Boardroom power plays, disgruntled founders, and CEO switcheroos are clipping the wings of this tech high flier.
by Jessi HempelIn March, shortly after Jack Dorsey went back to work for Twitter, the company he co-founded four years ago, he did a Q&A session with an entrepreneurship class at Columbia Business School. As students tapped away on their laptops (were they sending tweets?), Dorsey, 34, answered questions about his commitment to his new gig as Twitter's product chief. Dorsey, after all, is also CEO of Square, a hot payments business, and he returns to Twitter after a rocky run as its CEO -- the board demoted him in 2008. (Co-founder Evan Williams took over and held the job for almost two years; then operating chief Dick Costolo assumed the top job.) "Seems like a revolving door," mused the interviewer.
Dorsey laughed lightly and replied, "You know, we're just individuals. We're just humans running these companies." And he compared managing a startup to, of all things, supervising a theater company.
There's no shortage of drama at Twitter these days: Besides the CEO shuffles, there are secret board meetings, executive power struggles, a plethora of coaches and consultants, and disgruntled founders. (Like Williams. The day after Dorsey announced his return to the company -- via tweet, naturally -- Williams quit his day-to-day duties at the company, although he remains a board member and Twitter's largest shareholder, with an estimated 30% to 35% stake.) These theatrics, which go well beyond the usual angst at a new venture, have contributed to a growing perception that innovation has stalled and management is in turmoil at one of Silicon Valley's most promising startups, which some 20 million active users rely on each month for updates on everything from subway delays to election results -- and which a growing number of companies, big and small, seek to use to market themselves and track customers.
Just two years ago Twitter was the hottest thing on the web. But in the past year U.S. traffic at Twitter.com, the site users visit to read and broadcast 140-character messages, has leveled off. Nearly half the people who have Twitter accounts are no longer active on the network, according to an ExactTarget report from January 2011. It has been months -- an eternity in Silicon Valley -- since the company rolled out a new product that excited consumers. Facebook's Mark Zuckerberg used to watch developments at Twitter obsessively; now he pays much less attention to the rival service. Meanwhile companies are hungry to advertise, but Twitter hasn't been able to provide marketers with enough opportunities. Last year the company pulled in a mere $45 million in ad revenue, according to research firm eMarketer. Facebook brought in $1.86 billion.
Twitter doesn't lack talented engineers, potential paying customers, or loyal users -- and it certainly has plenty of money in the bank: It has raised more than $360 million from such heavyweights as Jeff Bezos and Kleiner Perkins. The problem is a board and top executive team that don't always appear to have control of its wide-ranging cast of characters, including founders who have attained near-celebrity status (another co-founder, Biz Stone, is a regular on NPR, and earlier this year Dorsey was profiled in Vanity Fair), headstrong and divisive managers, and investors used to getting their way. For some time Twitter's runaway growth -- in the first half of 2009, Twitter added more users more quickly than almost any web service in history -- masked its execution problems. But now, with growth of traffic to its site slowing and its rivals beefing up (new social-media darling Groupon has raised more than $1 billion, and Facebook has been on a hiring spree), Twitter needs to get its act together or risk losing buzz, potential ad revenue, and its bright future too.
To be fair, Twitter's founders didn't set out to build the next Facebook: Consumers turned it into a social phenomenon and kept signing on to see what it was about. Dorsey, Stone, and Williams started the service as an experimental side project; it was never designed to accommodate the 200 million–plus registered accounts worldwide it now hosts. Twitter crashed so frequently in its early days that its "fail whale" logo that signaled the service was down became a cultural icon emblazoned on ironic hipster T-shirts.
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