TWTR: Enough Already
Omid R. Kordestani
1355 Market Street, Suite 900
San Francisco, CA 94103
December 6, 2019
A part-time CEO who is relocating to Africa? Enough already.
My name is Scott Galloway (@profgalloway). I am a Professor of Marketing at NYU’s Stern School of Business, an entrepreneur, and a U.S. citizen. As of 12/6 I am the direct and beneficial owner of approximately 334,000 shares in Twitter. I reserve the right to establish a dialogue with like-minded shareholders regarding the nomination of class III directors and/or a resolution of “no-confidence” concerning you and CEO Jack Dorsey for consideration at your annual shareholder meeting in May.
To be clear, my primary objective is the replacement of CEO Jack Dorsey. However, your firm’s weapons of mass entrenchment include a staggered board that may force shareholders to seek to replace other directors, including yourself, first.
Twitter has, on every metric, underperformed peers for several years. Since Mr. Dorsey’s return to the firm in July 2015, shareholder return is –15%, vs. Google +153%, Facebook +129%, the S&P 500 +50%, Dow Jones U.S. Media Index +29%, and MSCI tech index +115%. The stock has experienced substantial earnings multiple contraction as the market is losing confidence in management, the board, and the firm’s prospects. Today, Twitter’s multiple on earnings is lower than media firms including:
This decline is despite the fact — and I trust we can find common ground here — that Twitter has become an iconic brand and the global heartbeat for our information age. The only firms with the reach and influence of Twitter (Tencent, Facebook, and Google) register 17x, 24x, and 39x the market capitalization, respectively.
Greatness is in the agency of others, and many talented executives have left the firm. It is difficult to ask people to work evenings and weekends when the CEO works mornings (is part-time). The exodus has resulted in anemic product development that has stunted growth and monetization. The poor performance has been somewhat wallpapered over by President Trump. His decision to communicate and govern via 280 characters creates a sugar high that masks the underperformance of management, and will not last. Few people have benefited more from Donald Trump’s election than Jack Dorsey.
Unlike Facebook, I believe Twitter is a net good for society. However, the problem is with the word net. Despite the community, news, communication, and joy Twitter offers, it’s clear there has been an adoption of big tech’s broader playbook: a disregard for the wellbeing of its users, the order of social discourse, and the sanctity of U.S. elections — in pursuit of profits.
However, for Twitter, the pursuit has come up short, and stakeholders have borne the brunt. Any examination of what ails the firm leads to one diagnosis: poor governance that tolerates what only four firms* in the Fortune 1,000 endure: a part-time CEO. Mr. Dorsey’s inattention and lack of urgency is understandable, as 85% of Mr. Dorsey’s wealth resides with his morning/afternoon job (CEO, Square).
Fake accounts, GRU-sponsored trolls, algorithms that promote conspiracies and junk science, and inconsistent application of your terms of service have resulted in a firm that not only underperforms, but is dangerous.
The poor citizenship of Twitter is bad. What’s worse is Twitter’s malfeasance coupled with scant benefit to stakeholders. The platform is all the calories of big tech (poor citizenship, divisiveness, hate) without the great taste (stakeholder returns). At least tobacco stocks performed well.
This decline in value, however, presents an opportunity. As Twitter has shrunk to a fraction of the value of its once-peers, there is an opportunity to fill an unserved niche — a platform healthy for users and the commonwealth. A platform that brings out the best, and not the worst, in its users. The firm desperately needs to turn the page.
It’s not Mr. Dorsey’s plans to move to Africa that constrain stakeholder value, but his plans to move back. Mr. Dorsey demonstrates a lack of self-awareness, indifference, and yogababble that have hamstrung stakeholder value.
This is not Mr. Dorsey’s fault. After serving on seven consumer, media, and technology public company boards, my experience is that if you tell a thirty- or forty-something person, who regularly wears black turtlenecks, that they are Steve Jobs, they are inclined to believe you. The real culprit is directors who enable this reckless behavior and render themselves flaccid fiduciaries for shareholders.
The most recent example of the board’s idolatry of innovators is enabling Mr. Dorsey’s move to Africa for much of 2020.
- Twitter is mentioned 74 times in the Mueller Report on Russia’s interference in the 2016 election. Yet Mr. Dorsey is moving to another continent during the heat of an election year?
- Russian interference is decreasing on Facebook but increasing on Twitter. All three intelligence agencies are using the term cyberwar for Russia’s actions on social media. These attacks are expected to escalate before the November election.
- As Jason Kint points out, it’s commendable that Mr. Dorsey wants to understand and collaborate in markets outside the U.S., but that doesn’t require the CEO to be on the ground. If Twitter doesn’t solve the current issues impacting the most critical market for its values and ARPU, then how are other countries a priority? All social media CEOs have said they’ve had moderation, disinformation, and manipulation decisions escalated to them.
- Political scandals happen daily under this administration. The president has tweeted about nuclear war. He becomes more erratic under pressure. How will the next bout of nuclear war tweets be handled? Whom, if not the CEO, are those delegated to?
- Twitter’s banning of political ads was laudable, but tweets by and about candidates are key to the platform. Bots still proliferate, spreading lies and outrage. How will the company handle the next Pelosi deepfake or threats of violence from a world leader? How will it protect journalists, especially women, from longstanding and increasing harassment?
- It’s a 9-hr time difference from San Francisco to Nigeria — so for pressing issues, the CEO will literally be asleep. How will absentee leadership affect employee morale and stress levels?
- James Madison wrote about the power of factions to divide society. He feared that strong partisanship passions “inflamed [people] with mutual animosity” and made them forget about the common good. Twitter is Madison’s fear come to life. The outrage that unchecked social media imposes on our psyches is pulling at the fabric of our republic and threatens the foundations of our social order. Democracy relies on mutual understanding and respect. In addition to handling urgent political crises, Twitter’s CEO needs to scale back “mutual animosity” and help heal public discourse in the U.S., not leave as it continues to deteriorate.
Weak governance, a part-time CEO, relocation to Africa, damage to the commonwealth, and poor returns. Stakeholders deserve a board and CEO that command the opportunity Twitter occupies.
I look forward to your response, and can be reached @profgalloway.
*In the original version of this post, I said “eight firms.”
Spot on. Why the hell does a company with $3b in rev have a part time CEO. Just read The Four and Post Corona in 2 days. Could not put them down. Incredible insights, thanks Scott 🙏🙏
He looks like a dirt ball on drugs too..
You can’t blame him. Nigeria is a beautiful place.
ENOUGH… ENOUGH. I feel like only” HE” can say whatever he wants whenever he wants. Without judgement…. It’s Bullshit. What’s going on? He’s such an embarrassment to our country. ENOUGH…. PLEASE…. PLEASE.😢😢😢
Я далёк от политических дебатов и перетягивания одеял. Но если Вы все хотите чтобы Twitter стал уникальной платформой будущего то: 1. Запрет на подключение к платформе сторонних приложений. 2. Выход в интернет вселенную через , Twitter фейков и прочих троллей. 3.Сворачивание всех рекламных блоков, ссылок и твитов. 4. Передача платформы искусственному интелекту..
So bad dear I’m so sad
What i need to do I need to do
Yeah okay and what is this all about
Why doesn’t Twitter allow some people to have property in their tweets — so that everyone who uses the tweet in a newspaper has to pay a small royalty?
Ok, I’m officially in the Kennel Club!
Hold of course 🙂
buy, sell, or hold?
Scott – this is a beautifully written shareholder letter. Concise, thoughtful and supported with data throughout. My favorite part of the letter bringing up James Madison’s thoughts on factions and how they inflame partisianship, much like Twitter and social media platforms do. Happy holidays, and I look forward to the next Section 4 webinar/class for readers.
Well written and to the point. Arrogance of leadership destroys companies. We shall see what the future holds.
I have no desire to censor one of the last bastions of free speech on the internet, to sweeten your personal honeypot but improvements in the platform’s ad implementation and content curation is long overdue. Innovate advancements like a marketplace (perhaps with Bitcoin integration) and a “stories” feature similar to IG and Snapchat would also go a long way to generating user growth and increasing profitability. In short, monetization could be improved without censorship.
if twitters twit isn’t auditory you need a better mechanism…
I particularly like your comments about the black turtleneck ceo. I do wonder if he even spends much time with the company. I’ve visited the place and it feels like a company with no leadership.
Talk to Pershing Square or Elliott Management about an activist campaign
and btw..ive lost a lot in the stock market and you all sound like the dreamers i’d talk to in 87, 93, 99, 2008 etc…..wake up or you will lose a lot ….like a dreamer like me has
Causal $10 mil in Twitter flex. Nice. Don’t think you hit your “idolatry” word count in this post. Good read.
Interesting argues, but except moving board and ceo, what would be the vision of Twitter, regarding your point of view ? How Twitter could build more value ?
how does one say it…drop the mic??
$10M in TWTR shares – impressive
While I abhor your politics, I admire you’re witty mind and reasoning, well said!
Don’t always agree with your tech bashing but this time you are right on
Add my 34k shares to that, part time CEO full time loser needs to go.
One thing to keep in mind with the political ad banning is Exxon can still post ads about how they’re great and not polluting the planet, but a political group can’t criticize them via an ad.
The shareholders demand no malarkey!
Seems like a good time to buy Twitter stock
“yogababble”…painfully ascetic yogababble in Myanmar ffs
Great writeup. Keep in mind there’s outrage factories on both sides of the aisle, not just ‘theirs’.
Fantastic! Well written and well researched.
Well said. However, your mention of Twitter’s p/e of 14 includes a one time income tax benefit in this year’s earnings. Twitter’s adjusted p/e closer to 30.
You R the Big Dog!!!
Very well said – please keep up the pressure.
why not just shut twitter down?
You can add in my 200 shares of TWTR to your crusade. Well said. Well thought out.
Well done. 100% agree. Stick to these topics, no more Bloomberg 2020 non-sense
BRILLIANT … THANK YOU !!!
@profgalloway – you but the ACTIVE in Activist Investor!
While I disagree that “Twitter’s banning of political ads was laudable”, I agree with everything else on this.
You forgot to include any actual criticism of Dorsey’s business decisions. What exactly do you want a new CEO to do, that Dorsey failed to do? Stuff more ads between tweets? Ban Donald Trump? Your critique sounds like sour grapes about your investment, and jealousy over Dorsey’s involvement in interesting projects.
Agreed. Too much politics talk as well, although I share some thoughts of Scott Galloway on financial performance, esp. share price. I also share the concern about the Africa relocation (?!) – possibly a good strategy and tactic to deal with political audience and shareholders. Although I don’t support any major parties, this message is political biased, IMHO. Maybe, despite bad fundamentals, TWTR should just scale down on investment in people and R&D and do more buybacks to inflate the price so shareholders (like Mr Galloway and possibly me) would be happier – see cases like E-Bay? Would a new CEO will be less evil that will not track us, filter comments, sell our data in the name of financial gains? Would Galloway be a better CEO? A “better” CEO might seem to have a good PR image but let their users feel helpless and miserable on the technical part or their biased and weak algo. This article lacks benchmark and examples of a much better benchmark / alternatives. More specific solutions, SVP! When can we have a platform that is sans-political?
Tweets. But editable?
“It’s not Mr. Dorsey’s plans to move to Africa that constrain stakeholder value, but his plans to move back.” GOLD! the big dawg has spoken!
Why I subscribe to no social media platforms—toxic
Thank you. Just…thank you.
Holy cow, you have $10 million in Twitter stock?
No mercy / no malice and spot on