Twitter’s board quickly agreed to buy the company from Elon Musk for $44 billion. To understand why to look no further than the skepticism Wall Street has about Twitter’s ability to meet lofty financial goals set by activist investor Elliott Management in 2020.
When Twitter reports its quarterly financial results on Thursday, analysts expect the number of users to grow less quickly than they need to meet the aggressive growth goals that Jack Dorsey, the co-founder, and then-CEO of Twitter, set for the company in the years to come. According to data from Refinitiv, Twitter is likely to miss this goal and stay off track for the rest of the year.
A well-known tech and media analyst at MoffettNathanson told investors to “take the money and run” two weeks before the deal was made public.
Twitter’s board agreed with us. Directors didn’t have faith in new CEO Parag Agrawal’s ability to make more money than Tesla CEO Elon Musk said, sources say. This made it easier for the board to decide to sell just four days after Musk said how he was financing the company.
Risks for Twitter increased when the CEO job was given away five months ago to an untested person. Ryan Jacob is the chief investment officer at Jacob Asset Management, which owns 7.7 million shares in Twitter.
“They have very high goals, and there’s a lot of doubt that they can meet them,” Jacob said. He doesn’t have a record.
Eight current and former Twitter employees, including both executives and employees, told Reuters that the company has long had problems with internal dysfunction, indecision, and a lack of accountability. One current employee said that the pressure to meet promises made the problems even worse.
Afterward, Dorsey thanked Musk and Agrawal for getting the company out of “an impossible situation.” He blamed “Wall Street and the ad model” for the company being “owned by Wall Street and the ad model.”
Twitter didn’t say anything. Tesla and its CEO, Elon Musk, did not answer questions right away.
ANOTHER REORG
Under Musk, more changes are on the way.
Since Twitter was founded in 2006, there have been many changes in the company’s top executives. This means that long-term plans are hard for the company to keep, and projects are often left hanging just as they start to work out. New CEO: The last big change was in December.
When Twitter tried to get into live sports, entertainment, and news in 2016 to use Twitter’s strength as a real-time platform, people saw it as a good way to make money. Twitter had signed high-profile deals with partners like the NFL to stream games, and they had a lot of people talking about it.
CEO: Dorsey and other company leaders went to New York to show off the service’s lineup to advertisers.
Twitter split itself into 10 groups in 2018, each with 10 people in charge of different parts of the business, like technology, product, and revenue. This spread the responsibility for projects like the live video push, a former executive and current employee told Reuters.
Lacking an owner in an increasingly competitive field, and with hearings in D.C. and privacy rules in Europe vying for executives’ attention at the same time, live video “sat there” for a long time, the people said.
Lack of coordination at the top meant that senior executives often worked on their own projects without working together, four sources said.
The problem was especially bad for people who were in charge of things like product, engineering, technology, and revenue, known internally as the “experience team,” the sources said. Elliot’s arrival made things even worse, one current employee said, likening the pressure to meet the 2023 growth goals to a “pressure test.”
Fleets, Twitter’s short-lived Snapchat-like product, was one.
Agrawal and Kayvon Beykpour, a product director at Twitter, pushed for the feature to be released in late 2020. Twitter users mocked the feature as a late attempt to join the disappearing message trend.
There were hundreds of engineers working on Fleets, but Agrawal and Beykpour didn’t work with their counterparts who were in charge of making money, two people who knew the project say. They didn’t plan to put ads in the feature when it was released, the people say.
People who used to work for the company said that “it was really messy.” ‘Hey, just push it out there. We’ll change it later.’
Fleets were put on hold by Twitter eight months after it was released and only a month after it was used in limited ads.
HANDS-OFF MANAGEMENT
Product and revenue mismatches might have been less common if Twitter CEO Jack Dorsey had held his teams to account, four former Twitter employees told Reuters. Dorsey, however, had a management philosophy that made him avoid making specific decisions, the former employees said.
People who used to work for Dorsey said that one of the things that made him so successful was that he hired strong people and encouraged them to take risks. Disney’s former CEO, Bob Iger, was well known for doing this.
One of the things that people say about Jack is that he sometimes takes a long time to make decisions, and he was afraid to get involved in decision-making. Getting into a tie-breaking is bad for Jack because it means the management team hasn’t found a way to solve the problem on their own.
Some people, especially developers who wanted to come up with new things, thrived when they had more freedom. However, some people thought the company was lost.
“Everyone agrees that we need to be more accountable for our decisions at the top,” said a current employee.
It was only later that day that workers at the whole company met to talk about Musk’s “questionable ethics” and what would happen to Twitter’s work-limiting hate speech on the site. In response to a question about whether Donald Trump, the former president of the United States, would return to Twitter, executives said they didn’t know where the company was going.
When Twitter has a new leader, he or she will have a lot of strong ideas about how to use Twitter.