MySpace, Trying to Remain Relevant, Hires a CFO

The micro-blogging phenom Twitter has faced a lot of doubts about its business plan as its popularity has exploded. The speed that the Company has seen and thus, the demand for monetization, led to the Company announcing the hiring of Ali Rowghani, currently CFO at Pixar, as the Twitter’s first financial chief.

The Company raised $100 million back in September and entered into licensing agreements with both Microsoft and Google to feed real time information into their search engines.

This all sounds good but Mr. Rowghani still has his work cut out for him. Here are three challenges he will face as the first CFO of Twitter:

Help Develop a Sustainable Business Model – So you’ve got this great idea, micro-blogging at 140 characters a pop. Now what? Sure you’ve struck deals with Microsoft and Google but are is there anything else cooking? How do you monetize how professionals use Twitter that doesn’t involve what you just ordered for lunch? Plus, how do address stats like these:

– 72.5% of all users joining during the first five months of 2009.

– 85.3% of all Twitter users post less than one update/day

- 21% of users have never posted a Tweet

– 93.6% of users have less than 100 followers, while 92.4% follow less than 100 people.

– 5% of Twitter users account for 75% of all activity

Control Expenses – Any startup company has to run a tight ship, regardless of their popularity and Twitter is no exception. The company is hiring engineers and other professionals that won’t come cheap (unless they pay them in equity, more on that later) and their headquarters is located in downtown San Francisco where rent doesn’t come cheap. That $100 million will burn up awfully fast if they don’t develop solid revenue streams and don’t keep costs down.

Build a strong infrastructure for the finance and accounting functions – Ultimately the CFO is responsible for the finance and accounting departments for a company. We’ll go out on a limb and say that the founders of Twitter know squat about setting up either, despite their importance within the organization.

Mr. Rowghani will have to get these functions in tip-top, especially if the pressure to take the company public proves too much to bear. Even if the Company manages to resist this route — like Facebook has so far — they still need reliable financial reporting, especially if they decided to do some less than vanilla transactions like equity comp. Additionally, they need people that will be able to lay out good financing options for the development of the Company. Whether that means borrowing money (not the best idea for a startup) or raising it through new investors (private or public) it will take airtight planning and the CFO will oversee all of it.

For the new CFO to succeed he will have address these issues and more as he balances the pressure of a weak economy and cautious investors concerned with guarding their capital.