6 Top Takeaways From Twitter CEO Dick Costolo’s Goldman Sachs Q&A

Twitter CEO Dick Costolo continued his state-of-the-Twitter-union-is-strong tour last night, sitting for a live-streamed Q&A interview at the Goldman Sachs Technology and Internet Conference in San Francisco.

Costolo, who had been fending off some investor unrest about his leadership, has seemingly calmed the waters for now. Although the company’s issues with slow growth and user retention continued in the fourth quarter of 2014, the combination of higher than expected revenue ($479 million in the quarter) and the future growth story Costolo and other executive have been telling seems to have soothed Wall Street for now. Twitter stock is up more than 15% since it reported earnings last week.

Costolo continued to tell an upbeat story during a 40-minute conversation with Goldman Sachs analyst Heath Terry. As he said in the earnings call last week, Costolo expects Twitter’s growth in monthly active users — which was only 4 million in the fourth quarter — to pick up this quarter and recover to its historical average of about 14 million.

The improvement, he said, will come partly because Q1 is typically a better quarter for growth than Q4, but also because of Twitter engineers’ work on recommendation algorithms. Such work provides the content for the push notifications and DMs that Twitter sends users when it believes there’s something happening that is “particularly relevant to you on the platform.” It also helps with the digest emails Twitter sends all users and special “Twitter health” emails it send to new users in their first week on Twitter.

The recommendation algorithm is also a key to the Instant Timeline experiment that Twitter launched last week on Android and — Costolo announced — on iOS devices on Tuesday. The Instant Timeline gives new users an immediate flow of content without having to follow anyone, making it more likely, Twitter hopes, that they will stick around. “We are particularly enthusiastic about the possibilities for that,” Costolo said.

Here are some other interesting topics Costolo addressed:

On The “Firehose” Deal With Google

Last week, Twitter and Google agreed to rekindle a relationship that fell apart in 2011 to send Twitter’s firehose of tweets directly to the search giant. The deal will help Twitter’s large audience of non-logged-in users discover more Twitter content. For instance, Costolo said, Twitter launched a Cricket World Cup hub Wednesday, different from last year’s soccer World Cup effort in “one important respect,” you don’t have to be logged-in to Twitter to see it. People can view it on feature phones, or on the mobile web.

“Now that we’ve got that ability, being able to aggregate attention to those experiences through partners like Google we think is really powerful,” Costolo said. “The second flavor of those kinds of relationships that are different now than they were a couple years ago are the Yahoo Japan announcement we made last week where we are now also syndicating our monetization engine along with our content to those third-party properties.”

On The Value Of Twitter Users

Costolo said Twitter’s 288 million monthly active — aka logged-in — users are worth more than $4 annually to Twitter and that Twitter is aiming to value its logged-out audience of 500 million at about $2.50 per user.

On Twitter’s Ad Load

Asked about how Twitter benchmarks its ad load compared to other platforms, Costolo said the company uses a model of about 5% (which would be about one tweet in 20 being a Promoted Tweet). “That may not be exactly where it lands but you can think about it as eventually being in that range,” he said. “We’re well below that now. We’ve got tons of room to grow there.”

On Twitter Ecommerce

Costolo said Twitter is still experimenting with the Buy Now button, searching for “magic” in-the-moment experiences that are distinct from online shopping elsewhere on the Internet. He gave the example of ticket sales as transactions suited for Twitter’s real-time nature. “It’s in-the-moment, now commerce that we really like the hypothesis and idea of,” he said, “and that we already see working in the experiments we run.”

On Twitter Video

Costolo said he is very bullish on video, saying Twitter’s Vine network and the new native mobile tool are part of an “ecosystem” that will be healthy for marketers.

“The beauty of that for marketers is that it enables them to connect to their audience using a form factor that they like and are used to — motion and sound,” he said. “I think that the secular shift to consumption of mobile video and the way that marketers like to participate in that kind of storytelling is going to come together nicely, and we are going to be doing a lot of work there.”

Some of that work is already in evidence. Wednesday, Twitter announced the acquisition of Niche, a startup that connects mobile video creators with brands.

On Private Messaging With Brands

Costolo said to expect more improvements to Twitter’s Direct Message private messaging system, including better methods for taking public conversations private. Such an ability, he said, would be especially useful when a customer with a problem reaches out to a business, like someone who missed a flight:

“When that conversation can be more fluid based on the kinds of capabilities we’re building into DM right now, and you can start to move the public conversation between a brand and a customer to a private channel seamlessly, bringing all the context of the public conversation into that private channel, there are going to be enormous possibilities there for CRM, for customer service, for commerce, for ticketing, on and on and on.”

Postscript: The original version of this post stated in error that Costolo said Twitter’s goal was to have a 5% ad load. I’ve corrected the ad load section to show that he said 5% was model that the company is using to benchmark itself against competitors.