Twitter: What Went Wrong

Some may see Twitter as a hot social media platform that fell way short of expectations, but that sounds a lot like it was a fait accompli, and that’s simply not true. Things don’t just happen to companies. The outcome is always a function of management decisions, good or bad.

On the plus side, the eight year-old company has a market valuation of more than $20 billion and is on track to exceed $2 billion in revenue this year. But there have definitely been mistakes. Not to sound like a Monday morning quarterback, but some of what transpired was foreseeable and possibly avoidable.

In some respects, Twitter got too far ahead of itself. In other ways, it pulled in its wings prematurely. In any case, it represents a cautionary tale of pitfalls to avoid and lessons to be learned for all of us.

Move fast and break things.

Silicon Valley startups – at least the successful ones – are known for fearless innovation that disrupts the status quo, even their own. But contrary to Mark Zuckerberg’s “The Hacker Way,” which gave rise to Facebook’s famed saying, “Move fast and break things,” Twitter’s MO of late has been more like, “If it ain’t broke, don’t fix it.”

From a product standpoint, the company has long been stuck between knowing it had to innovate to attract a broader audience and fear of changing what resonated with core users. While there have been improvements, the product remains relatively hard to use and not particularly engaging for the mainstream public.

That why Facebook has 1.4 billion monthly active users (MOUs) and counting while Twitter seems to have plateaued in the neighborhood of 300 million MOUs.

High expectations can be a double-edged sword.

The company has fallen way of short of meeting expectations set by former CEO Dick Costolo when he projected 400 million MOUs by the end of 2013. I’m sure he would have taken a do-over on that if he could have, but that bell simply couldn’t be unrung and it’s haunted the social media company ever since.

If you’re going to emphasize user growth as a key metric instead of fundamentals like revenues and profits, you can’t simply flip the equation later when it’s convenient. And the way Costolo kept searching for ever more creative ways to spin a non-existent growth story didn’t sit well with investors. The stock is down more than 20% since its late 2013 IPO.

**Mercurial management: so not funny.**

Meanwhile, Costolo’s management team has been in an almost constant state of flux. The former improv comic has turned over nearly his entire staff over the past year and a half or so. That’s not a good sign. Nor is stock-based compensation of $175 million or 35% of revenue last quarter. The company has previously spun that as a focus on executive talent and retention, but I see it as a sign of a mercurial boss constantly shuffling the deck and keeping too many former execs on the books in various roles.

The bright lights of Wall Street can be harsh.

Which brings us to the real elephant in the room: Twitter never should have gone public when it did. While the public markets do provide liquidity, credibility, and currency for acquisitions, in this case, it backfired.

If I’ve said it once I’ve said it a thousand times, the intense scrutiny under the bright lights of Wall Street is no place for a company that’s still trying to figure out what it wants to be when it grows up. More than five years ago, a certain blogger you and I know very well warned Twitter about that.

Did they listen? Nah. And who can blame them. Hindsight may be 20-20, but had I been in Costolo’s shoes, I might not have listened to me either.