Twitter's COO Adam Bain recently resigned, which makes him the latest executive to depart the struggling social media network. Bain, a six-year veteran of the company was on the list of potential candidates to replace Jack Dorsey as the company's CEO. Despite this opportunity, in a recent tweet, Bain stated that he was "ready to change gears and do something new outside the company." So, what is plaguing the young social media company? An unwillingness to change in the face of defeat.

Twitter Goes Public

In 2013, the world watched Dick Costolo navigate Twitter (NYSE: TWTR) through its initial public offering, promising a monthly active user (MAU) growth target of 400 million by the end of the year. Spoiler alert: To date, Twitter has yet to achieve this milestone, growing only a paltry 3% annually this last quarter to 317 million. Contrast that to Facebook's (NASDAQ: FB) MAU growth of 16% last quarter to reach 1.79 billion. This should be alarming to investors who have watched the stock price decline more than 50% since Twitter's IPO in 2013.

A Fatal Flaw

For now, we can only speculate on what may have gone wrong early on in Twitter's history. In my opinion, a fundamental flaw of the platform lies within its signature Tweet. In 2006, Twitter launched with a refreshed outlook on how consumers wanted to communicate. It gained momentum through it's minimal, yet effective, microblogging messages which were capped at 140-characters. Coincidentally (or not so much), this coincided with the character limit for SMS messages on older feature phones. However, in 2007 with the release of the iPhone and the advent of smart devices, our communication habits changed forever. As SMS alternatives, such as iMessage, were launched, consumers were freed from the shackles of the 140-character limit. But Twitter failed to capitalize on this rapid market shift. Though they've recently loosened their grip on the 140-character limit within Tweets for certain circumstances:

Say more about what's happening! Rolling out now: photos, videos, GIFS, polls, and Quote Tweets no longer count toward your 140 characters.

1:00 PM ‐ 19 Sep 2016

@Twitter

it may be too little, too late.

Compound that with Twitter's glacial rate of evolution and you can begin to see why their MAUs have peaked. This lackluster growth has caused disenchantment among advertisers who keep spending less money on the platform resulting in a revenue growth of only 8% last quarter. Compare that to the 20% growth in its previous quarter and 58% growth in its year ago, quarter. While some of Twitter's recent initiatives have been innovative (think the acquisition of video streaming service Periscope and the curating of tweets and stories into "Moments"), they've been quickly eclipsed by the likes of Instagram Stories and Snapchat's Live Stories in what's proved to be failed ventures.

Heading for the Exit

Because of the unwavering allegiance to the 140-character cap and the failure of the company to innovate beyond its core microblogging platform, the executive churn has been high. As the raging talent war in Silicon Valley continues, Twitter's equity-based compensation continues to climb. At more than 30% of total revenue in 2015, its equity-based compensation was nearly twice that of its competitors: LinkedIn (17%) (NYSE: LNKD) and Facebook (16%) (NASDAQ: FB). Even Yahoo (NASDAQ: YHOO), with its tumultuous journey over the past several years is only at 9% of total revenue.

Though the cash bonuses and restricted stock options may be high at Twitter, it is no longer enough to keep the talent housed inside it's four walls happy. January saw a wave of executive exits including:

  • Katie Jacobs Stanton - Media Head
  • Alex Roetter - Engineering Head
  • Kevin Weil - Product Head
  • Brian Schipper - Human Resources VP
  • Jason Toff - Vine's General Manager

In the months to follow, Jana Masserschmidt (Business Development Chief), Nathan Hubbard (Media and Commerce Head), and Jeff Seibert (Consumer Product Head) all followed suit and resigned. Most recently, in early November, Twitter's India Chief also resigned fueling speculation that other overseas execs may be soon to follow.

Free Falling

Revolving doors of executives, Dorsey's latest news of layoffs, stagnant MAU and revenue growth, and tanking consumer initiatives have all caused insider to lose confidence in Twitter's ability to regain traction. About 257,000 shares have been sold on the open market, without even one share being bought by insiders. With COO Bain departing, it appears that Twitter will continue its freefall for the near future, hopefully, not going the way of Black Berry.