Cantillon: laughs run dry for Twitter investors under comedian Dick Costolo

Investors believe microblogging site is failing despite growth

Some shock waves went through Silicon Valley this week when Twitter chief executive Dick Costolo abruptly announced he was stepping down.

The microblogging site's co-founder Jack Dorsey will become the interim chief executive following Costolo's last day with the company on July 1st.

It is likely Costolo’s impending departure has been influenced by investors unhappy with stagnant user growth, disappointing results from Twitter’s direct response advertising business and the absence of profit.

They believe Twitter is failing, which says a lot about the extraordinary scale of social platforms, considering the company has about 300 million active monthly users. In less than five years, Costolo has grown Twitter from a $3 billion valuation to a tech behemoth with a $23 billion valuation.

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That is not always enough in the Valley, it would seem.

Twitter’s monthly active user numbers have fallen 30 per cent between 2013 and 2015, which has concerned investors. The company also posted a net loss of $162 million for the first quarter of this year.

Twitter’s user base hasn’t grown as fast as Facebook’s and its messaging service has underperformed.

Facebook recently announced its Messenger app now has 700 million monthly active users. Twitter then interestingly announced it would remove its iconic 140-character limit from its direct messaging product.

One reason Twitter co-founders Biz Stone and Evan Williams gave when they hired Costolo, a former comedian, as the company's chief executive was: "He's funny." Obviously he wasn't funny enough for investors.