Costolo, who's served as CEO of the social messaging service since 2010 and took it public in late 2013, resigned Thursday afternoon. He'll be replaced on an interim basis by Jack Dorsey, one of Twitter's co-founders and the chairman of its board of directors. Dorsey, who is also CEO of the payment startup Square, would not appear to be a likely candidate to take the job permanently, although the company said both external and internal candidates would be considered.
Calls for Costolo's ouster began almost as soon as the company reported its first quarterly earnings, revealing that, while it was outperforming analysts' expectations on ad sales, its acquisition of new users had become alarmingly flat. Under Costolo's direction, Twitter attempted a variety of strategies aimed at goosing user growth, including aggressive partnerships with media companies, alterations to the various aspects of the user experience and the acquisitions of two social video apps, Vine and Periscope.
But the number of new quarterly monthly active users never jumped meaningfully--not after tweets about the 2014 Academy Awards generated 3.3 billion impressions or after people sent 672 million tweets about the World Cup. Seizing on those huge numbers, Twitter last summer began migrating to a different way of thinking about the size of its platform, one focused on total audience rather than logged-in, active users. But Wall Street, hung up on unfavorable comparisons to fast-growing services like Facebook and Instagram, wasn't having it.
I interviewed Costolo for an Inc. cover story in January 2015--Twitter's CEO: How I Stay Focused Under Fire. At the time, many analysts were predicting he would be replaced any minute. I asked him how the speculation about his staying power affected his ability to get things done. "It doesn't bother me or affect me," he replied, insisting that the board of directors had repeatedly expressed full confidence in him.
"I know I have a really good sense of what I need to do and what we need to do in the company, and the board and I are all totally on the same page on that, so that stuff doesn't bother me at all. The tactical thing that you then just have to spend time on, is helping the rest of the company know, 'Yeah, don't worry about this. I'm not spending anytime thinking about it. Don't worry about it for me.' "
Costolo also told me that Dorsey is one of his closest advisors and allies, with the two getting dinner every week to talk about problems facing Twitter.
Shares in Twitter are up strongly in after-hours trading on the news of Costolo's exit, but perhaps they shouldn't be. For Twitter to replace him now suggests the second-quarter user numbers won't be any healthier than the last few reports.