SAN FRANCISCO: Welcome to the Dick Costolo Show. The audience, le beau monde of cinema, has gathered at the Debussy Theater on this unseasonably cool May morning on the French Riviera. The event, officially the opening of the 2012 Cannes Film Festival, will be remembered for freakish storms that left stars shivering on the soaked red carpet.
But before the Palm d'Or, a little stand-up comedy from Costolo, chief executive of Twitter. He has prepared some sober remarks for the occasion - a paean to the mighty tweet, an explication of how new tools of social media are reinventing business, social activism and everything in between.
Nah. Out goes the script.
"Since I've got 45 minutes, if we can just start with some quick introductions," he says, gesturing to the front row. "Start over here. Stand up, say what company you're from and what animal you could be if you could be any animal."
So goes his keynote speech at Cannes.
It's not quite as strange as it sounds. Long before the Twitter revolution and his ascent to the heights of social media, Costolo was a professional comedian. And you know what? He's still doing improv - only it's the business kind. He'll wax on about growth and revenue like the next CEO. But then he'll dig out a joke and do something that might hurt his business - and miff his investors - because, well, he thinks that something is the right thing to do.
He has broken with the pack on the issue of patent infringement, an issue that drives the tech world crazy, and, in stark contrast to Facebook, has let newcomers to the site opt out of being tracked through the service - a daring move, given that Twitter makes money from advertising.
Even in Silicon Valley, that Neverland of Mark Zuckerberg and hoodied Lost Boy executives, Costolo can seem an un-CEO. To which he says, essentially, whatever.
"People have Plato's form in their mind of what a leader is, or what a CEO is, and it is a bunch of elements that I really don't conform to at all," Costolo says. "I've given this a lot of thought, and I came to the conclusion that I don't care."
That kind of attitude could take Twitter to heretofore unimaginable success. Or it could turn it into a B-school case study of a startup company gone wrong. The choice, for the moment, is Costolo's. Today, Twitter seems ubiquitous. But this company didn't even exist seven years ago. Bankrolled by venture capitalists, it has grown into a multibillion-dollar enterprise with 140 million users worldwide. Although the company doesn't share its financials, it is estimated that it will have $350 million in revenue this year.
"We're an entire quarter ahead of our projected goals," one executive says.
Its next big step is to go public on the stock market, and insiders say the current goal is to have an initial public offering in 2014. Twitter's social media twin, Facebook, has already gone public, of course - and, so far, Facebook stockholders have lost billions, at least on paper. Facebook's troubled IPO hangs over the technology industry as a cautionary tale of how investors can become star-struck.
Costolo didn't found Twitter. Jack Dorsey, Christopher Stone and Evan Williams did. But today Costolo is essentially running the business alone, and friends and colleagues say he is eager to build the company. And he has succeeded before. During the early 1990s, he worked at Andersen Consulting to subsidize his comedy career. He tried to explain this thing called the World Wide Web to his bosses, but, he says, they didn't listen. So he and several co-workers started their own consulting firm, Burning Door Networked Media, specializing in Web projects.
Costolo went on to help found and sell three companies. One of them, Spyonit, notified people when a website changed. (This was a decade before anyone had heard the term "real time.") People used Spyonit to monitor auctions on eBay and to see when comment threads were updated on Web forums. Another of his companies, FeedBurner, helped bloggers syndicate content. FeedBurner was sold to Google in 2007 for more than $100 million.
But starting a small company and then selling it to a big one, difficult as it can be, seems easy next to taking Twitter to the next level. On paper, Twitter is valued at close to $10 billion. That means the most likely exit strategy for its initial backers - notably Charles River Ventures, Benchmark Capital, Union Square Ventures and Costolo himself - would be to take the company public. But after the Facebook fiasco, Costolo will have to persuade Wall Street that Twitter, and its share price, could keep rising.
His audience - Wall Street, Silicon Valley and the wider world - is waiting for his next act.
Silicon Valley sometimes seems like high school. Companies tend to form cliques around alpha personalities. Stereotypes are stereotypes, but sometimes there's something to them. Facebook employees can seem to be nerdy, hard-charging engineers - just like their CEO, Zuckerberg. Apple draws hipster designers who worship Steve Jobs. Twitter is full of class clowns and the popular kids - people like Costolo.
"In a board meeting, he's pretty down to all business," says Mike McCue, the chief executive of Flipboard and a former member of Twitter's board. "But if you get him on stage or outside, then it's different story. He utilizes all his really cool stand-up comedic talents."
Costolo certainly doesn't come across as a strident, over-serious executive. As they do each summer, heavyweights from the worlds of media and technology descended on Sun Valley, Idaho, in July. The event was the Allen & Co. media conference, sometimes known as summer camp for billionaires. Costolo showed up, too - a sign of Twitter's emergence as a serious player.
One afternoon there, Costolo remembers, an executive tapped him on the shoulder and showed him something that another chief executive might have found embarrassing: A video titled "(HASHTAG)flockmob" uploaded on YouTube, showing a dancing flash mob of Twitter employees in the company's cafeteria. It was choreographed to the song "Baby" by Justin Bieber.
"That's awesome!" Costolo said.
Costolo embraces such antics, and often joins in.
Once a week, Twitter employees meet for Tea Time, an off-the-record conversation with executives. Outsiders are forbidden. Employees say that this is where Costolo, who stands on a stage with a microphone and answers questions, shines. Sometimes the meetings are serious; other times they are rife with comedic relief.
"Dick can stand up there in front of all of the employees and just work the crowd," says one Twitter employee, who, like other employees, spoke on the condition of anonymity so as not to offend his bosses. "One minute he's talking about revenues or negative press, the next he's cracking jokes and making fun of employees for tweets they've sent during the week."
During one Tea Time, employees played Battledecks, a Silicon Valley game in which people improvise presentations from previously unseen, and often strange, PowerPoint slides. Costolo grabbed the mike, and before nearly 1,000 employees, performed as if he were host for a late-night comedy show.
As previously unseen slides of strange images streamed by, Costolo narrated as if he were on stage at an improv comedy club. He can also handle being the butt of jokes.
Marcus Phillips, an engineer at Twitter, once dressed up as Costolo - wearing a shirt stuffed with tissues to imitate Costolo's brawny build, along with glasses and a bald cap - and mimicked his boss during a presentation.
Costolo then took the microphone and said: "Everyone say goodbye. Today is his last day."
He was kidding.
But the business of Twitter is no joking matter. At times, the company has made decisions that might hurt its prospects.
While lawsuits over patents have embroiled many tech giants - Apple, Samsung, Microsoft, Yahoo and Facebook, among others - Twitter has chosen a different path. This year, it announced a program called the Innovator's Patent Agreement that puts the rights of patents into the hands of engineers and designers at Twitter, not Twitter itself. This way, the patents can't be used by the company for litigation purposes without the employees' consent.
Twitter approaches privacy differently, too. In May, when Twitter announced a new feature on its website that tracks users with the goal of offering better suggestions for whom to follow, the company also gave people the ability to opt out of being monitored, with a feature called "do not track."
The Federal Trade Commission, which has clashed with Facebook over privacy issues, publicly praised the new features. The White House did, too.
McCue of Flipboard says Twitter and its CEO are pushing the traditional limits of what it means to be a company that delivers media to people. It is neither a technology company nor a media company, he says.
"Twitter is an entirely new thing," McCue says. "I like the fact that Twitter is unapologetic to that. Dick is the same way with his decisions."
Twitter has defended the privacy of its users. It has taken on New York City courts to protect the identities of Occupy Wall Street protesters, and gone up against the U.S. Justice Department, which tried to gain information about WikiLeaks supporters.
"No one wants a pen that's going to rat them out," says Alexander Macgillivray, Twitter's chief lawyer. "We all want pens that can be used to write anything, and that will stand up for who we are."
In Twitter's early days, Stone, nicknamed Biz, said this of the company's growth: "It's like we're on a rocket ship that we were just painting, and suddenly it took off and we're holding onto the ship with our fingernails."
Nowadays, Costolo is the one trying to steer that rocket.
He didn't plan to end up at Twitter. In 2009, Costolo and his wife, Lorin, and their two children grew tired of Chicago's weather and decided to move to California. He started at Twitter as chief operations officer and became chief executive in 2010, after Williams, one of the Twitter co-founders, stepped down to focus on other projects. Williams, who is still on Twitter's board, and Stone now run Obvious, a startup incubator.
Last year, Costolo brought back Dorsey, who left the company in 2009 after he struggled to fix engineering problems that knocked Twitter offline for hours at a time. Such problems still occasionally plague the service.
Dorsey's role has since been reduced after employees complained that he was difficult to work with and repeatedly changed his mind about product directions. He no longer has anyone directly reporting to him, although he is still involved in strategic decisions. Dorsey declined tocommenton how people feel about working with him. But, in a statement, he said he considered Costolo to be one of Twitter's founders.
"He's had a dramatic impact on the company and the culture," Dorsey said. "He's questioned everything we started with and made it better."
Costolo says he looks to Dorsey for ideas and sometimes has to pull them out of him. Although Dorsey is a regular on the media circuit, appearing on CNN, as well as "Charlie Rose" and other programs, he tends to be quiet in meetings.
"Dick does a good job of saying 'Jack, what do you think?"' says Michael Sippey, director of consumer product at Twitter. Sippey works with Dorsey to make sure that new features are "Twittery."
Costolo's quick decision-making can be both good for a company that is growing so quickly, but bad for people who move more slowly than him. Employees say he can come across as insensitive. Earlier this year, for example, he ousted a senior employee over the phone to save time. He has also pushed some stockholders off the board.
Costolo has also evicted some third-party applications from Twitter, a decision that some see as insensitive to early adopters who helped the company grow.
"The techno-enthusiasts that helped Twitter grow are far less valuable to them today," says Michael Gartenberg, an analyst at Gartner. "It's the same way that Apple now cares more about the 10 million consumers than catering to the 10,000 hard-core consumers."
When Costolo doesn't get his way, he tends to bang his fingers on a tablet as if he's playing an imaginary piano that won't make any sounds. Even so, his work ethic - and comedy - have come to permeate Twitter's culture.
Peter Thiel, the billionaire co-founder of PayPal and an early investor at Facebook, once said of Twitter: "You could throw a grenade into Twitter's offices after 6 p.m. and the only person you would kill is the cleaning lady."
Not anymore, Costolo says.
"It's really difficult to change a company's culture, but I did this by making sure I stayed late," he says. "I'd go home, have dinner with my kids and then come back into the office. People knew that if they were in the office at 10 p.m., I'd be here, too, and that's when I would go around and talk to people and answer questions."
Advertising is just one of the potential revenue sources for Twitter. Adam Bain, who joined Twitter in 2010 from the Fox Audience Network, says tweets, those 140-character Twitter messages, have become "envelopes." When people share messages about a movie, for instance, Twitter now embeds a video that can be watched directly within their Twitter stream. Eventually, Bain says, you could perform transactions inside those envelopes, too, like buying a ticket to a movie that someone just tweeted about.
If such ideas pan out, Twitter's revenue, which is expected to reach $1 billion by 2014, could soar.
Twitter has come a long way since it started out in 2006 in a small, grimy office with a rat problem in the South Park area of San Francisco. The company is now in its fourth headquarters - three floors of a former furniture warehouse on Market Street, complete with a 10,000-square-foot roof garden.
The conference rooms are named after birds - (AT)puffin, (AT)kiwi, (AT)blackbird and so on. The cafeteria area, known as the Commons, swarms with people munching on free snacks. Food is labeled with hashtags and "(AT)" symbols borrowed from Twitter's website - (HASHTAG)Comfort for fried chicken, (AT)birdfeeder for pasta, for instance. Two cast-iron skillets overflow with bacon and are topped up all day.
Twitter's signature color - a deep, flat turquoise - is everywhere. So are Twitter mugs, Twitter T-shirts and Twitter hoodies.
Costolo has come a long way, too, since his comedy club days. In Chicago, he once was a co-host for a comedy show about a fake university course called "Modern Problems in Science." The audience would decide the roles of the comedians, who then posed as professors. At one show, for example, the troupe had to prove that "ugly things fall faster than pretty things."
Those nights taught Costolo a number of lessons that he now applies to running a company of 1,300 employees. He rarely uses the word "but." Instead, he says "Yes, and ... " - an improv principle that allows people to discuss something without disagreeing.
He also says improv taught him how to see things through to the end.
Once at a large theater in Chicago, he says, "we were about seven minutes into this one-hour show and we knew it got off on the wrong foot." People started howling curse words at him and were trying to shout the troupe off the stage, he remembers.
"People are yelling, 'Get 'em off!' and we're up there for another 53 minutes. There is no safety net - a juggler isn't going to come out and save us - we just have to keep going for another 53 minutes."
Costolo is still ad-libbing - and there's no safety net at Twitter, either.
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