Twitter Analyst Day: The Tough Questions Dick Costolo Will Have to Answer

Twitter Analyst Day: The Tough Questions Dick Costolo Will Have to Answer

Twitter will host its first-ever Financial Analyst Day today from 9am until 4pm PST in San Francisco. During the session CEO Dick Costolo, CFO Anthony Noto and other members of Twitter’s senior management team will “share the company’s vision, strategy, and financial overview,” alongside their “priorities and growth initiatives across key functional areas”.

As such, it will be watched very closely by investors. The event follows an underwhelming third quarter earnings report where Twitter failed to meet analyst expectations for its monthly active user (MAU) tally, leading to a sharp decline in the share price, which is down more than 18 percent since October 27.

Twitter Analyst Day: The Tough Questions Dick Costolo Will Have to Answer

The answers given by Twitter’s top staff, especially Costolo, will be picked apart for insights, and any signs of weakness could prove extremely troublesome for an already ailing stock.

The good news is that I believe investors are looking for a reason to buy Twitter – they want their faith in the company resorted. But increasingly there’s pressure on senior management, and especially Costolo, to step up or step aside.

“Assessing Twitter at this stage of its evolution is largely about assessing the company’s management, in our view,” said analyst Brian Wieser of Pivotal Research. “We view the company as essentially a late stage start-up, and the company’s efforts to become something bigger than it already is in terms of user growth probably explains some of the executive turnover we have seen this year. From the outside, it seems as if goals may have been ambitious and potentially unrealistic. However, we recognize that the company may not have established its current scale and trajectory without heightened ambition over the years.”

So what sort of questions can Costolo expect? Here are five I would expect to see:

1. What are you doing to boost user growth? – Twitter’s growth is clearly flattening, and the platform might actually be close to its peak. Indeed, it’s year-over-year growth was the lowest it has ever been in Q3 of this year: just 23 percent. Facebook’s growth didn’t fall below 25 percent until it already had one billion users. Twitter has just 284 million. Clearly Twitter will never come close to catching Facebook, but what is it doing to accelerate user growth in Q4 of this year and beyond?

2. What is your vision for Twitter’s future? – Beyond the ailing user growth numbers, what plans does Twitter have for next year, and the next five years? What new products are they working on? What improvements are they making to existing products? Can they monetize the brand in any new areas?

3. How can you make more money from existing users? – Twitter’s Q3 MAU increase might have disappointed Wall Street but 284 million people is still a large number. However, with Q3 revenues of $361 million, Twitter is making just $1.27 per user. What can they do squeeze out some extra cents?

4. How can you make money from non-users? – Recently Twitter has tried to turn the focus on their much bigger tally of non-users – that is, folks who consume tweets around the web and on television, etc., but never log into the service. This could be as many as 2-3 times Twitter’s MAU total – 540 to 710 million people. What are Twitter’s plans to monetize that group?

5. How stable is Twitter’s management? – In the past few months a number of key personnel have left Twitter, including COO Ali Rowghani, former head of media Chloe Sladden and news chief Vivian Schiller. Last month product chief Daniel Graf was demoted. These are troubling times at Twitter. What attempts are they making to level the ship?

However he responds to these questions, Costolo must be feeling the pressure. My gut feeling is that if Twitter’s Q4 earnings report is weak he’ll almost certainly have to step down. So we can look closely today for clues on how bullish he feels about Twitter’s immediate future to also gauge expectations on his own.

You can follow a live webcast of the event at investor.twitterinc.com from 9am PST.