A stand-up guy.

Twitter Has 140 Characters in Need of Leader

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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For months now Twitter's Chief Executive Officer Dick Costolo has been the question that's too big to avoid. It was hard not to think about his shelf life as executives, rank-and-file employees and Wall Street abandoned the messaging service.

But it got harder to ignore the question in the days following Twitter's disappointing third-quarter earnings report. Amid the sea of "Twitter strategy" stories, America's best-known stock pundit Jim Cramer stopped being polite. He all but called for Costolo's head. (And with 797,000 followers, he naturally took to Twitter to get the message out.)

Alas, it's hard to do much more than rant when you're limited to 140 characters, even over the course of a week-long tweetstorm. So it was reporters Yoree Koh and Kirsten Grind at the Wall Street Journal who fleshed out Cramer's case. Armed with deep reporting and more than 13,500 characters, Koh and Grind painted an unflattering portrait of Costolo. By their estimation he's good at running a startup but in over his head at a company with a market value of $25 billion. Beloved but bumbling, they describe him as a strategy-challenged, waffling ex-improv comedian. Unsurprisingly the story has been catnip for the anti-Costolo crowd.

So say Cramer et al. succeed in pushing out Costolo. Then what happens? Corporate America -- and the tech sector in particular -- isn't exactly brimming with great managers. So you get rid of Costolo (no more CrossFit classes with Dick L) and then who steps in?

That brings us to the somewhat smaller question: Twitter Chief Financial OfficerAnthony Noto. After Noto joined the company in July the ink on the press release was still wet when investors and (rival, possibly envious) bankers started to wonder if the former Goldman Sachs dealmaker had designs on the CEO spot.

The WSJ story reflects those rumblings too. Though it stops short of saying so, the newspaper makes clear that Noto is taking on a bigger role as a company spokesman and teller of Twitter's story:

[In] May, Mr. Noto, the ex-Goldman banker, joined the company and gathered its management team. Their mission: to boil down Twitter's vision and strategy so he could explain it to Wall Street...

During the [earnings] call, Mr. Costolo's presence was more muted, while Mr. Noto handled most of the analysts' questions.

It's such a tidy solution. Noto's already there. Investors seem to love him. The stock rose more than 2 percent when he joined Twitter. And he's an effective operator in his own banker-y, ex-Army Ranger sorta way. (Remember those reports that Noto pushed the Twitter IPO team to work grueling 12-hour days for 12 weeks?) What says "strong hand on the tiller" better to you? Ex-stand up comedian or West Point graduate?

But it would be tough to find a smarter CFO than Noto, a career finance guy who has done turns as a financial analyst, investment banker and CFO of the National Football League. Noto helped Goldman lead the Twitter initial public officer, so he's well-positioned to keep big investment firms happy with the stock, having pushed many of them to buy it in the first place.

And as a finance pro, it's hard to believe that Noto is the best person to lead a company that has real product puzzles to solve. Twitter is impossible to search and you can't control how and when the information hits you. My editor likens it to the old Home Shopping Network. Time for toasters! Buy this Bowflex. Up next, cubic zirconias in every color. As others have pointed out, some of these quirks might be hampering wider adoption. Twitter may very well need a new manager, but Noto, shouldn't be the only option.

It isn't hard to understand why investors are down on Twitter. The company has a beloved, but confusing product. It's trying to figure out what it wants to be when it grows up. And it's figuring that stuff out under the glaring spotlight of the public markets. That's hard to do. And a quick C-suite coup won't make it easier.

It's clear that Twitter will probably have to change how the service works and what it does for users. If Facebook is any indication, big changes run the risk of angering core users. If Netflix is any guide, a radical move might also alienate investors. (In both of those cases, the revamps were the right thing to do; those executives were later vindicated.) That tension always exists, but Twitter is getting more scrutiny for lots of reasons, including the fact that tech, broadly, has become a favorite activist target. (Facebook shares stayed under $30 for a year while the company figured out mobile. Twitter has been public for just a year.) The longer that Twitter draws it out, the less likely it is that Costolo will get to oversee the makeover. And the longer these issues fester the more profound the change needed to restore the company's growth.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net