As pathetic as it is, the Twitter (TWTR) CEO mess isn’t even the worst of TWTR’s problems.
Twitter’s CEO search is a debacle that is emblematic of the company’s dysfunction and puts another nail in the coffin for TWTR stock. Everyone knew former CEO Dick Costello’s days were numbered, but the board of directors put no succession plan in place.
That’s incompetent.
Worse is that the search process is dragging on — and has become something of a joke. TWTR’s fundamental issues may be unsolvable, but if they can be fixed, the best person to address them — co-founder and interim CEO Jack Dorsey — is also CEO of Square.
Twitter’s board has pledged to hire a CEO who will give TWTR his or her undivided attention. Shareholders should demand no less. And yet, it feels like better-than-even odds that Dorsey will get the nod.
Sure, he could promise to give his full attention to TWTR, but he’d be lying. Square is gearing up for an IPO. There’s no way Dorsey can stand on the sidelines while Square’s Wall Street bankers line up buyers for the company’s stock market debut.
Besides, no new CEO will be able to turn Twitter stock around anytime soon. TWTR’s problems run too deep.
TWTR is suffering from a stark slowdown in growth, one that calls into question whether the company can make the leap to become a global mass-market advertising platform like Google (GOOG, GOOGL) and Facebook (FB).
TWTR May Have Hit Its Ceiling
As of now, TWTR is not even close. As InvestorPlace‘s Tom Taulli points out, Twitter is not even a blip on digital marketers’ radars:
“On a year-over-year basis, daily active (Facebook) users jumped by 17% to 968 million, while monthly active users were up 13% to 1.49 billion. For perspective, FB added more than 190 million net MAUs, which is more than half of Twitter’s total MAUs (304 million, excluding SMS users).”
Compared to Facebook and Google, TWTR doesn’t have the scale or ad-targeting capabilities to make it a must-buy for mega-brands. Moreover, its efforts to achieve acceptable scale are squeezing margins. Indeed, TWTR’s cost of revenue is growing faster than its revenue growth.
Twitter thinks it can fix these problems with improvements to its products, but it might very well be that Twitter has simply hit a popularity wall. Perhaps it just lacks the must-have appeal of Facebook or the utility of Google. The potential user base may not be all that large.
TWTR can’t even begin to tackle such questions without a CEO — one who can convince the market that the product doesn’t have a fatal flaw.
Twitter is close to its two-year anniversary as a publicly traded company and TWTR stock is essentially back to its IPO price — and it’s lucky to be doing even that well. Decelerating growth, a leadership vacuum and possibly flawed assumptions about the potential audience make TWTR stock a pointless risk to take.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
