Twitter’s Rowghani Steps Down as COO After Clash With CEO

June 13 (Bloomberg) -- AIG Non-Executive Chairman Steve Miller and Gabelli Asset Management CEO Mario Gabelli discuss Twitter’s management shake-up on Bloomberg Television's “Bloomberg Surveillance.” (Source: Bloomberg)

Twitter Inc. (TWTR)’s Ali Rowghani resigned as chief operating officer after a power struggle over responsibilities, said people familiar with the matter, in the biggest executive exit since the microblogging company went public last year.

Rowghani, 41, wanted to keep control over Twitter’s product vision, as well as operations and corporate development, setting up a clash with Chief Executive Officer Dick Costolo, who decided to have more of those functions report to him, said the people, who asked not to be identified because the conversations were private.

The exit illustrates Twitter’s rocky internal dynamics as it grapples with growing pains following its initial public offering in November. Rowghani’s job entailed helping Twitter increase members, yet the social media company has experienced decelerating user growth and has struggled to boost people’s engagement with the service. Twitter shares, which rose 3.5 percent today to close at $36.79, are down 42 percent this year.

“If you’ve got too many smart people opining about the same subjects -- perhaps in this case with Twitter about the direction of the growth -- it’s possible that you can have too many cooks in the kitchen,” said Anthony DiClemente, an analyst at Nomura Securities. “There are plenty of companies in the Internet industry that don’t have a COO.”

Board Support

Twitter’s board, which includes co-founders Jack Dorsey and Evan Williams, has raised questions about growth in members and user engagement, said one person with knowledge of the matter. Costolo continues to have the support of the board, said the person.

Costolo originally gave Rowghani control over product late last year but decided to remove the responsibility in April, precipitated by the hiring of Google Inc. maps executive Daniel Graf as vice president of consumer products, said people familiar with the matter. Rowghani wanted Graf to report to him, said the people. Costolo decided the new executive should report to him instead. Graf is set to be a big part of the company’s growth strategy, said the people.

This year, Twitter’s head of consumer product and head of engineering both resigned amid pressure to expand the company’s business. Twitter last month appointed a new head of engineering, Alexander Roetter, who was already at the company. Costolo now has those in charge of product and engineering reporting to him, reducing the need for a COO, said one person.

Another Departure

Chloe Sladden, who ran Twitter’s media team that works with television companies and live events, also departed today after five years at the company. She had been a friend of Rowghani’s for 20 years, she said in a post on the company’s site. Sladden was originally planning to leave in late July and decided to depart sooner after today’s shakeup, according to a person familiar with the situation.

The team that reported to Sladden will now be under Gabriel Stricker, who leads marketing and communications at the company, the person said.

Costolo has been concerned about building a stronger culture at Twitter and has been asking others for advice, said one person familiar with the matter.

Rowghani will remain a Twitter employee and an adviser to Costolo, the San Francisco-based company said in a filing today, adding that it won’t fill the COO role. Stricker declined to comment. Technology blog Re/code yesterday reported on internal friction with Rowghani.

Complimentary Tweets

On social media, Rowghani and Costolo posted nostalgic and complimentary tweets and didn’t elaborate on the executive shift.

“Goodbye Twitter,” Rowghani posted today. “It’s been an amazing ride, and I will cherish the memories.”

“Thank you for being an incredible executive & partner,” Costolo responded in a tweet. “Twitter could not have succeeded without you.”

Twitter hasn’t always had a COO. Costolo was brought on to that position in 2009 to expand the business, and replaced co-founder Williams as CEO in 2010. The company didn’t have a COO again until December 2012, when it hired Zynga Inc.’s Mike Gupta to be CFO. Rowghani, who was finance chief at the time, took the operating role.

Twitter is projected to take 0.8 percent of the $138 billion digital advertising market this year, according to EMarketer. Last year, Twitter had 0.5 percent, while Facebook had 5.8 percent and Google had 32.4 percent.

Future growth

Rowghani joined Twitter in 2010 after nine years as CFO at Pixar Animation Studios. Before that, he was an associate at consulting firm McKinsey & Co. Though he is known for his ability to analyze issues, he doesn’t have experience building products, an area that Twitter has said its future growth depends on.

Rowghani’s product strategy has also been controversial within the company longer than the past few months. After joining the company, Rowghani supported Twitter becoming more closed off from the ecosystem of developers who build applications on top of the service, a move that was opposed by some in the company’s ranks, said a person with direct knowledge of the matter.

Rowghani argued this was a way to give Twitter more control over how the product was presented and bigger opportunities with advertisers, this person said. Costolo supported those efforts at the time and Rowghani’s influence in the company rose as a result, the person said.

Rowghani recently sold 300,000 shares of his Twitter stake for a profit of about $9.9 million, even with the stock price near an all-time low, according to a filing with the U.S. Securities and Exchange Commission. The sales followed the expiry of a lock-up period on shares. By contrast, Costolo and co-founders Williams and Dorsey pledged to hold on to their stock to signal confidence in the company.

To contact the reporters on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net; Jonathan Erlichman in Los Angeles at jerlichman1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Ben Livesey

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