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Here's Why Twitter's CEO Swap Could Be Just What Its Ad Business Needs

Adam Bain seen as likely candidate

Twitter chief revenue officer Adam Bain is seen as a likely successor, or at least a candidate, to replace Dick Costolo.

The ad industry is looking for whatever clues it can get about the future of Twitter after CEO Dick Costolo handed temporary authority to co-founder Jack Dorsey today and the company begins its search for a full-time replacement.

"I do not foresee any changes in strategy or direction," Dorsey said in a call he held, alongside Costolo, with Wall Street analysts following the announcement. "I do believe in the course the company is on."

Both men are Twitter longtimers. Costolo was CEO for six years and took the company public, while Dorsey helped found it more than nine years ago. The two claimed the leadership change was not related to recent criticism of Costolo's leadership, pressure from investors or lackluster performance.

Costolo said he approached the board at the end of last year with the idea of leaving the company, and he decided to make the move following a shareholder meeting last week. He was not fired and won't take a severance package.

Twitter is a powerful force in media but has struggled to build a mass audience of engaged users. It's a powerful force in advertising, too, but it has not brought in the kind of revenue—or made a profit—that investors demanded.

In particular, Costolo tried to infuse the platform with targeted ads, but marketers did not pay as much for the opportunity as he thought they would, leading to a sales miss last quarter. Also, user growth has slowed, even as the platform topped 300 million monthly users for the first time.

"The board still has some faith in Costolo, but he's lost his way. Twitter needs someone who can give direction," said one digital ad exec speaking on condition of anonymity. "This positioning of Twitter as a direct-response vehicle is failing. They are an awareness play."

Adam Bain, chief revenue officer at Twitter, is on a very short list of potential successors, according to a number of ad-industry players. "His relationship with those of us who pay the bills is exemplary," said Noah Malin, head of social at MEC Global, echoing the sentiments of a number of his peers. "He's smart, personable and great to work with. He engenders a huge amount of trust in the brand and agency world."

Twitter has some compelling ad opportunities like its deal with the NFL to tweet live game highlights and sell sponsorships to brands, and it's in the moment and part of the conversation during every major TV event.

Costolo presided over a recent acquisition that many think could be the future of Twitter—Periscope, the livestreaming app that has attracted the attention of media companies and brands.

Still, even after continually refining the product to attract the widest possible audience, Twitter has had to look outside the platform to reach people. It has never quite achieved the widespread popularity of Facebook or even Instagram. Costolo has tried to generate money from billions of tweets that appear in media outside of Twitter.

The company has had trouble keeping up with Facebook in ad technology and building a mobile ad network. It recently made a deal with Google to allow its clients to use DoubleClick to buy ad space on Twitter. Tweets are starting to appear in Google search results, too.

In fact, Twitter and Google have grown so close that some have said the search giant should just buy the company. Today, Dorsey said Twitter would look to build an independent future but that the board would have to entertain any offer that represented the best deal for shareholders.

Costolo still has many supporters, even if Wall Street soured on his leadership, and many people thought he was unfairly targeted.

"I'm sad to see him go," said Michael Kassen, CEO of strategic advisory firm MediaLink. "I have enormous respect for Dick Costolo."

Wall Street may have turned on him and Twitter's prospects, but on Madison Avenue, the view was different.

"Twitter is relevant in every media conversation," Kassen said.

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