One of my biggest regrets in being a Yahoo! (YHOO) shareholder over the past four years is that I didn't start asking tougher questions of CEO Marissa Mayer sooner.
When a new CEO comes in, especially to do a turnaround, the natural response of investors is to give that person a wide berth. Mayer had a lot of star power at the time of her hiring, and Yahoo! certainly had its challenges. My bias was to give Mayer the benefit of the doubt, and trust that the board had made the right selection and would do its job in effectively overseeing her performance. I thought she would show her stuff over time.
Finally, two years after her hiring, confused by her announcements and shifting language in describing her strategy, I became more publicly critical of her. Looking back, I shouldn't have trusted the board to take care of shareholders. Instead, I should have asked tough questions as soon as I had concerns, like when she hired Henrique De Castro from Google (GOOGL) or when she started selling her Yahoo! stock through something called a 10b5-1 plan with the SEC that she described at an internal town hall meeting as an example of "good governance."
In viewing the turnaround that is supposedly going on at Twitter (TWTR), I can't help but also be puzzled at what's really happening. Therefore, even though I'm not a shareholder and even though Twitter CEO Jack Dorsey has only been on the job for seven months, I'm going to try to learn from the mistakes I made in not speaking out sooner about Mayer and ask:
Is there any evidence that Twitter is a better company today than before Dorsey was appointed CEO last October?
To me, the answer is obviously no. And I think it's fair to ask Dorsey to give some more fulsome answers about what exactly he's been doing and how it's tangibly changed processes at Twitter. The commentary he's provided during the recent earnings calls have given no hints as to the answer.
On the most recent earnings call, Dorsey said: "My focus is a lot on recruiting this year and specifically into engineering and to products."
Since his hiring, the big external hires at Twitter appear to be two new directors and a new head of marketing.
What is different in engineering or Twitter's product today compared to, say, last September? To my eye, and presumably to the eyes of all the moms, dads and grandmas who tried Twitter once after Ev Williams appeared on the Oprah show in 2009 and then never tried it again, not much. (Yes, it's been seven years since Ev went on Oprah to introduce the world to Twitter.)
Some might say Dorsey doesn't have to tell me or any of Twitter's investors that kind of detailed info I'm asking for. They might point to Jeff Bezos at Amazon (AMZN) and say he never gave detailed product improvement updates on his calls. Heck, Bezos doesn't even participate on these quarterly calls. He leaves it to his CFO to handle them. (Amazon is part of TheStreet's Growth Seeker portfolio.)
My response would be though that Bezos has successfully kept Wall Street on his side for 20 years. That's been through two economic collapses as well. But you've never heard people say: "The valuation Amazon is getting is too low. Therefore, Bezos should consider taking it private." If anything, the complaints have been more that Wall Street is being too generous in its valuation of the company.
How has Bezos been able to keep the confidence of his investors for 20 years when CEOs like Mayer and Dorsey appear to be losing it after seven months?
There's a second thing, though. Bezos is a great communicator. He's smart. He's clear-headed. And he breeds confidence. Watch this clip of him speaking at the 92nd Street Y in New York in April 2001. It's clear that Bezos is very steeped in the business, as well as the technology.
With Dorsey, I have no clue what Twitter is doing differently today under his leadership compared to when he was only executive chairman paying particular attention to product back in September. Dorsey was executive chair from 2011 to 2015. He reportedly had dinner with CEO Dick Costolo every week over that period to discuss the company in great detail.
It's not entirely obvious why the product was so slow in changing between 2011 and 2015, nor why Dorsey's appointment as CEO last fall was going to speed things up, as he'd been in the loop for the previous four years. All the public comments Dorsey has made since his appointment to the top job have not shed any light on these questions.
Going through the last Twitter earnings call, you would get three impressions:
(1) The business is not growing at all in terms of new users.
(2) The old promoted tweet ads aren't growing and in fact seem to be shrinking.
(3) The company believes its future will be built around live events and selling big video ads next to those events.
But why is Twitter going to do live better than Facebook (FB)? Dorsey's answer last week was:
"We have been doing live for 10 years and we have -- we believe we have a leadership potential in it. We have a leadership position in it, but it's not just about showing a live event, it's also about hosting a conversation around the live event. Twitter has always been the best place to see what's happening immediately, to see what's happening instantly, and to bring people together around a particular shared experience. And as we talked about last time, we think the easiest way to get what Twitter is, is really to show a live event, show people the great accounts who are providing insights that you can't find anywhere else, you can't find in your address, but you actually meet on Twitter through that experience, to connect them through a follow and also to encourage them in a conversation. And that is exactly what we are focused on making sure that we continue to do."
The answer is too long. It's not clear. It doesn't suggest why Facebook can't drink Twitter's milkshake (even though Dorsey's right that Twitter does have some inherent advantages compared to Facebook). (Google, Twitter and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)
From now on, Dorsey needs to be articulate every quarter about what has been improved internally at Twitter over the prior three months. There must be a much clearer sense of momentum conveyed to investors about how Twitter is doing things better internally, which should soon translate into external metrics observed by all.
That was never a problem for Bezos. It has stymied Mayer and Dorsey thus far in their tenures as CEOs.