The Answer to Why Twitter Isn't Facebook Isn't in Cincinnati

By Sarah Lacy , written on March 2, 2012

From The News Desk

The Wall Street Journal has a bizarre story about Twitter today. I've read it three times. And I'm just confused.

The WSJ Twitter story doesn't really have any new information, but it manages to take existing information and put it together in a way that's not wrong...but completely misses the point of what's going on at the company. It's like a Picasso. Sure, there's an eye and a nose and a mouth but everything is in the wrong place.

[Update: We're actually hearing that the central premise that P&G didn't spend money on Twitter for Tide Pods is totally wrong. See here for evidence. Also they used Twitterific's logo in the chart, not Twitter's. Doh.]

The story starts out by going to Cincinnati to find the answers of why Twitter isn't going public at the headquarters of Procter & Gamble.

Wait, what? You can find those answers a lot more clearly in Silicon Valley. The story spends a lot of time talking about P&G, giving short shrift to three much more obvious realities at play here.

1. Three CEOs in four years. This fact is mentioned like an afterthought at the bottom of the story, but it is the single big glaring reason Twitter is significantly behind on monetization. This isn't like changing CEOs at a public company. Ripping out a founder is incredibly traumatic for a small company.

Most Valley companies don't survive one ousted CEO. Twitter has survived two... And kicked investors off its board... And fired several senior people after that. All that has taken a toll on the company. The culture has had to be completely reset. Twice.

This is the biggest thing that has slowed Twitter down relative to competitors, not the success or failure of its ad sales team. Current CEO Dick Costolo has taken the time to get this right, because he knows how many deep stress fractures there were in the company, and he knows the company likely couldn't survive a third regime change. There's no mystery here to anyone who has built or worked in a start up. The fact that the product has remained popular enough to carry the company through this highly distracted period is a startup miracle.

2.  It isn't aggressively trying. Twitter has one of the most popular services on the Web, and it has something even Facebook doesn't: Celebrities all over the place. If it wanted to monetize today, it could. The ad products would be shitty, and they would piss off users, but brands would love them. Twitter could absolutely open the flood gates to revenue immediately, if it wanted to. This is clearly not the playbook.

The issue is less that brands are hesitant to buy Twitter ads, and more that Twitter is only finally really getting ad products in the market in a meaningful way. Twitter is dramatically behind Facebook in revenues for one simple reason: It hasn't been aggressively selling ads anywhere near as long, and the ad units are harder for companies to understand. (Why? See point one.)

Twitter has had some ad products since 2009, but really only got serious about monetization when it hired Adam Bain as chief revenue officer in 2010. Even then, they were selling direct, so new advertisers were only added as quickly as Twitter added sales team members. It has only recently unveiled a self-serve product, and even that has to go through American Express.

Twitter has long had a culture of rolling ad products out slowly and methodically, making sure that brands are getting value and that users don't balk at the intrusion. The article seems to acknowledge this on one hand, but then throws in head-scratcher moments like this one:

Twitter still "doesn't have the same mass appeal of something like a TV commercial on the Super Bowl," said Joel Ewanick, General Motors Co.'s global chief marketing officer, which has used "promoted trends" for its Chevy Silverado pickup truck, among other cars.
Yes, Twitter isn't the Super Bowl. My cat is also not a dog. It's almost as if the WSJ is defining things they think Twitter should be, then rapping the company on the knuckles for not being those things.

Put another way, arguing that Twitter can't go public because it's not monetizing at the level Facebook was two years ago is like writing that I'm not being cast in movies because I haven't lost all my baby weight. A more likely explanation is that I'm not going on auditions, not an actress, and I'm spending most my time blogging at home in pajamas.

Similarly, the last thing on Costolo's mind is trying to get P&G to sign an ad deal quicker so he can go public. It's almost as if -- Gasp, WSJ! -- that's not some arbitrary end goal that the company obsesses about every day.

This is the major cultural chasm between Wall Street and Silicon Valley: Wall Street doesn't understand why everyone isn't dying to go public, Silicon Valley doesn't understand why anyone would want to go public. To Wall Street an IPO is success; to the Valley it's a necessary evil.

3. Twitter was founded in 2006. It's 2012. Is six years really a "slow road to an IPO" for a company valued at $8 billion? LinkedIn and Pandora both took more than a decade. Facebook has a two-year head start on Twitter, didn't have the same leadership issues, and is only now going public. On the contrary, Groupon rushed out and promptly reminded everyone why rushing out to an IPO isn't always the smartest strategy.

Stop trying to complicate something that isn't complicated. We all know the issues at Twitter. They've been well-reported, and the company is heads-down trying to fix them. If it takes ten years to justify an $8 billion valuation, that'll still be pretty impressive.