Today’s news of Costolo’s resignation as the CEO of Twitter comes as no surprise. As its co-founder, Costolo has nurtured the platform from start up to the social media giant it is today with over 300m active users and 500m tweets daily. Yet in its 9 years Twitter has focused significantly more on user experience than it has on its profitability. Judging by its financial state you could be fooled into thinking it was not-for-profit rather than floating company.
Considering Twitter announced that they “have incurred significant operating losses in the past… and we may not be able to achieve or subsequently maintain profitability” it was a controversial IPO from Wall Street back in November 2013. Although many doubted a company with such widespread and vast usership could ever fail to turn a profit, 18 months on and investors are done twiddling their thumbs.
With its social media rivals Facebook, LinkedIn, Instagram all enjoying the success of both popularity and profit, why is it that Twitter can only achieve one of these? Where did Twitter go so wrong?
There is no question that Twitter’s had a rocky 18 months since it was floated on the stock market. It’s difficult to think of another company that’s experienced a similar shake up of top executive positions in such a short period of time. Having booted or lost numerous senior team members including its Chief Financial Officer, Chief Operating Officer and Head of Consumer Products to name but a few, achieving a turnaround in its profitability was always going to be tricky.
Looking past the headlines and deeper into the platform itself, it becomes apparent that Costolo has never shown a great deal of enthusiasm in monetarizing the service. Since the outset his revenue strategy has been unclear, alternatively focusing on the growth and reach of its users rather than unlocking the potential value they hold. Rumours have arisen that next in line for Costolo’s post will be Adam Brain, current Head of Revenue. If there was any hope in turning around Twitter’s profit surely he would be it?
Its lack of profit certainly isn’t from a lack of potential revenue streams, these we’re just plain and simply avoided. Costolo’s intent of offering a clean and enjoyable user experience stretched as far as to continually upgrading its service meanwhile disallowing lucrative banner ads to support the investments to do so. Its recent launch of Twitter Cards is just one example of a missed revenue opportunity. This incredible upgrade was handed on a plate to its business users, enabling companies to easily harvest leads directly from twitter for free.
Even when it comes to data Twitter has failed to make the most of its undeniably rich resources. Purely by the sheer volume of tweets its users publicly share each day, Twitter has a wealth of data which could be sold for use by external parties. The profitability of companies from Google to Visa who attribute a huge proportion of their revenue the sale of their data, is a testament to the success of this strategy. At the moment less than 6% of Twitters revenue comes from this stream, however this is soon to change if Data Strategy Chief Chris Moody gets his way.
Could Costolo’s resignation be the breath of fresh air needed to turn it’s the company’s profitability on its head and relieve Wall Street of its worry? With a strong and stable team of executives to explore Twitter’s many money making options with open arms rather than a raised eyebrow the future of this platform is definitely looking brighter.