WHEN: Today, Friday, February 6th
Following is the unofficial transcript of a CNBC EXCLUSIVE with Twitter CEO Dick Costolo airing today, Friday, February 6th on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET). Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000352578 and http://video.cnbc.com/gallery/?video=3000352629.
All references must be sourced to CNBC.
CARL QUINTANILLA: So Dick, let's look at MAU's first. We'll talk about this the iOS 8.0 integration in a second, but it does sound like the guidance at least is leading people to the notion that new users, and the addition of new users, is going to revert to the way it sort of used to be last year. Is that right?
DICK COSTOLO: Well, yeah, we provided an outlook, I would say, that based on the first month of the year at least, January, we saw a return to organic growth that coupled with usual seasonal grown in Q1 and product initiatives, growth product initiatives, lead us to conclude that our outlook for Q1 is back to that trend that we saw in the first three quarters of last year.
CARL QUINTANILLA: What do you think happened there in the interim where user growth became obviously I imagine a concern for the company but certainly a concern for Wall Street?
DICK COSTOLO: Well, I think that you know, in Q4 we mentioned we had a couple specific issues that were our issues and we had our -- Q4 is seasonally a weak quarter for growth for us typically. It was just a combination of those things I think that we saw in Q4.
CARL QUINTANILLA: This iOS 8.0 integration, the unforeseen bug, has thrown some people for a loop. Why would you lose so many viewers on a software upgrade? I've seen pictures, I've seen memes on Twitter, pictures of random people. "There's the four million users." How did that work and do you see that happening again?
DICK COSTOLO: Well, it's two it was actually two distinct things that happened. One in the upgrade from iOS 7.0 to iOS 8.0 there's an auto pulling mechanism for Safari users that had authenticated into Twitter that previously auto pulled tweets down and pulled tweets down for them. And those three – that was three million users. That auto pulling went away in iOS 8.0. We don't expect to get those three million users back as we indicated on the call. The second issue was just a bug related to the way Twitter is integrated into iOS. It's not a one-size-fits-all fix for us, so we've been working hard the moment we saw that bug on our end. And you know, we've recaptured a bunch of those users but over a million, as we mentioned on the call did not come back.
CARL QUINTANILLA: Right. It leads some to believe, Dick, that if these users were thrown off of Twitter and not interested in chasing Twitter again on an upgrade maybe they – it doesn't say the best thing about the stickiness of the platform. Is that a concern?
DICK COSTOLO: Yeah. Yeah. No, not at all. And I'm glad you asked me about that specifically on your follow up. It is such a – as I mentioned on the call and now, it's not a one-size-fits-all correction. There's actually a number of complex and fairly detailed steps we have to take people through to get them back into that tightly integrated experience on iOS, if they've experienced the bug.
CARL QUINTANILLA: I know you confirmed the Google deal that had been reported on the call. I don't think you're giving any terms. I doubt you're going to tell us anything about potential licensing fees. But you've been down this road before. Why is it different this time?
DICK COSTOLO: Yeah, I think there's one big specific difference about the previous relationship we had with Google and this new deal we have. And that's because we're now really pursuing this total audience strategy of our logged in user base that more than half a billion people that come to Twitter as logged out users who are now starting to organize experiences and content for, and our syndicated audience. The difference between the previous relationship and now is we'll be able to pull people from Google search for events, for kinds of people and for topics into those immediate logged out experiences that we think are going to be really compelling that we're going to be able to organization for people.
CARL QUINTANILLA: Yeah, and some people argue some people would love to see Google buy Twitter. And now they're saying that because of this deal that's less likely to happen. You got any reaction to that?
DICK COSTOLO: Well, look, we love the company we're running. You know, I talk constantly internally about the impact the platform has in the world and the way we're growing the business, so we're excited about the business we've got and we like running it as an independent company.
CARL QUINTANILLA: All these new products are encouraging. It's an encouraging deal with Google. But in the end this quarter was still about weak MAUs. Do you disagree?
DICK COSTOLO: Listen, we're pursuing this total audience strategy that we talked about. We like the return to growth that we've seen in the very beginning of Q1. I talked about that being January – again, that's only a one month January and, but it informs our outlook for the rest of the quarter.
CARL QUINTANILLA: Let's talk about these memos that were reported earlier in the week regarding abuse and trolls and haters, so to speak, on Twitter. You said those memos of yours, you said, in the memos, you say, "We suck at dealing with abuse." You say it's embarrassing. It's absurd. That you're ashamed. All due respect, Dick, where have you been? I mean this has been a topic of conversation for years.
DICK COSTOLO: Yeah, I'd like to first say that it had to be an email in which I used crass language like, we suck, that ended up getting leaked to the press instead of my one my more sophisticated tomes. But look, as the leader of the company, I have to take accountability and responsibility for an issue that we all are aware across all sorts of platforms is an issue. Abuse – digital abuse specifically. I think that it's easy to say, Hey, these are complex issues and we're looking to address them in these kinds of ways. But it takes a leader to step up and say, I'm going to take accountability and responsibility for this right now and we're going to start making aggressive changes in the way we think about this, to get the team to rally behind the kinds of efforts that we need to put forward quickly to make Twitter and all these kinds of platforms a clean, well lit place that anyone can have an expectation that they can step into and have a delightful experience without harassment or abuse.
CARL QUINTANILLA: When you say, "We're going to start taking these people off right and left," when you talk about aggressive change, specifically how will it be different other than reporting the way you do now?
DICK COSTOLO: Yeah, the way it will be different is it's going to be harder and harder to be an abuser on the platform. I think that what you want to do is change the economic equation around so the onus and burden isn't on the person being abused to report it, but rather the onus and the burden are on people who are engaging in harassment to prove that they should be allowed to continue to use the platform.
CARL QUINTANILLA: You know, Cramer's dream is that there's Twitter Gold. Some premium service where your account is actively policed by a human being. And, like, sort of the way Yelp protects certain retailers. Is that ever a possibility?
DICK COSTOLO: I think we have – saw a number of great product initiatives that are already underway that are gonna make that possible for – make it the case that all users across the world will be able to come to Twitter and have it be a clean, well lit place for them without fear of having to worry about reporting abuse when it happens to them, but have it be taken care of for them.
CARL QUINTANILLA: One last question on this, Dick. You know, some celebrities have talked about checking Twitter less. Lena Dunham, Adam Levine have said, "Let's make 2015 a year where we sort of crack down on this sort of thing." Are you worried about celebrity defections? What would happen if Katy Perry suddenly said, "I'm out of here?"
DICK COSTOLO: I'm worried about abuse of anybody on the platform. It so happens that celebrities, because they have these large followings tend to be victims of that maybe more than other people. And that's, again, true on all sorts of platforms, not just Twitter. I want it to be the case that any user can come to the platform and use it freely and openly without even having to worry about abuse or even having to report it themselves. It should just be taken care of automatically and algorithmically by the platform. And we have a number of initiatives underway to make that the case.
CARL QUINTANILLA: Let's talk about Dick Costolo for a moment, Dick. As you know, last few weeks there have been a lot of investors –
DICK COSTOLO: Thank you for pronouncing my last name correctly.
CARL QUINTANILLA: A lot of people have been calling for change at the top.
DICK COSTOLO: It's an ongoing struggle.
CARL QUINTANILLA: A couple weeks ago Bob Peck of SunTrust said there's a good chance you'd be gone by the end of the year. Stock jumps 5%. Your reaction to those who want to see you gone?
DICK COSTOLO: Listen, if you're going to be the CEO of a public company, you better develop a thick skin. You just – that's the world we live in. I'm focused on two things. One, making sure that the leadership team here, the people who are working for me and the next level of leadership under them, are working well together and pushing the company forward and improving our pace and quality of execution. And then secondly, making sure that I'm taking the time to look out ahead over the next hill and around the next corner to be able to prepare the team for the opportunities ahead of us. That's what you have to focus on as a leader and you have to do that while pushing all the outside noise to the side and focusing on the task at hand.
CARL QUINTANILLA: Can you sit here and tell me that you will be in this chair on New Year's Eve? Will you be CEO by the end of the year?
DICK COSTOLO: Are we going to pick dates – we're going to pick dates that different people think – that different people want to point out and say that I am or I'm not going to be here is kind of silly. I love leading this company. I love doing it. I love the team I've got around me. I'm excited about coming into work every day and there's nothing I'd rather be doing right now.
CARL QUINTANILLA: Jack Dorsey with some high profile tweets defending you in the past few days, Dick. Did he tell you in advance he was going to do that?
DICK COSTOLO: Jack and I have dinner regularly. In fact we have dinner at the same restaurant at the same table at the same time on Tuesday night. So it's that regularly. So Jack and I had had conversations about it back and forth at various times. It was not a major topic of conversation. But in one of the recent dinners he mentioned like, "Hey, I really want to send out this tweet storm about XYZ," and we went back and forth on that. And you know I said, "Sure, you should do that. Make sure, you know, it would be interesting if we talked about these kinds of things that are going on in the company right now."
CARL QUINTANILLA: Last question, Dick. It's been a while, but Anthony Noto did have a very famous DM that went out to the world, your CFO. With the benefit of time, can you talk about what that was all about and did you ever say to him, "What was that?"
DICK COSTOLO: No, I didn't say to him, "What was that?" because we've all had our own experiences with DM fails. Hopefully those will – DM fail for those of you who don't know is when you meant to send a private message and you end up sending a public tweet. I didn't have a conversation with him about it.
CARL QUINTANILLA: Some people use it as an example of a platform that is still, to some, difficult to use.
DICK COSTOLO: Yeah. Look we've been clear about the fact that we have a lot of work to do to make it easier to use Twitter. One of the reasons I'm so excited but instant timeline is that it's going to make it easier for people to drop into the platform and get an immediate, high value experience without having to figure out what are the 30 accounts I should follow. But that goes for a number of other things across the platform. It's a design issue that we know we need to address. And we're going to address it.
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