup, Square, has yet to prove itself a success.
Twitter stock jumped 7.34% after hours on the news.
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