The Zuck Factor: Facebook's Advantage Over Twitter

By Markets Fool.com

The fall ofTwitter CEO Dick Costolo was not a huge surprise on Wall Street, as many had been clamoring for his exit. Under Costolo, the social media platform had fallen short of analyst estimates time and again, and its sluggish user growth had repeatedly disappointed investors.

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Many complained that the service was too confusing to attract new users, while others blamed a lack of innovation for the company's problems. But Costolo's resignation also raises one seemingly overlooked question: Why was he there in the first place? After all, Costolo was not among the group of entrepreneurs that started the company, leaving the average investor to wonder who's really been in charge of Twitter throughout its short history.

How it started
Even Twitter's genesis nearly a decade ago is murkier than that of most enterprises. Without a single founder, the company evolved out of the combined work of Evan Williams, Biz Stone, Noah Glass, and Jack Dorsey, who initially started a podcasting platform called Odeo.

Twitter was created by Odeo, first as just a single product that was essentially a group text-sharing platform that collected a few thousand users, but it grew from there into its own company in 2007.

Dick Costolo, Twitter's outgoing CEO. Source: Twitter.

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Fast-forward to 2009, when Twitter brought in Costolo as chief operating officer. Costolo had previously co-founded FeedBurner, a Web feed management service that Google ultimately acquired. In 2010, then-Twitter CEO Evan Williams stepped out of the leadership role to take paternity leave, passing the reins to Costolo.At the time, Twitter had 165 million users, more than half of what it has today.

Under Costolo, Twitter seemed to struggle with a question that had always plagued the company: What does it want to be when it grows up? Conceived almost accidentally as a simple message-sharing service, the company defined itself in its S-1 filing in 2013 as a "global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to create, distribute and discover content, we have democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered."

But the complexity of Twitter's platform and mission seems to be reflected in the revolving door that is its leadership, and not just during Costolo's time -- Twitter's founding fathers have also gone in various directions. Most of Twitter's top executives also moved on while Costolo was CEO, making the mission to grow the company and drive profitability all the more difficult.

In many ways, the confusion that is Twitter the product and Twitter the company is a result of Twitter's leadership team and the constant shake-ups that have befallen it. Perhaps Twitter user @raymondsultan put it best when he said: "Requirement for next CEO: Find a way to explain Twitter to actual human beings."

Meanwhile, in Palo Alto...
While Twitter is in the throes of another identity crisis, Facebook has become the newest Wall Street darling. After a rocky start in the public markets, the social network has grown its valuation to $275 billion, the stock has more than doubled since its IPO, and it is swimming in profit.

Comparing the two companies, it's hard to ignore that Facebook's leadership history and product perception is virtually the opposite of Twitter's. Mark Zuckerberg, who founded the company in college in 2003, is still running it today, and investors know there won't be another person in the hoodie next year, or maybe even in 30 years. Zuckerberg isn't pursuing other pet projects in Silicon Valley the way Twitter's founders are. (For example: Interim Twitter CEO Jack Dorsey famously went on to found Square, where he is now CEO as well.)

While Facebook has had its growing pains, notably during the stock's post-IPO swoon, at least one major reason for the company's success is the focus of Zuckerberg and his leadership team. This was his vision from the beginning and he has stuck with it. Sheryl Sandberg, the company's COO and No. 2 executive, has been with the company since 2008, adding to that focus and consistency.

The power of founders
Many studies have shown that founder-led companies outperform others. For a young tech company in particular, the guidance and vision of a founder seems to be key. In the tech world,NetflixandAmazon.comoffer other examples of founder-led juggernauts.

What's amazing about Costolo's departure from Twitter is that he wasn't forced out; instead, he told the board he wanted to leave, saying he was simply tired of the job. That's not going to happen at Facebook.

Based on the paths that Twitter's founders have taken, it seems they don't want the top job, either. Twitter investors have to be concerned about a statement like that. Who wants to invest in someone who doesn't even want their job?

The article The Zuck Factor: Facebook's Advantage Over Twitter originally appeared on Fool.com.

Jeremy Bowman owns shares of Apple and Netflix. The Motley Fool recommends Amazon.com, Apple, Facebook, Netflix, and Twitter. The Motley Fool owns shares of Amazon.com, Apple, Facebook, Netflix, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.