- Anthony Noto, COO of Twitter, and former Goldman Sachs banker, is leading the company through challenging times.
- He’s betting the company on a risky strategy: to turn the social network, famous for celebrity feuds, trolls and Donald Trump, into a destination for live video — from sports to financial news to political debates.
- His plans are showing early signs of progress: “I’m beyond happy with how things are going,” Twitter video partner and Cheddar CEO Jon Steinberg says. “It is the most important social platform for us, far and away.”
- But Noto, a Silicon Valley outsider known for his hard-charging style, has struggled to convince investors or Valley insiders that his plan can really fix the company.
It was the fall of 2016 and Twitter’s employees were worn out.
They’d been through constant leadership changes, two rounds of layoffs, slowing growth, a languishing stock price and endless news reports that Twitter was trying to sell itself but no one wanted it. Salesforce, their last hope of a buyer, even publicly dissed the company when it walked away.
Anthony Noto, the company’s notoriously forceful finance chief, stood up at a company all-hands meeting and, in answering employees’ questions, delivered what was described as a tough but inspiring call-to-arms.
“No one is going to save us,” he told them. If they wanted their company to survive and thrive, they needed to knuckle up and do it themselves, he said. His attitude was, “We can’t control a lot of things. But what we can control is how hard we work and how many times we get back up when we get knocked down.”
Employees ate it up.
They weren’t convinced that this New York ex-banker was the tech visionary that could cure the company’s ills. In an industry where engineers and product gurus are revered, a Wall Street banker doesn’t have the street cred among the rank and file.
Still, Noto’s take-charge style was exactly what the troops needed.
“At least Noto was standing up and saying, ‘This is what we’re going to do. This is the plan. This is the direction.’ Good or bad, a lot of people were saying, ‘Yes! Just tell us what to do,'” one former Twitter engineer recalls.
By nearly all accounts, Noto is the driving force behind Twitter’s strategy these days.
This is partly because its famous founder, Jack Dorsey, who returned as CEO in 2015, isn’t focused full time on Twitter. Dorsey continues to be CEO of the other public company he founded, Square.
That means that Noto is the de facto day-to-day leader as Twitter attempts to fix its ailing business.
And Noto has a plan. His goal is to remake Twitter into more of a media company with 24-hours-a-day of live video, a place where people watch breaking news and discuss it. He wants the world to stop seeing it so much as a social network competing with Facebook.
Business Insider talked to about a dozen people who know Noto ranging from former execs and employees to business partners. They painted a picture of Noto as a divisive figure, intensely competitive, very hard working, and so confident in his vision that some find him condescending; others, inspiring.
If Noto’s strategy ultimately succeeds, he will have led one of the greatest Silicon Valley comeback stories of all times all time.
The “war time” CEO
Anthony Noto, 49, was a star football linebacker at West Point who served in the Army Rangers before getting his MBA. He spent most of his career at Goldman Sachs working up to become the head of the powerful Technology, Media and Telecommunications unit. He left Goldman for a two-year stint as CFO of the NFL in 2008, when the economy crashed.
Those military roots show themselves in several ways. For one, a Twitter engineer who recently left describes Noto as a desperately-needed “wartime CEO.”
“You’ve heard the term wartime CEO? Even when it was obvious that things weren’t going in the right direction, we had peacetime CEOs,” this person said.
For another: his work ethic is famous.
During Noto’s first year at Twitter, he worked in its San Francisco headquarters when his family still lived in New York. So he flew home every weekend late on Friday night and took the six-hour red-eye back on Monday arriving so early to work, he was often in before Costolo.
“Doing that once or twice is hard enough but doing it over and over again? The guy’s tireless,” Twitter’s former CEO Dick Costolo, told Business Insider. Costolo hired Noto in 2014, and resigned under the weight of Twitter’s issues back in 2015.
“I was amazed at his capacity, his stamina and engine.”
Bankers taking over
But others have clashed with Noto and found his style to be obstinate and political.
“Anthony has such a strong belief in his own intelligence that it’s hard for him to learn. He believed himself smarter and better at everyone’s job,” this person said.
This person believed that Noto undermined other people’s efforts at Twitter while pushing ideas from his own team, even if those ideas did not bring in “high quality” new users, the ones advertisers pay a premium to reach.
“He looked out for the people he drafted for his ranks as he beat up everyone else,” said this former exec, who quit the company during Twitter’s tumultuous 2015 year out of dislike for working with Noto.
Other people have described his management style as brusque and commanding.
If an employee suggests an idea, Noto wants data, not opinion, and will play devil’s advocate so vigorously, he’ll rip the idea apart, not letting on if he likes it. It can leave employees feel intimidated or unnerved. But this is his method of “pressure testing” ideas “looking for blind spots,” especially if he likes the idea, according to another person familiar with his leadership style.
Noto’s hefty compensation package was also a source of initial tension internally. When Noto joined Twitter in 2014, the company granted him a pay package of $73 million, mainly in stock awards. That’s about three times what Twitter had paid its prior CFO, and triple what Twitter is paying the new CFO it just hired last month, another from Goldman Sachs. It made Noto the highest paid exec at the company his first year.
While that salary was high for Twitter, Noto’s compensation is in line with other star tech executives in Silicon Valley. Multiple executives at Google, for example, reportedly get paid more than NBA star LeBron James.
The contrast between the Twitter’s old guard and Noto also caused tensions. When former COO Adam Bain left in November, some felt like the genial executive was gone while the hard-nosed banker remained.
“People described Noto as the devil on Jack’s [Dorsey] shoulder and Adam as the angel,” said a Twitter partner that Business Insider talked to, referring to the metaphor of the good and bad spirits whispering advice into someone’s ear. “Clearly Noto got his way,” the person said.
Former CEO Costolo defends his star hire and insists that Noto’s style isn’t political, it’s stringent.
“Anthony is super rigorous, [often asking] ‘Why do we believe this? Let’s interrogate numbers this way, that way,'” Costolo said. “Anthony and the rest of the team there are really honest with everybody including themselves.”
Going all-in on video
Last year, Noto became known inside the company as the man with a growth plan: to go all-in on video.
His 2016 break-out moment was a deal with the NFL for the exclusive rights to stream ten Thursday night football games online, beating out bids from Facebook and Amazon.
Noto won the deal by crafting a pitch he knew from working there that the league would like: Twitter’s pitch showed data on all the NFL fans tweeting on Thursday nights, particularly the 18- to 24-year-olds, a person familiar with the deal said.
It cost Twitter a reported $10 million for those rights, a mere $1 million per game, instead of the tens of millions of dollars per game that traditional media outlets pay.
Noto got creative with the deal and offered the NFL a generous share of the ad revenue. The NFL would get the revenue on 50 out of 70 in-game ads, Fox reported.
The deal was considered a success.
“It was a win/win for everyone. Twitter got great content no one else had, and it proved it could attract millions of viewers to a live stream. The NFL got to test streaming with a smaller test partner … who paid them,” said one Twitter partner.
But in 2017, Amazon won the exclusive streaming rights for Thursday night NFL games by paying five-times more, or $50 million, according to The Wall Street Journal.
Losing the NFL rights was a black-eye for Noto, but, as is his style, he was not deterred. He inked a new, multiyear deal with the NFL for special sports analysis shows and access to highlight clips.
And then he doubled down on the idea of live video, to turn Twitter into more of a media company, past its roots as a social network.
Last spring Twitter announced more than 12 partners who will launch original shows on topics of business, sports and entertainment — the types of things that people already like to Tweet about. And Noto wants Twitter to have enough content to fill 24 hours of live programming, he told BuzzFeed in April.
So far, Bloomberg has signed on to give that a try, and will launch 24×7 streaming in the fall. Plus Twitter plans to launch Stadium in the fall, too, a 24-hour sports network.
Wooing more partners
Noto has also been nabbing other live video news partners, like Cheddar, the first internet streaming financial news network that launched on Facebook last year.
“I’ve known Noto for years and within days of launching. Noto DM’d me and said, ‘I think this is exciting,'” Cheddar’s Steinberg told Business Insider (A DM refers to a “direct message” on Twitter).
Noto negotiated to get a live-streaming hour from Cheddar, too. Steinberg says it went so well, he launched a second hour earlier this year with HP as a sponsor for the shows, and Cheddar joined Twitter’s “Amplify” revenue-share advertising program for on-demand videos embedded into tweets.
Cheddar is already on track to do $10 million in revenue this year, Steinberg said, with much of that thanks to Twitter.
“I have more people seeing our content on Twitter than any other platform. I’ve invested heavily in it and I would do more programming with them,” he said. “It’s profitable for us.”
Steinberg calls Twitter Cheddar’s “most important social platform for us, far and away.”
As for Noto, he’s personally involved with the partnership, communicating with Steinberg almost weekly. “He’s spectacular. I don’t have another relationship with a COO at another internet company like that,” Steinberg said.
If investors and Silicon Valley doubt Twitter, people in the news business “already understand” its plans, Steinberg said. “I feel about them the way the stars today feel about Netflix. Everyone in the news business wants to work for Twitter.”
The number Wall Street can’t get over
While publishers may be bullish on Twitter’s early video efforts, Wall Street is still focused on the platform’s stalled user growth. The company just reported its second consecutive quarter of declining revenue last Thursday, and the stock nosedived.
The big problem: Twitter has been stuck at roughly 300 million monthly active users (MAUs) for years.
It ticked up to 328 users earlier in 2017 but then reported no new users at all for its second quarter, even as Facebook hit over 2 billion MAUs in 2017, WhatsApp 1.2 billion, Instagram 600 million and as Snapchat has burst onto the scene.
“Users matter,” RBC Capital Market’s Mark Mahaney told Business Insider, who rates the stock an “underperform” and dropped his price target for the stock to $14. While he believes Twitter will slowly add more users, “I think the best growth days for Twitter are behind them,” he predicts.
Noto has been trying get investors excited about growth in Twitter’s daily active users instead. There’s only one problem: he refuses to say how many DAUs Twitter actually has, citing competitive reasons. His coyness on the matter has earned pushback from the Street and is a source of frustration from peers.
“It’s like your relative who you love that keeps making a bunch of bad decisions over and over again, that’s Twitter,” one top exec who left a couple of months ago said.
Worse still, by focusing the world on a number that Twitter is unwilling to share, Noto missed an opportunity to get more attention on the truly good news: it already looks like his video strategy is working.
Live streaming doubled from about 600 hours in the first quarter to 1,200 in the second across 625 events, increasing 22% and attracting 55 million viewers, Noto revealed to analysts on the quarterly conference call.
And for Twitter’s video efforts to pan out, acquiring more active users may not be essential at this point. Steinberg told Business Insider that Cheddar is seeing increased viewership each month and as long as that happens, he’s happy and doesn’t care if Twitter’s overall users grow.
“No one can stop us but us”
Despite the good early signs, it won’t be easy for Twitter to turn into a must-watch platform. It faces heavy competition from better-funded companies like Facebook, Google, Netflix and Amazon. Noto will likely also need to pay to develop content, which could become a big new expense, compared to crowdsourced tweets, some analysts point out.
“People are using Twitter for all sorts of different purposes, but they are not going there to watch video,” warns eMarketer’s Debra Williamson.
Noto also needs to beat the clock. If Twitter can’t get at least modest overall user growth this year, investors will likely call for a change in strategy and in leadership, again. Some are already starting to rattle their sabers.
Other investors are willing to give Noto a chance to succeed.
“He’s not a tech guy. He’s a numbers person,” Ryan Jacobs, chairman and chief investment officer of Jacob Funds says of Noto. His fund holds an “above average” stake in Twitter. “By being around the sector for as long as he has, he has a good feel for what ingredients are necessary for long-term success, even though I’m sure it’s frustrating to not quite crack the code on what it takes to make Twitter less of a niche product.”
And everyone agrees that Twitter is a unique, valuable company. If all else fails, it will find a buyer, if the price was right.
“There are longer-term issues of overall user growth, frequency on the site, value of traffic. These are issues they’ve had for a while. Eventually, they’ll figure it out. If not, it’s retained a fair amount of value potential for acquisition,” said Jacobs.
One of Noto’s biggest believers is Costolo, the man who hired him.
“When it feels like you are taking a lot of rocks thrown at you, the media, the stock not doing well, whatever the thing is, Anthony is great at getting up in front of people, and saying, ‘I’m going to be right there next to you and we’re going to do this … and no one can stop us but us,” Costolo said.
“I don’t think people outside the company appreciate what an inspirational leader Anthony is,” he said.